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Opinions from analysts around Wall Street Wednesday
From Standard & Poor's Equity ResearchROTH CAPITAL MAINTAINS BUY ON BIDZ.COM AFTER NEGATIVE REPORT
Roth Capital analyst Elizabeth Pierce notes that Bidz.com (BIDZ) responded yesterday to negative article from CitronResearch which questioned the company's business model and practices. She notes that CitronResearch will publish a follow-up today which is supposed to expose some extremely questionable bids and bidding practices.
She feels BIDZ did a decent job addressing the issues, although it had a tougher time addressing its questionable bidding practices. Pierce says, based on the fact BIDZ reiterated fourth quarter and 2007 guidance and a 78% sales increase over Thanksgiving weekend, she does not believe there is much risk to the fourth quarter.
She believes the company should be judged by its results (15 consecutive quarters of profit) and future growth prospects, rather than this report.
STIFEL NICOLAUS UPS VERIGY TO BUY
Stifel Nicolaus analyst Patrick Ho tells S&P MarketScope Verigy (VRGY) once again beat expectations, posting pro-forma EPS of $0.63, ahead of his $0.55 forecast. He says there are two main reasons for his upgrade from hold: he believes VRGY is one of best fundamental stories in the challenging semi test environment and valuation.
Although the industry clearly is in a state of flux, Ho believes VRGY's strong market share position (one that he thinks will continue to improve) and its strong business model will allow the company to weather the industry's volatility than its peers. He says the company also announced a $150 million stock buyback program, which he thinks addresses the company's continued strong cash flow generation through the cycles. He has a $32 price target on the stock.
STIFEL NICOLAUS UPGRADES OVERSTOCK.COM TO HOLD FROM SELL
Stifel Nicolaus analyst Scott Devitt says Overstock.com (OSTK) stock is down by 40% in the past month, vs. an 8% drop in the NASDAQ. He upgrades OSTK to hold. However, he lowers his fair value estimate to $23-$27, or 0.6 times 2009 gross merchandise value (GMV).
Devitt says, as OSTK's business shifts from direct (owned) inventory to indirect (non-owned) inventory, he believes its business should be compared with eBay (EBAY) on a GMV basis. Given that eBay shares are trading at 0.6 times 2009 GMV and its organic growth rate remains higher than OSTK's, he finds eBay to be the preferred investment of the two.
He would become more positive on OSTK given any signs it can grow its business, on an organic basis, at or near domestic eCommerce growth levels.
MORGAN KEEGAN MAINTAINS MARKET PERFORM ON CBRL GROUP
Analyst Robert Derrington says CBRL Group's (CBRL) $0.57 first quarter EPS missed his $0.68 and the Street's $0.65 estimates; revenues of $581.2 million fell short of his $583.7 million estimate. He notes that first quarter operating margin, at 6.2%, was weaker than he expected, dragged by higher-than-expected labor and operating expenses.
Derrington says, despite much lower-than-expected G&A ($33.2 million vs. his $36.4 estimate), the weaker-than-expected revenue and operating margins dragged EPS below expectations.
The analyst also notes that the restaurant chain cut fiscal year 2008 (July) EPS guidance to $3.00-$3.15 from $3.05-$3.20, given the volatile consumer environment. He says he'll be adjusting his EPS estimates, including $3.10 for fiscal year 2008, following the company's conference call this morning. He maintains market perform.