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Here are highlights from Thursday's Analyst Blog:
LoopNet Sell Rating Reiterated
We reiterate our Sell rating on shares of LoopNet (Nasdaq: LOOP) following the release of second-quarter financial results. Although the company owns the leading online commercial real estate marketplace, we believe that a challenging near-term operating environment will curtail share price appreciation.
Continuing macro-economic challenges will likely put stress on the commercial real estate sector, in our opinion, as slower economic growth combined with tight access to debt capital may limit transaction activity. Various key operating metrics began to weaken during the second quarter, and we believe that a lower multiple is appropriate at this time.
FEMSA Has Plenty of Pop Left
We are keeping our Buy recommendation on Coca-Cola FEMSA S.A. de C.V. (NYSE: KOF). The company posted slightly better-than-expected results for the second quarter, and the results in the Mercosur division were particularly impressive. Going forward, we believe new lines of business combined with the recent acquisition will enhance topline growth despite the difficult economic environment throughout the world, including Mexico.
Currently, Coca-Cola FEMSA is trading at 14.6x our 2008 earnings estimates, close to industry mean. We think the shares have a considerable upside potential and have used a P/E multiple of 17x our 2008 earnings estimate, closer to the valuation of its parent company Fomento Economico (NYSE: FMX). Our target price is $67.50.
Corrections Corp. to Benefit
Corrections Corporation of America (NYSE: CXW | Quote | Chart | News | PowerRating) is the largest private owner and operator of correctional and detention facilities in the United States. We view the company's long-term prospects favorably.
The company holds a significant market share advantage over its peers, with a substantial pipeline of additional capacity scheduled to be added to the portfolio over the next two years. CXW is the clear leader in an industry with a strong outlook, supported by favorable economic and demographic trends.
Lexicon Has "Knockout" Punch
Based on its proprietary "gene knockout" technology, Lexicon Pharmaceuticals Inc. (Nasdaq: LXRX | Quote | Chart | News | PowerRating) has attracted both drug-based collaborations and strategic equity investors. We are also optimistic about the company's pipeline.
Lexicon recently announced that it is focusing its operations on drug discovery and development activities related to its 10TO10 Program (advancing 10 drug candidates into human clinical trials by 2010) following the scheduled completion of Genome 5000 project. The company has four candidates in clinical studies and its cash position is also relatively strong.
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