Q1 down, three to go

Sector stocks given bullish outlook

With the first quarter coming to its close, various sector stocks earned bullish reviews from Wall Street analysts.

Merrill Lynch analyst Jessica Reif Cohen strongly reiterated her "buy" rating on News Corp. shares, citing today's shareholder vote on the proposed Liberty Media-DirecTV deal. "We anticipate the vote will pass, which we view as a near-term positive catalyst for News shares," she said in a report. "We do not believe today's (Wall Street) consensus estimate of $1.25 fiscal year 2008 earnings per share (vs. our $1.28 estimate) fully reflects this adjustment."

Beyond allowing News Corp. to exit the competitive satellite TV market and buy back a big chunk of stock, the deal could also have other positive results for investors, Reif Cohen said.

For example, "We expect News Corp. to announce the elimination of its 'poison pill' and staggered board either concurrently or shortly after a positive vote," she explained.

Her $30 price target provided upside potential of 26% for the stock.

Also citing the Liberty deal, Pali Research analyst Richard Greenfield last week boosted his price target on News Corp. shares by $3 to $27.

Meanwhile, Bear Stearns analyst Spencer Wang upgraded Time Warner Inc. from "peer perform" to "outperform" rating with a $23 price target.

"We believe that over the next 12-18 months TW will more aggressively restructure its business portfolio, which we think will lead to incremental value recognition," he said, citing possible deals involving TW's AOL and magazine units as possibilities down the line.

In a less bullish call, Pali's Greenfield late last week also upgraded — due to valuation — his rating on Warner Music Group shares from "sell" to "neutral" even though he emphasized that the "music industry is not out of the woods yet."

WMG shares are down 31% year-to-date "due to deteriorating music industry unit sales, a weak release schedule, lack of visibility surrounding a potential EMI merger and worries over WMG overpaying (in an all-cash bid) to acquire EMI," Greenfield explained.

"While we do not see a dramatic change in WMG and/or broader music industry fundamentals on the near-term horizon, the stock has surpassed our prior $16 price target," he said.