Electronics Boutique (ELBO): Maintains 5 STARS (buy)
Analyst: Markos Kaminis
The stock declined after a mid-March EPS conference call where marketshare concerns were raised. But S&P views the company as a strong leader in video game retailing. The company wins supply allocation from manufacturers by sharing pre-order data, and price matching and gaming focus wins customer loyalty. S&P believes that decreased trading volume indicates a bottom, and thinks the shareholder base has solidified. The stock is compelling at 21 times S&P's fiscal 2003 (Jan.) EPS estimate of $1.59, against the 39% two-year average growth seen. S&P's discounted cash flow model indicates intrinsic value at roughly $47.
Bradley Pharmaceuticals (BPRX): Downgrades to 2 STARS (avoid) from 4 STARS (accumulate)
Analyst: Michael Santicchia
The stock continues to sell off after disappointing fourth quarter results. The company is building up its marketing and sales force to support the introduction of new products. A negative investor reaction to its recent Form S-3 filing to sell 1.9 million shares and negative sector sentiment leads S&P to advise avoiding the stock.
EMC Corp. (EMC): Maintains 3 STARS (hold)
Analyst: Richard Stice
A story in Wednesday's Wall Street Journal discussed the possibility of added layoffs at EMC in an attempt to return to profitability in the second half of 2002. The sector continues to struggle as near-term customer demand remains weak and as pricing pressures cut into margins. S&P views the move as likely, given the new emphasis on the less labor-intensive, higher-margin software business. S&P still sees a 2002 loss per share of $0.01, and sees 2003 EPS of $0.20. Despite the industry leadership position and a strong balance sheet, S&P would not add to EMC holdings until IT spending levels improve.
Ericsson (ERICY): Maintains 3 STARS (hold)
Analyst: Ari Bensinger
The CEO of leading wireless network equipment maker Ericsson says ahead of the company's annual meeting in Sweden that he's not seeing a significant rise in European orders and does not expect a market rebound during 2002. S&P forecasts a 30% sequential sales decline for Ericcson's March quarter. Wireless operators continue to curtail investments to increase their cash flow. Next generation General Packet Radio Services (GPRS) is growing slower than anticipated. S&P would also avoid Comverse Technology (CMVT) and sell Andrew (ANDW).
A.G. Edwards (AGE): Maintains 3 STARS (hold)
Analyst: Robert McMillan
The company posted February quarter EPS of $0.37 before charges, vs. $0.57, below expectations. The 29% drop in commission revenue offset higher revenues from principal transaction, investment banking and asset management segments, and lower operating expenses. Investment banking business is up 48% on growth in fixed income offerings. Rebounding investor confidence and cost cuts should help future profitability. S&P is reviewing it estimates, and views A.G. Edwards as fairly valued at 19 times the Street's fiscal 2003 (Feb.) $2.36 EPS estimate, which is a premium to some of its larger, more diversified peers.