Wall Street sweet on new media

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The Nasdaq advanced 5.8% in October, but the real action was in new media, particularly in larger companies and video game publishers.

Online search companies caught fire, with Yahoo -- after years of moving mostly sideways -- shooting up 15.9% to $31.10 after bottoming at $22.27 during the summer. Similarly, Google rose 24.6% to $707 as it broke the $700 mark for the first time Wednesday. It now boasts a market capitalization of an astonishing $220.7 billion, easily making it one of the most valuable companies on the planet.

Goldman Sachs last month raised its year-end target on Google from $620 to $800, suggesting the stock has about another $100 upside by year's end.

"We are incrementally more positive about the company's growth prospects," Goldman Sachs analyst Anthony Noto said of Google. "We see significant opportunity in areas like display advertising through gadget advertising, video ads, typical display formats such as banner ads, iGoogle, mobile and increased penetration and monetization of international markets."

RBC Capital Markets analyst Jordan Rohan last month raised his Google target from $690 to $725. He also lifted his Yahoo target from $34 to $36. "The worst may be behind Yahoo," he said.

In the video game sector, THQ rose 8.4% to $27.09 even though the company lowered its financial guidance. The company is scheduled to deliver quarterly earnings today.

Goldman analyst Mark Wienkes, who is "neutral" on THQ, said that its problems, which include delays in the release of some games and slow sales in others, will not spill over to others in the sector.

So far, the analyst seems correct when looking at stock trends. Electronic Arts was up 9.3% last month to $61.12; Activision was up 9.5% at $23.65; and Take-Two Interactive Software rose 9.9% to $18.78.

Highlights from monthly sales numbers courtesy of research firm NPD Funworld indicate sales of video game software was up 47% in September, mostly on the back of "Halo 3" from Microsoft.

"Halo 3" also led to a surge in sales of Xbox 360 consoles. NPD said that 528,000 units were sold, compared with 501,000 Nintendo Wii units and 119,000 of Sony's PlayStation 3.

"We would opportunistically add to positions in Activision, Electronic Arts, GameStop, THQ and Ubisoft," Michael Pachter of Wedbush Morgan Securities said after perusing the NPD data.

Meanwhile, NDS, a TiVo competitor that is controlled by News Corp., surged 19.2% during the month to $59.60. The company reported "generally solid" quarterly results this week, said Todd Mitchell of Kaufman Bros. "Operating metrics show accelerated activity across all business lines, with 100%-plus gains in authorized smart cards and middleware and DVR deployments."

Similarly, giant-screen and 3-D exhibition company Imax saw its shares jump 22.6% to $5.15, probably thanks to it seeing success in forming partnerships like a five-theater deal it struck last month with Regal Cinemas.

"As theater operators continue to embrace the upside benefits of installing an Imax theater, there could be a land grab at some point as those operators rush to secure key locations before their competitors do the same," Merriman Curhan Ford & Co. analyst Eric Wold said. He rates Imax a "buy" and predicts the company's stock will rise 30%-50% in the next year or so.

Other big new-media movers during the month included Apple, up 23.8% to $189.95, and Netflix, up 27.6% to $26.47.

Netflix said it expects to end the year with 7.5 million subscribers, up from a previous estimate of as many as 7.3 million. Competitor Blockbuster had 3.6 million online subs at last count, though it is expected to update that number today.

A couple of rare downside new-media movers included Sirius Satellite Radio and XM Satellite Radio, down 3.7% to $3.36 and 6.3% to $13.28, respectively. The pair await governmental approval for a merger, though analysts said there's about a 50% chance they'll not receive such permission.
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