div style=”text-align: justify;”Roth is out downgrading span style=”font-weight: bold;”Shanda (NASDAQ:SNDA)/span to Sell from Hold with a $30 tgt noting the shares hit a new 52-week high yesterday and are now up +87% from their Dec-08 lows. Firm believes the stock is ahead of itself at current levels and think there are better risk to reward opportunities in the sector.br /br /span style=”font-weight: bold;”Roth’s thesis./span Their downgrade is based upon the following: 1) overly optimist expectations for AION 2) operating margin pressure in 2H09 3) growing competition and 4) valuation.br /br /span style=”font-weight: bold;”AION – sell the hype. /spanShanda will begin limited-CB for AION today, with unlimited-CB scheduled to begin on Apr-8. We advise investors to use the recent share price appreciation – largely due to hype surrounding AION launch (and co-op announcements) – to take profits. Four key risk areas for this game/Shanda include: NcSoft’s lack of a track record in China, potential hacker problems, restrictive HW requirements, and license fees.br /br /span style=”font-weight: bold;”Operating margin pressure. /spanThey believe Shanda will face operating margin pressure in 2H09 and will be unable to maintain OM’s above 40% despite incremental new revenue. This is due to lower margin revenue associated with AION and increasing OpEx related to the company’s expansionary efforts and new game releases.br /br /span style=”font-weight: bold;”Growing competition./span Firm believes Tencent will overtake Shanda as the largest online game operator in China either this year or next year. Additionally, they believe growing competition from a number of smaller online game companies will further erode Shanda’s market share position.br /br /span style=”font-weight: bold;”Premium valuation./span Shares of Shanda are now trading at 12.4x and 10.9x FY09 and FY10 estimates, respectively. This represents a 25% premium to the comp group, which they believe is unwarranted. The $30price target is based on 9.5x FY09 EPS estimate of $3.17.br /br /span style=”color: rgb(255, 0, 0);”Notablecalls:/span Note that RBS is also out with a Sell call on the name today saying Shanda lacks a blockbuster game and views shares as overvalued.br /br /Should make the latest buyers panic and others think about taking some profits. Sub-$38 anyone?br //divdiv class=”blogger-post-footer”img width=’1′ height=’1′ src=’http://res1.blogblog.com/tracker/29297569-5941765084322925237?l=notablecalls.blogspot.com’//div

Last 5 posts by Notable Calls

• Petroquest Energy (NYSE:PQ): Compelling Valuation with Near-Term Catalysts; Upgrading to Overweight - J.P. Morgan - October 29th, 2009
• 15% correction coming in SP500? - October 21st, 2009
• Boeing (NYSE:BA): Downgraded to Underweight at Morgan Stanley, target to $43 - October 20th, 2009
• Par Pharmaceuticals (NYSE:PRX): Upgraded to Overweight at Barclays; target raised to $30 - October 15th, 2009
• Wyndham Worldwide (NYSE:WYN): Upgraded to Buy at Goldman Sachs; $26 target established - October 7th, 2009