Markets & Finance

S&P Picks and Pans: Bear Stearns, Vodafone, OXPS, Allstate


Analyst opinions on stocks making headlines Wednesday

S&P REITERATES HOLD OPINION ON SHARES OF BEAR STEARNS

From Standard & Poor's Equity Research

BSC; $108.45

Bear now expects to take a $1.2 billion write-down in Nov-Q to mark its mortgage-related exposure to market. Given this mark and other revenue reductions and lower margins, we are lowering our Nov-Q estimate to a loss of 90 cents from EPS of $1.69. We believe the mortgage market will remain challenging in fiscal 2008 (Nov.), but growth in Bear's commodities business may mitigate some losses. We are reducing our fiscal 2007 EPS estimate to $6.60 from $10.07, our fiscal 2008 estimate to $9.60 from $10.80, and our 12-month target price by $15 to $120; 1.3X projected book value, a discount to peers. /M. Albrecht

S&P MAINTAINS SELL OPINION ON ADRS OF VODAFONE

VOD; $40.40

Vodafone's results for the first half of fiscal 2008 (Mar.), including a 7% rise in EPS and 9% revenue growth, appeared strong to us. We contend the divisional performance reflects the strength in emerging market wireless operations, with 40% growth in revenues, and the maturity of Western European markets such as Germany and Italy. We believe the strong performance is reflected in the ADRs' premium-to-peer P/E valuation, while the lack of wireline could hurt Vodafone's market position. We raise our 12-month target price by $2 to $31 on currency adjustments, but we believe the ADRs are overvalued. /C. Perea

S&P MAINTAINS HOLD OPINION ON SHARES OF OPTIONSXPRESS HOLDINGS

OXPS; $29.95

OXPS reports strong monthly trading statistics for October, with daily average revenue trades up 64% year-over-year and 26% sequentially. DARTs at 44,600 were a record, and trading results were well ahead of our expectations. We believe OXPS is benefiting from high volatility in the U.S. equity markets and growth in its customer base. Despite the recent strength, we remain concerned that prolonged periods of market volatility or declines in the market are negative for retail trading activity. With shares near our target price of $30, we see limited potential for appreciation. /J. Willey

S&P MAINTAINS BUY RECOMMENDATION ON SHARES OF ALLSTATE CORPORATION

ALL; $54.66

We view the shares of this property-casualty insurer as undervalued, as compared with many of its peers, and are encouraged by steps Allstate has taken to refine its pricing and risk management capabilities and to reduce its exposure to catastrophe claims. This is tempered by our view that price competition remains heated and that some claim trends are eroding. Our $65 target price, which we reduced $1, assumes the shares trade at 9.2X our $7.08 2007 operating EPS estimate and 9X our $7.25 operating EPS estimate for 2008, both still discounted to most peers. /C. Seifert


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