Santarus, Inc. (SNTS), Cytec Industries Inc (CYT), TD Ameritrade Holding Corp. (AMTD): Four Noteworthy Upgrades on Monday

Morgan Stanley cites a number of catalysts that could impact earnings to the upside. For one, if the global economy continues to improve, the travel industry will also improve. With Priceline.com Inc (NASDAQ:PCLN) being the largest online travel company, it could see the largest growth. Moreover, lower costs and more efficient service management could ease margin pressure, according to Morgan Stanley.

Morgan Stanley is essentially guiding for higher revenue and higher margins, thus boosting profits. Much like TD Ameritrade Holding Corp. (NYSE:AMTD), I think Priceline is a bit too pricey. Sure, Morgan Stanley might be right, and makes a good case, but with operating margins of 35% and over $5.5 billion in revenue during the last 12 months, I don’t see where the big upside is created. Especially considering that Priceline trades at 7.75 times sales, compared to Expedia’s 2 times sales.

Final Thoughts

Each of these firms gave valid reasons for their call, but Santarus, Inc. (NASDAQ:SNTS) is the only that I believe is fundamentally and logically validated. In Taking Charge With Value Investing (McGraw-Hill, 2013), I explain that while you may want to jump on the analyst bandwagon, you have to use common sense and look for reasons “why” a call is correct.

With Santarus, we know that sales of Uceris were above the consensus during its launch, and have channel checks to indicate its future success. Thus, it is logical to conclude that future sales should be above the consensus. In fact, if I disagree with anything about the Santarus call, it is the price target, I think its sales and pipeline warrant a much higher target.

The article 4 Noteworthy Upgrades on Monday originally appeared on Fool.com and is written by Brian Nichols.

Brian Nichols is long SNTS. The Motley Fool recommends Priceline.com and TD Ameritrade. The Motley Fool owns shares of Priceline.com. Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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