This last week was the beginning of earnings season and analysts were making many calls.  While we track a dozen or more key research calls each day, we always find a few that stand out above and beyond the rest.  Some of these calls were large impact calls and some are fringe calls with big implications down the road. 

While there are more than six companies mentioned here, the top analyst upgrades and downgrades seen this week were in shares of Community Health Systems, Inc. (NYSE: CYH), Google Inc. (NASDAQ: GOOG), GTX Inc. (NASDAQ: GTXI), Melco Crown Entertainment Ltd. (NASDAQ: MPEL), Quicksilver Resources Inc. (NYSE: KWK), Transocean Ltd. (NYSE: RIG), Silver Wheaton Corp. (NYSE: SLW) and Royal Gold, Inc. (NASDAQ: RGLD). 

We have outlined the implications and the impact on each.  We have also added color if applicable here.

Community Health Systems, Inc. (NYSE: CYH) saw a major whip-saw this week after Tenet Healthcare (NYSE: THC) sued the company over fraud over Medicare abuse as a means to prevent a hostile acquisition.  The prior Friday had Community Health shares up above $40.00 and shares closed at $25.89 on this last Monday.  By Friday shares had risen to $31.90 but news of a US subpoena on claims took out another 13% of value and shares went back to about $27.50 in the after-hours session Friday afternoon.  We are curious to see how this pans out now because we some analysts defending this one during the week as follows:

• Citigroup raised the target to $38  with a “Buy” rating after having earlier cut the target to $34 from $46.
• Jefferies initiated it with a “Hold” rating and a $36 price target.
• Deutsche Bank defended it with a “Buy” rating
• Caris actually cut this to “Average”

Google Inc. (NASDAQ: GOOG) had a mixed earnings report.  Larry Page spoke only very briefly in his remarks as his first quarter earnings report as CEO, making analysts investor worried that he is not going to be very forthcoming.  More importantly, Google is just spending too much money as its expenses are rising significantly faster than its revenues.  We saw several price targets get cut after earnings and shares closed down almost $48.00 or 8.25% at $530.70 on Friday after the report.  Some of the new targets we saw are as follows:

• Citigroup downgraded the stock to Hold;
• Credit Suisse cut to $700;
• Gabelli maintained “Buy” rating;
• Goldman Sachs cut to $690;
• Oppenheimer cut to $650
• Stifel Nicolaus cut to $750;

GTX Inc. (NASDAQ: GTXI) is small enough that 90% of our readers will ask “Who or what is that?”… The market cap is a mere $199 million even after a large rise for the biotech outfit targeting cancer, osteoporosis, bone loss, and muscle loss.  This last Wednesday came an upgrade from Citigroup to “Buy” from “Hold.”  What was so amazing was the reaction as shares literally traded up almost 34% to $3.68 and shares had been up closer to 50% at a high of $4.18 during the trading day.  The stock volume was more than 3.8 million shares and average daily volume was only about 140,000 shares prior to this jump.  GTX Inc. only traded 3+ million shares on two trading days in 2010 and it is important that its shares rose for two more days after this call to close at $3.85 for the week.

Melco Crown Entertainment Ltd. (NASDAQ: MPEL) saw a big pop from a research call out of Bank of America/Merrill Lynch in Friday.  The Macau casino and ‘City of Dreams’ was raised to “Buy” from Neutral and noted that it trades at a 36% discount to peers on an enterprise value.  As such, BofA raised a target of $8.00 up to $11.10 per ADR.  Friday’s price change was up 5.35% to $9.15, but shares briefly hit a new 52-week and multi-year high of $9.32 mid-Friday.  This stock is back to highs not seen since mid-2008.

Quicksilver Resources Inc. (NYSE: KWK) and Transocean Ltd. (NYSE: RIG) came to a tie in research impact.  These two were about equally moved (in opposite directions) by a research change at Howard Weil, a firm that is greatly respected when it comes to its energy research.  That makes these two a tie as the calls were moving calls in each. 

Howard Weil raised Quicksilver’s rating to “Outperform” from “Market Perform.”  Quicksilver Resources Inc. (NYSE: KWK) rose 4.6% to $14.28 and trading volume was more than twice normal at more than 6.7 million shares.  

Transocean Ltd. (NYSE: RIG) was cut to “Market Perform” from “Outperform.”  Its shares closed down 3.1% at $75.88 on about 20% above-average volume of more than 5.8 million shares.

We have another tie in a single firm’s research calls with implied upside.  Silver Wheaton Corp. (NYSE: SLW) and Royal Gold, Inc. (NASDAQ: RGLD) could have significant upside beyond consensus if Scotia Capital is correct.  These two upgrades did not move the needle much but it is the expected upside that stands out so much.  With more loud calls for $50 silver, the Devil’s Metal is still in focus. 

Silver Wheaton Corp. (NYSE: SLW) closed Friday at $42.61 versus a 52-week range of $16.80 to $47.60.  This last week came news that Randy Smallwood, who had been its President, is replacing Peter Barnes as CEO.  Scotia Capital raised its  Chief Executive Officer.  Dow Jones reported on Friday that Scotia Capital raised its price target from $47 to $58 based upon its prospects.  This call did not move the needle much, but if it is right then the silver bugs can expect another 36% upside in Silver Wheaton.  This appears to be the highest price target of the analyst group and it is well above the consensus price target of $47 to $48 that exists currently.  

Royal Gold, Inc. (NASDAQ: RGLD) saw its price target raised to $77 from $72 according to Dow Jones.  Its shares closed up 0.6% on Friday at $53.77 against a 52-week trading range of $42.15 to $55.22.  Analysts have a consensus price target of almost $69.00, implying that “the wolf pack” expects upside of about 28% currently.  If Scotia is right, then there is more than 43% upside left in Royal Gold.

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JON C. OGG

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