Exxon Target Unchanged at $105

We continue to like Exxon Mobil Corporation (XOM ) shares for the company's best-in-class upstream business, a chemicals business that is fully integrated with its quality refining assets, an exceptionally strong balance sheet, and a track record of returning significant capital to shareholders.

The recent increase in quarterly dividend and ramped-up share buybacks, currently averaging around $8 billion a quarter, is clear evidence of the management's commitment to returning cash to shareholders. Exxon shares should also hold up better, in our view, compared to any other name in this space in the event of a pullback in crude oil prices, given its relatively defensive and conservative posture.

While Exxon shares have all the hallmarks of a defensive play, we believe it has more growth potential than it gets credit for. The company has an exceptionally strong balance sheet. It is AAA rated and has more cash on its balance sheet than debt.

Our unchanged $105 price objective reflects a 2009 P/E multiple of 11.3x, still at a discount to the overall market. Our continued bullish stance on Exxon reflects our view that the stock's P/E multiple will expand as visibility regarding greater-than-currently-expected production growth emerges over the next few quarters.

Expect Strength from Altera

Altera Corporation (ALTR) designs, manufactures and markets a broad range of high-performance, high-density programmable logic devices (PLDs) such as field-programmable gate arrays (FPGAs) and complex programmable logic devices (CPLDs). Altera reported revenues of $336 million in Q1:FY2008, exceeding our estimate of $326 million, mainly due to growth in sales of new products.

Altera reported Q1 GAAP EPS of $0.27, well above our $0.21 estimate and consensus of $0.23. Going forward, management recently updated its guidance for Q2:FY08. The sequential growth will now be at the high end of the company's previous guidance of 1%-4% sequential revenue growth. We maintain our Buy rating on the shares.

The stock is currently trading at 20.6 times our 2008 earnings estimate. We think inventory is being worked down and expect revenue growth to speed up by mid-2008, in light of the updated guidance. Our target price is derived by applying a target P/E multiple of 21.5x to our fiscal year 2008 EPS estimate, which currently in line with the industry's median P/E multiple.

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