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Plus: Analysts' opinions on Standard Pacific and Evergreen Solar
From Standard & Poor's Equity ResearchS&P MAINTAINS BUY OPINION ON SHARES OF JPMORGAN CHASE (JPM; 47.11):
JPM and Bear Stearns (BSC; 10.50) amend their merger agreement, increasing the price to $10 per BSC share from $2 a share. The FED agrees to supply a $30 billion lending facility, with JPM responsible for the first $1 billion in losses. Given that BSC's board approves the merger, and that new shares are to be issued that will give JPM 39.5% ownership if BSC's stock, we believe the acquisition will be consummated at the current offer price of $10 a share. -S. Plesser
S&P MAINTAINS SELL RECOMMENDATION ON SHARES OF BEAR STEARNS (BSC; 11.87):
With BSC shares trading above the revised JPMorgan Chase offer of 0.22 shares of JPM, or about $10 per BSC share, we are keeping our sell recommendation. JPM is also buying just under 40% of BSC in new shares in a deal that does not require shareholder approval, and is also now taking on the first $1 billion in losses from assets guaranteed by the Fed. Considering the new stipulations and JPM's acquired voting power, we believe there is a strong likelihood this deal will be done in its revised form. We are lifting our target price to $10 from $2.50 to reflect the offer. -M. Albrecht
S&P DOWNGRADES SHARES OF FAMILY DOLLAR STORES TO SELL FROM HOLD, ON VALUATION (FDO; 21.72):
After the recent price increase, FDO shares are now trading above our p-e-based 12-month target price of 20, which we raised today from 17 mainly to reflect higher peer multiples. In view of macro-economic pressures on customers and aggressive pricing by competitor, we think the company will have a tough time arresting its negative same-store sales trend over the near term. Based on that, as well as the added challenge of business disruptions from merchandising changes in selected stores, we do not expect improvement in FDO's fundamentals during fiscal year 2008 (August).-J. Asaeda
S&P MAINTAINS HOLD OPINION ON PALM SHARES (PALM; 4.72):
PALM posts third quarter operating loss per share of $0.23, vs. EPS of $0.11, $0.03 wider than our forecast. Revenues were down 23%, falling a bit further than expected as pressure on the handheld segment and slower sales of legacy smartphones outweighed sales of the new, low-priced Centro phone. Gross margin was weaker than we anticipated. While we believe sales will turn around in fiscal year 2009 (May) on further gains of Centro and a revamped product lineup, we see ongoing operating losses due to higher marketing costs and increased interest expenses. We maintain our price/sales-based target price of 6. -T. Rosenbluth
S&P MAINTAINS HOLD OPINION ON SHARES OF STANDARD PACIFIC (SPF; 4.93):
With SPF getting an extension of a waiver of non-compliance with its credit facility, lowered from $900 million to $700 million, and holding $293 million in cash on hand at Mar. 21, we believe it has a better chance of surviving the severe housing downturn. SPF also appointed a new CEO from its director ranks last week. We believe SPF's high lot inventories in California will become attractive when the housing market turns around. Applying a price-to-book slightly below 0.5 times to a forward book value of $14.75, in line with small builders, we are maintaining our 12-month target price at 7. -K. Leon-CPA
S&P MAINTAINS BUY OPINION ON SHARES OF EVERGREEN SOLAR (ESLR; 8.14):
ESLR shares are down 55% since the start of 2008, which we believe is due to economic worries and an uncertain supply/demand equation for solar panels and their primary raw material of silicon. We still think ESLR's prospects are favorable, as silicon purchase pacts of the past year are enabling it to expand production goals. Yet, given limited visibility for ESLR's primary business factors, we are reducing our cash flow growth outlook for the coming years. We are also cutting our DCF-based 12-month target price by $6 to $11, which still offers appreciation potential. -M. Jaffe