Upgrading Lamar Advertising To Neutral, Increasing Price Target

11/6/2009 1:54 PM ET

(RTTNews) - Friday, Credit Suisse upgraded Lamar Advertising Co. (LAMR: News ) shares to Neutral from Underperform and increased its price target to $30 from $16.

Analyst Stabler increased price target from $16 to $30 based on his belief that expenses will hold through 2010, an inflection point with regard to revenue risk has passed, radically cut capex will ramp more slowly than previously thought, and current valuation is sustainable based on revised EBITDA estimates, historical valuation, and investors' preference for a non-secularly challenged pure play on an improving advertising climate in 2010.

While the analyst upgraded his view, he remains cautious. Though downside risk to both topline and margin estimates is declining, the unprecedented operational conditions with regard to price and occupancy lead us to be conservative with the analyst's revisions.

The analyst continues to believe the outdoor recovery will lag other media types, and his 2010 revenue estimate of $1.075 billion will land below revised consensus estimates. The analyst believes the advertising climate will continue to improve, albeit slowly.

The analyst forecasts 1.5% growth for U.S. outdoor in 2010, and 3% in 2011. The analyst's estimate for Lamar sees outperformance owing to their dominant small market competitive position. While the analyst favors outdoor long-term, he would like to see indications of pricing improvements before becoming more constructive.

Currently, LAMR is up $0.22 or 0.76% and trading at $29.02.