The management has hinted that it may announce a more explicit EPS goal of 15% to 25% growth in 2009 if all its long-term growth goals are achieved.
However, the challenging consumer environment has the potential to put pressure on 2008 sales. The management expects input costs to rise by approximately $32 million. In the first quarter, the company's advertising spending increased by $10 million. Increased costs and expenses could offset the savings from the company's cost-reduction initiatives.
Hanesbrands stock has traded in P/E range between 13 and 20. It is currently selling at 15.3 times trailing 12 month EPS. The target price is $30.00, which is a 16.5 P/E multiple on 12 month trailing earnings.
Hold-Rated NVIDIA Gets Premium
As the only remaining major independent player in the market for Graphic Processing Units (GPUs) used in PCs, NVIDIA Corporation (NVDA) is well-positioned to benefit from increased graphics requirements. We are positive on the company's Computer Unified Device Architecture (CUDA) initiative, which should drive additional uses for its installed base of GPUs.
However, product-related transitional issues have taken a toll on gross margins, and we continue to be cautious on the outlook for consumer spending. Enterprise-level capital spending is highly sensitive to changes in the economy and this is likely to cut into the future demand for PCs should the U.S. economy slow as expected. We therefore maintain a Hold rating on the shares.
Shares of NVIDIA are currently trading at 14.5x our fiscal 2009 EPS estimate of $1.33. We set our six-month price target of $20.50. Our target price represents a multiple of 15.4x our fiscal 2009 EPS estimate, a premium to the industry mean, which we believe is deserved given NVIDIA's strong position.
ViroPharma Value Worth Buying
We remain confident that ViroPharma Inc.'s (VPHM) position is strong. At this level the stock remains incredibly cheap, and we are optimistic that management will be able to add significant value in the coming years.
We see several driving forces in 2008 that lead us to believe it will be another solid year for the Vancocin antibiotic. We see significant opportunity for Vancocin to gain share in the most severely infected patients. Clostridium difficile infection is a life-threatening disease and the data is becoming clear that Vancocin is the best available option for its treatment.
We are concerned about this generic risk but also remind investors that ViroPharma could be a dramatically different-looking company in 2010 if pipeline antiviral candidate Camvia succeeds in treating cytomegalovirus disease.
The stock will most likely remain in the tight trading range until we get an update from the U.S. Food and Drug Administration/Office of Generic Drugs on generic Vancocin. Positive news will send the shares significantly higher. The launch of a generic product will probably cause a sell-off, although considering the current market value is $735 million and ViroPharma is sitting on $599 million in cash, we think that is a bet worth taking.
At this level the stock is too attractive to ignore. Our 2008 revenue forecast of $219.9 million yields a price to sales ratio of 3.3x. This is significantly below the biotechnology peer-group average of around 6.5x. We forecast 2008 EPS at $0.90. The price to earnings ratio is only 11.8x. We think Camvia offers a significant growth opportunity over the long-term. As a result, our rating is Buy and our price target of $14 is based on 15.5x our 2008 EPS estimate of $0.90.
