Stock Market Predictions

McDonald's August sales miss; Japan drags

Stock Market Predictions

The world's largest hamburger chain, whose shares fell 4.4 percent on Friday, said sales at restaurants open at least 13 months rose 3.5 percent globally. Analysts polled by Thomson Global Markets were looking for an increase of 4.3 percent.

Same-restaurant sales rose 3.9 percent in the United States, just shy of analysts' 4.0 percent expectation. In Europe -- McDonald's largest market -- the company reported an increase of 2.7 percent, missing analysts' estimate of a 4.7 percent increase.

To help increase sales, McDonald's has relied on new products like breakfast oatmeal and a beverage overhaul that has included the introduction of fruit smoothies and other drinks.

In August 2010, demand for smoothies helped drive up U.S. same-restaurant sales by 4.6 percent.

This year "new product launches were really weighted toward the front half of the summer," Morningstar analyst R.J. Hottovy said.

But he noted the company was still doing better than its competitors in terms of same-restaurant sales.

"It's still comping positive while a lot of their competitors are still squarely in negative territory," Hottovy said.

McDonald's sales and profits for months have been the envy of the global fast-food industry, which means that the company is punished when results meet or miss expectations.

The company has been outpacing rivals like Wendy's Co (WEN.N), Burger King Corp BKCBK.UL and Yum Brands Inc's (YUM.N) KFC by attracting a broader range of diners than fast-food's typical young adult males.

WEAK JAPAN WEIGHS

McDonald's reported a 0.3 percent decline in Asia/Pacific, Middle East and Africa, while Wall Street had forecast a rise of 3.5 percent.

Asia was dragged down by a sharp decline in comparable sales in Japan, where consumers are still adjusting to the aftermath of the March earthquake and tsunami.

Janna Sampson, co-chief investment officer at Oakbrook Investments, said the weak results in Japan were troubling, given how many months have passed since the earthquake and tsunami struck in March.

"I would have thought that was already priced into expectations," Sampson said. "But one month does not make for a pattern ... If we see that continue in September, it becomes more problematic."

Earlier this week, Red Lobster and Olive Garden parent Darden Restaurants Inc (DRI.N) warned that Hurricane Irene had dented its quarterly earnings by 2 cents per share.

But Irene had only minimal impact on McDonald's sales, a company spokeswoman said.

Oak Brook, Illinois-based McDonald's shares were down 4.4 percent at $84.71 in New York Stock Exchange trading.

(Additional reporting Lisa Baertlein in Los Angeles; Editing by Lisa Von Ahn, Dave Zimmerman)

Brokerages cut earning estimates on BofA

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Though the largest U.S. bank by assets currently has a pro-forma $37 billion capital cushion under the Basel III framework, mounting mortgage losses could transcend earnings and cut into the capital buffer, leading the bank issue stock and dilute shareholders, JMP Securities analysts David Trone said.

"As we saw in 2008 and 2009, financial firms will often be forced to raise capital well before the technical benchmarks are breached," Trone wrote in a note.

"We suspect the company would raise (capital) even at $50 billion, or half the projected loss levels in our 'reverse engineer/stress test' analysis."

JMP said the newly issued warrants to Berkshire Hathaway Inc imply a modest share dilution, cutting its 2011 operating EPS estimate by a cent to $0.95 and 2012 operating EPS by 7 cents to $1.42.

It maintained its "market perform" rating on the stock.

In August, Warren Buffet said he will invest $5 billion in the bank.

Separately, Guggenheim Partners also cut its earnings estimates and lowered its price target by a dollar to $10 on the bank's stock to reflect the market's current lack of appetite for risk and the overhang which is directly related to the bank's acquisition of CountryWide.

The brokerage lowered its 2011 estimated EPS by 3 cents to a loss of 17 cents and estimated 2012 EPS by 4 cents to $1.33, while maintaining its "buy" rating on the stock.

Shares of Bank of America were trading down 2 percent at $7.07 in early trade on Friday on the New York Stock Exchange. The stock has lost nearly 50 percent of its value since January.

(Reporting by Tanya Agrawal in Bangalore; Editing by Joyjeet Das)

EBay shares slip on concern over U.S. Postal Service closures

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The move by the USPS will impact e-commerce because when consumers buy a physical product online it has to be shipped, and often in the U.S. that's carried out by the USPS.

The USPS is losing billions of dollars a year and Postmaster General Patrick Donahoe told Congress this week that it may default on a $5.5 billion payment due to a retiree health program at the end of September.

Donahoe wants to cut more than 100,000 workers, close thousands of post offices and end Saturday mail delivery.

"Any changes with any of the carriers that impact service are a big deal for e-commerce," said Dan Weiss, vice president of operations at Shipwire, which stores and ships products for online merchants.

E-commerce has exploded and has taken market share from brick and mortar retailers. Part of that success has been fueled by efforts to make online shopping much like an in-store experience, while offering very cheap and fast delivery.

"Turmoil at the U.S. Postal Service will make it harder to do that," Weiss told Global Markets.

Big Internet retailers, like Amazon.com Inc (AMZN.O), tend to use FedEx Corp (FDX.N) and United Parcel Service (UPS.N) rather than the U.S. Postal Service, according to Scot Wingo, chief executive of ChannelAdvisor, a software provider that helps merchants sell more online.

However, if thousands of post offices close, that will make it harder and more expensive for small and medium-sized online sellers, known as SMB sellers, to ship products, Wingo explained.

"That means eBay has the most exposure," Wingo added. "That's where those SMBs live and thrive mostly."

About 30 percent of eBay sales come from SMB sellers, Wingo estimated.

All the smaller online sellers on eBay's main marketplace will find it tougher to ship items. They will have to travel further to post offices, or pay more to ship using FedEx or UPS.

EBay shares closed down 6.7 percent at $28.46 on Friday, while Amazon.com declined 2.7 percent to $211.39. The Nasdaq Composite index shed 2.4 percent.

"EBay has historically relied more on small and medium sized businesses, as well as individual proprietors, as a source of activity, listings and transaction revenue," said Scott Kessler, an Internet analyst Standard & Poor's Equity Research. "It would definitely be one of the companies adversely affected by some type of restructuring involving the U.S. Postal Service."

Spokeswomen at eBay and Amazon didn't immediately respond to requests for comment about the impact of U.S. Postal Service changes.

(Reporting by Alistair Barr, editing by Bernard Orr)

Google buys Zagat to vie with OpenTable, Yelp

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Local commerce offers services such as finding a discount from a nearby store, or a review of a neighborhood eatery, and the world's No. 1 search engine plans to compete in this market against Yelp and OpenTable.

The deal, for which Google did not provide financial information, gives it valuable content about restaurants, hotels and nightclubs that can be paired with its popular online maps and mobile search services.

Google needs to provide more than just directions to consumers seeking information about restaurants and other local businesses, said Marissa Mayer, Google's VP of Local, Maps and Location services, in an interview with Global Markets on Thursday.

"It's also (about) getting them a sense of the place. A sense of what to expect," said Mayer. "Zagat reviews, in a few short lines and a few scores, gives you a great sense of a place very quickly when you're on the go."

The move is part of Google's push to adapt its online services for a world in which consumers increasingly access the Web on mobile phones such as Apple Inc's iPhone and rely on social networking services such as Facebook to get information from friends.

Last month, Google announced plans to acquire mobile phone manufacturer Motorola Mobility for $12.5 billion. The deal, if approved by regulators, will allow Google to produce its own line of smartphones based on its Android software.

"A reasonable person would say that Google may never beat apple in product design by itself. At least not for a sustainable period of time. But Google could better integrate content and have that become another reason to buy those devices," said Stifel Nicolaus analyst Jordan Rohan.

The 32-year-old Zagat, which polls consumers and compiles reviews about restaurants around the world, will become a cornerstone of Google's "local offering", Google said.

"This underscores Google's local and mobile initiatives," said Brian Pitz, an analyst at UBS, who expected the acquisition to provide a boost to Google Maps as customers look for restaurants. Last year, Google moved Mayer, a top search executive, to head its local initiatives.

Google needs reviews and other content for its "Google Places" websites, in part to fend off criticism. It has been accused of using comments from review sites such as Yelp, essentially siphoning off their readers and, more importantly, their clicks. Google has toned down its borrowing of comments recently, Pitz said.

The Federal Trade Commission has been looking into the issue as part of a broad antitrust investigation, a source familiar with the probe has said.

The move raises the question of whether the search giant will start its own restaurant reservation service, building on existing ties with restaurants that advertise on it.

The shares of restaurant-booking service OpenTable, which also publishes reviews and ratings, closed down more than 8 percent at $57.50 on Thursday after hitting a low of 54.50 earlier in the day.

OpenTable is already reeling from financial results that have disappointed investors this year and the departure in May of CEO Jeffrey Jordan, who joined venture-capital firm Andreessen Horowitz. Jordan remains chairman.

Pitz said expanding into reservations would require extra steps such as building out reservation software and getting restaurants to install it, as well as building different relationships with the restaurants.

"It's apples and oranges," he said.

While much of Zagat's content is free and available to anyone, some content remains behind a paywall and it was unclear if Google would remove it.

Founded by Tim and Nina Zagat, the eponymous service provides the familiar burgundy pocket-sized guides to restaurants in more than 100 cities. It may be one of the earliest forms of user-generated content, Google Vice President Marissa Mayer said in a blog post on Thursday.

Zagat gave Google a tongue-in-cheek rating on its home page on Thursday, awarding the Internet company a maximum 30-point rating for its "local, social, mobile and usefulness" categories. Industry analysts regard the local, social and mobile markets as some of the fastest-growing areas of the technology sector.

"We are thrilled to see our baby placed in such good hands and to start today as official 'Googlers,'" the founders said in a joint statement.

Zagat enlisted Goldman Sachs to explore a sale as early as 2008, although no buyers emerged in the middle of a recession. The company might fetch as much as $200 million, it was reported at the time.

In late 2009 Google was in talks to acquire Yelp for at least $500 million, according to news reports at the time, but the deal fell apart.

(Reporting by Edwin Chan and Sarah McBride; editing by Maureen Bavdek and Andre Grenon)

Saab union eyes bankruptcy push

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Saab's workers are still waiting to get their pay for August and unions have the right to seek bankruptcy if they want to activate a state scheme to pay the salaries instead.

The company said it would make a fresh application for court protection from creditors on Monday, as it tries to fend off what many commentators see as the inevitable collapse of the 60-year-old group, but a lawyer said he thought the plea for the process, called a reconstruction, would be rejected again.

Production at Saab, rescued from closure just last year, has been halted for months as bills to suppliers remain unpaid.

White collar union Unionen said it would make a legal move next week. "We have to act quickly," said legal officer Martin Wastfelt. "We must act within a couple of working days."

The blue collar union, IF Metall, and a smaller engineers union said they would wait, but wanted a quick wage solution.

"As we see it today, there is a possibility that our members will get their money from Saab, but that must happen soon, in a couple of days the money must be in the bank accounts," IF Metall chief Stefan Lofven told reporters.

Saab's Dutch-based owner Swedish Automobile NV (SWAN.AS) was not throwing in the towel.

"We anticipate filing (an appeal) by Monday," Swedish Auto Chief Executive Victor Muller said, referring to an appeal against a lower court decision on Thursday to reject the company's application for protection of creditors.

His company, then called Spyker, rescued Saab from closure in early 2010 by buying it from General Motors (GM.N), but ran into a cash crisis this year.

"We are now talking with our Chinese partners and our Chinese advisors to put together a more convincing and compelling information package to submit to the court," he said in an interview on public radio.

Muller said the company had money to pay the salaries but had been legally advised it could not pay out as this would be showing preference to one set of creditors over another.

SCEPTICISM

Hans Rydberg, an official at the state debt collection agency, which has been seizing funds in Saab accounts to pay suppliers' debts, told public radio that Muller would be breaking the law if he had concealed funds.

Muller told news agency TT he has all along been advised by lawyers. "The advice we have been given is that we are absolutely within the law," he said.

Saab has said suppliers are owed 150 million euros.

Rolf Abjornsson, a partner at law firm Danowsky & Partners who specializes in insolvency and company reconstruction, said Saab's court appeal was likely to be fruitless.

"The law requires that there is a reasonable chance that the reconstruction process will work. If you have production stopped and you have no cash, then you have no proper financing. It just does not add up," he told Global Markets.

Muller told the radio that the court appeal would answer the first court's questions about the process by which Chinese car companies Pangda Automobile Trade Co Ltd (601258.SS) and Zhejiang Youngman Lotus Automobile are seeking approval from China's authorities to invest 245 million euros. ($343 million)

Saab will also supply to the appeal court more detail on when that money can be expected and whether it is sufficient to get the company up and running again.

The first court said the company had already had protection from creditors in 2009-2010 and it had not made a convincing argument for a new scheme.

Swedish Automobile's shares were down 42 percent at 0.4150 euro at 1425 GMT after a two-day suspension. They are down 79 percent this year.

In Sweden skepticism is high about the chances of survival for Saab, a small niche maker of premium cars in a highly competitive market dominated by the likes of BMW (BMWG.DE). "End the misery now," was the headline in daily Dagens Nyheter, which went on to say bankruptcy was unavoidable.

Business daily Dagens Industri said: "Someone not blinded by all the beautiful phrases about a premium brand with iconic status and a world-class car factory cannot avoid seeing that Saab as a business stands naked." ($1=0.714 euros)

(Additional reporting by Simon Johnson, Patrick Lannin and Roberta Cowan; Editing by Greg Mahlich and David Holmes)

AOL shares fall; report of possible Yahoo tie-up

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AOL Chief Executive Tim Armstrong reportedly approached private equity firms to gauge interest in a deal with Yahoo that would place Armstrong as the head of the combined company, according to a Bloomberg report.

CNBC later reported that a source close to Yahoo said the company had no interest in a deal with AOL.

AOL shares closed down 5.3 percent at $14.72 while Yahoo inched up 0.3 pct to $14.48.

Both Yahoo and AOL declined to comment.

Benchmark analyst Clay Moran said that AOL investors were likely disappointed that Yahoo was not interested in a deal.

This is not the first time that reports of an AOL-Yahoo tie-up have surfaced. Last year, AOL, once famed for its dial up and email services, tapped Bank of America to explore strategic options, including a potential merger with Yahoo, people familiar with the matter told Global Markets at the time.

Yahoo has been embroiled in its own troubles, causing the ousting of its Chief Executive Carol Bartz earlier this week.

(Reporting by Jennifer Saba and Alexei Oreskovic; Editing by Tim Dobbyn)

Analysis: BofA shake-up a crucial test for CEO Moynihan

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After reorganizing senior management and creating chief operating officers -- a move straight out of the playbook of former Citigroup Inc (C.N) Chief Executive Charles "Chuck" Prince -- Moynihan has few excuses if the bank fails to reverse course.

"This is a make-or-break type move," said Andrew Ward, associate professor and corporate governance chair at Lehigh University.

Investors are pressing Bank of America to improve its performance after it lost money in four of the last six quarters and its stock has fallen by half this year.

"Any CEO whose stock is down where Bank of America's is will be under some pressure," said Jason Goldberg, bank analyst with Barclays Capital. "But you can't turn an oil tanker around over night."

And that's the problem. It has 280,000 employees and more than $2.25 trillion of assets, making it tough to maneuver.

Investors have been spooked by worries the bank could need to raise as much as $50 billion in capital, by some estimates, to meet new global capital requirements. Bank of America has said it can raise the money it needs through selling assets and generating earnings, but tepid U.S. economic growth and mounting mortgage lawsuits may cut into earnings.

On August 8, Bank of America shares plunged more than 20 percent after insurer American International Group Inc (AIG.N) alleged a "massive" mortgage fraud.

The stock price drop was temporarily arrested by a $5 billion investment -- and public vote of confidence -- by billionaire investor Warren Buffett in late August. But shares fell on Tuesday below the $6.99 closing price on August 24 before the Buffett investment was announced, erasing the boost from his purchase.

Bank of America shares closed up 7 percent at $7.48 on Wednesday amid a broader rise in bank stock prices.

"(Moynihan is) in charge of a big castle that's under siege from this army of lawyers and he has to protect the throne," said James Ellman, president of Seacliff Capital, a San Francisco-based investment manager.

A Bank of America spokesman declined to comment.

THE NEW PRINCE?

Bank of America announced a far-reaching reorganization of its senior management team on Tuesday, which included the departure of consumer bank chief Joe Price and wealth management head Sallie Krawcheck.

Commercial banking head David Darnell and Thomas Montag, global banking and markets head, were promoted to become co-COOs.

The move was similar to when Prince -- then CEO of Citigroup -- named Robert Druskin chief operating officer in December 2006 and charged him with cutting costs. In October 2007, Prince shook up the leadership of Citigroup's investment banking division and announced that sales and trading head Tom Maheras would be departing.

Moynihan and Prince have a lot in common. Both are lawyers charged with cleaning up the messes of acquisitive predecessors.

Both had some initial success as chief executives, followed by a period of failure. When times got tough, both added chief operating officers and shuffled senior management.

For Prince, the story did not end well -- he resigned in November 2007.

Analysts said Moynihan may be under less immediate pressure because Bank of America has more capital than Citi had entering the 2008 global financial crisis and its operations outside its home loan business are profitable.

Bank of America has worked to resolve large portions of its mortgage and litigation exposure, but progress has been slow for some investors.

The restructuring is the third management change under Moynihan since he replaced Kenneth Lewis in January 2010. It has included four chief financial officers and creating a new division to cope with a $1 trillion portfolio of troubled loans the bank holds and services for other investors.

In October, the bank is expected to outline its cost-cutting program, known as New BAC, a play on its ticker symbol.

The expense control program will include job cuts.

Bank of America has entered into an $8.5 billion settlement with large institutional investors who purchased Countrywide bonds, although that deal is facing mounting opposition from investors and others.

Bank of America has also settled with Assured Guaranty Corp and Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) over similar repurchase issues earlier this year.

But if the bank is unable to rein in its mortgage and litigation costs, analysts said Moynihan's job could be in jeopardy and either Montag or Darnell could be potential successors from the co-COO post.

"If this doesn't work and he can't make progress, the board has two natural replacements," said Marty Mosby, a bank analyst with Guggenheim Securities LLC.

(Editing by Andre Grenon)

Major Yahoo shareholder calls for new board

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A "reconstituted board with new directors who will bring fresh eyes, relevant industry expertise and increased investor alignment to the table is immediately necessary," wrote Loeb the chief executive of hedge fund Third Point LLC, which has about $8 billion under management and now owns about 5 percent of Yahoo shares.

In a letter to the Yahoo board, Loeb called for the prompt resignation of Chairman Roy Bostock and directors Arthur Kern, Vyomesh Joshi and Susan James.

Third Point said it has held discussions with a number of potential replacements for current directors.

Bostock fired Yahoo CEO Carol Bartz over the phone two days ago, less than three months after he expressed support for her during a shareholder meeting.

Third Point welcomed Bartz's departure but said the board ultimately was responsible for the company's performance.

"From the failed Microsoft sale negotiations, to a subsequent bungled and disappointing search deal with Microsoft, through a series of misguided CEO selections, and most recently the Alipay debacle, this board's failures have destroyed value for all Yahoo stakeholders," the letter said.

Yahoo's board said through a spokesperson that it recognizes the critical challenges facing the company. "Accordingly, the Yahoo board welcomes a dialogue about the concerns that have been raised by the Third Point filing. The board is committed to acting in the best interests of shareholders."

Additionally the board said that Bartz cannot stay on as a Yahoo director and is obligated to resign her seat.

The fact that shareholders are beginning to stir is not surprising given Yahoo's recent woes and share performance, said Scott Kessler analyst at Standard & Poor's.

"It was only a matter of time before something like this happened," said Kessler.

Kessler pointed out that only one Internet company, Akamai, is represented on Yahoo's board. "If you look at the board, it seems to me like you have more people with experience at airlines than you do at Internet companies."

Two decades ago, Yahoo was one of the world's hottest Internet companies -- in January 2000, at the height of the dot-com bubble, its shares traded at more than $125. It has since been mired in problems as it tries to hang on to its share of online advertising revenue, which is being siphoned away by larger and more nimble rivals Google and Facebook.

In 2008, Yahoo turned down an offer from Microsoft to buy the company for $31 a share. Shares of Yahoo closed up 6.1 percent at $14.44 on the Nasdaq on Thursday.

Third Point said its own analysis values Yahoo at more than $20 a share.

The hedge fund said that in four years Yahoo executives have not been able to set the company on the right course and that Bartz only aggravated Yahoo's problems, especially when it came to its Asian assets.

"Ms. Bartz's poor decision-making and communication skills publicly alienated the company's highly respected Asian partners, as well as its shareholders, sell-side analysts, bloggers, customers and employees," the Third Point letter said.

Yahoo is currently worth about $16 billion, with much of that ascribed to its roughly 40 percent stake in China's Alibaba, the parent company of websites including Alibaba.com and Taobao. Yahoo, along with Japanese mobile company Softbank. own Yahoo Japan.

Relations between Yahoo's Bartz and Alibaba founder Jack Ma had frayed recently. In May, Yahoo revealed that Alibaba had abruptly handed Alipay -- one of Alibaba's crown jewels -- to a company controlled by Ma. Yahoo claimed it was blindsided by the move.

(Reporting by Paul Thomasch and Jennifer Saba; Editing by John Wallace)

HMV equity issue not on playlist

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"It is not on the table today, we do not have an equity story today," chief executive Simon Fox told reporters Friday when asked about analyst speculation of a rights issue early in 2012.

He said such a move would only be considered when HMV had demonstrated "a sharply improved business performance, and the initiatives we are putting in place work in a convincing way."

The 90-year-old group, famous for its Nipper the dog trademark, said sales at stores open more than a year plunged 15.1 percent in the 18 weeks to September 3, which spans its fiscal first quarter.

That compared with a like-for-like sales fall of 14.5 percent in the year to April 30 and was broadly in line with analysts' expectations.

Total retail sales in the first quarter, including the impact of 29 store closures, slumped 21.8 percent. Including the firm's HMV Live business, total sales fell 19.4 percent.

"Entertainment markets have changed rapidly and we've got to move really fast, we've got to change our business," said Fox.

HMV has issued four profit warnings this year as a downturn in consumer spending exacerbated the long-term challenges of intense competition from supermarkets and internet retailers, as well as the increasing popularity of digital downloading.

In June, the group secured its immediate future with a 220 million pounds ($354 million) refinancing deal with banks. It has also sold the Waterstone's book chain and its Canadian arm to cut debt.

REVAMP

HMV has been shifting its emphasis from CDs and DVDs to the growth markets of entertainment-related technology products such as MP3 players, headphones, speaker docks and tablet computers, as well as live music and event ticketing.

It is spending 6 million pounds refitting 150 stores by early October to focus 25 percent of selling space on the new product areas.

It said like-for-like technology sales in its initial six "Fast Forward" stores have continued to more than double.

Extrapolating that uplift across 150 stores would deliver a 6-7 percent improvement in like-for-like sales from current run rates, said Fox.

The firm said HMV Live fared well during the summer festival season, with attendances up 23 percent on a like for like basis.

Fox said a strong product line-up at Christmas gave him some confidence, highlighting releases of all six Star Wars films on Blu-ray discs, and new albums from Coldplay and The X Factor artists.

HMV shares, which have lost 90 percent of their value over the last year, were unchanged at 6.4 pence at 1058 GMT, valuing the business at about 26 million pounds.

HMV made an underlying pretax profit of 28.9 million pounds in the year to April 30. However, analysts expect little or no profit in 2011-12 and, despite the refinancing, believe the firm, which employs about 4,500, faces an uncertain future.

Seymour Piece analyst Freddie George forecast a 2011-12 pretax profit of 2 million pounds. "We maintain our sell recommendation as we continue to believe that the business is a value trap and management will struggle to grow profitability."

Thursday, Home Retail's (HOME.L) Argos business reported an 8.6 percent plunge in second-quarter underlying sales, while Wednesday, Dixons Retail (DXNS.L), the UK's largest electricals retailer, posted a 10 percent fall in first-quarter UK like-for-like sales.

($1 = 0.622 pound)

(Editing by Rhys Jones, Sophie Walker and David Hulmes)

Bayer gains as U.S. hopes revive for stroke drug

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But analysts said the drug, being developed with Johnson & Johnson (J&J) (JNJ.N), was only likely to carry a claim of non-inferiority, rather than superiority, over the established product warfarin and there may be a need for further studies.

"(The vote) should aid recovery in the stock although investors should be aware that Xarelto could still be delayed in the United States for stroke prevention," JP Morgan analysts said in a note.

Xarelto's place in the global stroke-fighting market, which could top $10 billion annually, had looked in serious jeopardy just three days ago.

On Tuesday, Food and Drug Administration (FDA) reviewers called for the agency to delay approval in an initial assessment, sending Bayer shares on a one-day slump of 7.5 percent.

They recovered on Friday to be up 2.2 percent at 1114 GMT.

Now, with the backing of the advisory panel, the medicine seems likely to get to the U.S. market, though it could face delays and may well end up with labeling that puts it at a disadvantage to rivals.

WestLB analyst Norbert Barth said Xarelto's commercial potential appeared limited, even if it was approved in the U.S. by the target date of early November.

Other analysts were not convinced approval would come so quickly.

Jeffrey Holford of Jefferies said it seemed likely the FDA would require a further small clinical study to assess risks for patients when they come off the drug, delaying its launch by around 12 months.

A delay for Xarelto could give a further edge to a rival treatment, Eliquis, being developed by Bristol-Myers Squibb (BMY.N) and Pfizer Inc (PFE.N), which is considered to have the strongest profile among the new rivals to warfarin.

Another blood clot preventer, Boehringer Ingelheim's Pradaxa, was approved last year and is already available in the U.S. as an alternative to decades-old warfarin.

All three drugs are designed for patients with atrial fibrillation, an irregular heartbeat mainly affecting the elderly that can cause blood to pool, increasing their risk of blood clots and strokes.

Tim Race of Deutsche Bank said it seemed likely Xarelto's label would disadvantage the drug relative to Pradaxa and Eliquis, denting commercial expectations.

That could cut Deutsche's 2015 U.S. Xarelto sales forecasts to 300-400 million euros from a current assumption of 900 million, he added.

Bayer said in a statement it continued to see worldwide peak sales of Xarelto at more than 2 billion euros ($2.8 billion), "irrespective of the decision by the FDA in early November."

The German chemicals-and-drugs group sold exclusive U.S. rights for Xarelto to J&J in 2005. As part of that pact, Bayer stands to receive royalty payments of up to 30 percent on U.S. sales, while retaining exclusive rights outside the U.S.

In Europe, Bayer expects approval of Xarelto in the third or fourth quarter of this year.

($1 = 0.714 Euros)

(Editing by Hans-Juergen Peters, Sophie Walker and David Hulmes)