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Cendant: Ready to Climb Again?


In 1998, Cendant (CD) was flying high at 41. Chairman Henry Silverman's appetite for big-name chains--such as Ramada Inn, Avis, and Century 21--had created a $35 billion dynamo. Things had started to unravel, however, in late 1997, when Silverman's former HFS merged with direct marketer CUC International to form Cendant. Silverman inherited a scandal involving more than $700 million in inflated earnings. A $2.8 billion shareholder settlement prompted a 1999 rally, but the stock now trades at 13.

Nevertheless, says Jay Leupp, an analyst at Robertson Stephens, who has upped his target twice in the past six weeks, "we feel the stock has bottomed out. Management is right smack in the middle of a turnaround." He expects Cendant to trade in the 20 range by yearend--a conservative target, since earnings are growing in the mid-teens.

Also in the plus column is Cendant's recent sale of money-losing Move.com to HomeStore.com for $900 million. That gave Cendant a 19% stake in dynamic HomeStore.com, the largest online real estate site. "This is one of the few firms in a difficult environment that has business momentum," says Peter Higgins of Dreyfus, who manages about $7 billion. Higgins expects 2001 earnings of about $1 a share and the stock to double in a year.

Gene Marcial is on vacation. By Mara Der Hovanesian


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