Analyst Actions: Amazon.com, Cadence Design, Allliance Data

Opinions on various stocks in the news Thursday

From Standard & Poor's Equity Research

BEARS STEARNS SAYS AMAZON.COM'S MARGINS DISAPPOINTING

Bear Stearns analyst Robert Peck says Amazon.com's (AMZN) stock was down on disappointment around gross margins and lack of significant margin expansion for 2008 guidance. On the positive side, he says Amazon continues to demonstrate very strong revenue growth with accelerating North America revenues and strong free cash flow and return on invested capital.

Peck thinks shorter-term investors will point to margin concerns and Amazon's large p-e multiples, while long-term investors will focus on sacrificing near-term results for building longer-term entity. He says with the lack of near-term catalysts, he thinks debate will linger until first quarter EPS can shed more light on the direction of the company.

He cuts $1.75 2008 GAAP EPS estimate to $1.64. He maintains peer perform opinion on Amazon shares.

JP MORGAN CUTS CADENCE DESIGN SYSTEMS TO UNDERWEIGHT FROM NEUTRAL

JP Morgan analyst Sterling Auty says Cadence Design Systems' (CDNS) 2008 outlook was diminished by longer sales cycles as customer spending is under pressure, causing him to lower estimates to show declines in 2008. Auty notes management suggests semi R&D growth of 4% in 2008 vs. his 2.6% estimate, well off 2007 levels.

He says customers are taking longer and CDNS not willing to aggressively discount to speed sales closings, causing some first half 2008 opportunities to likely slip into the second half. He notes even with the stock down he thinks its performance will lag his coverage on relative basis as headwinds facing electronic design automation (EDA) will linger for several quarters.

Auty cuts $1.00 2008 EPS estimate to $0.60, and sees $0.74 for 2009.

BEAR STEARNS UPS ALLIANCE DATA SYSTEMS TO OUTPERFORM

Bear Stearns analyst James Kissane says Alliance Data Systems (ADS) posted solid fourth quarter results, once again beating his estimates, and provided an upbeat 2008 outlook. He also notes the shares have fallen more than 45% from their 52-week high.

Kissane says he's been a long-time fan of ADS, and after having rated it outperform from around the June 2001 IPO through May 2007, when the merger deal with Blackstone was announced, he's now returning to outperform (vs. peer perform).

He says PHM's upside is substantial, given its "superior long-term operating and financial track record," solid fourth quarter results, upbeat 2008 outlook, and valuation. He has a $66 yearend 2008 target price, or 14 times his preliminary 2009 cash EPS estimate (including FAS 123).