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S&P Ups Juniper Networks to Hold from Sell

Juniper Networks (JNPR) : Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Ari Bensinger

We believe Juniper Networks continues to execute well, both in its commitment to its financial metrics and in what we see as its technological edge over its competition. However, we think that the company needs to expand its distribution base and product application features to better compete in the enterprise market with rival Cisco (CSCO). Our 12-month target price remains $17, which we think appropriately accounts for our view of potential execution risks as the company aims to expand its enterprise presence.

Beazer Homes (BZH) : Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: William Mack, CFA

Sharp recent declines in the stock price offset much of our concern over demand for homes, which we think will continue overall to weaken. We are maintaining our fiscal year 2006 (ending September) EPS estimate of $10.40, and initiating our fiscal year 2007 forecast at this same amount. Our 12-month target price of $57 is unchanged.

Big 5 Sporting Goods (BGFV) : Cuts to 1 STAR (strong sell) from 2 STARS (sell)

Analyst: Mark Basham

First quarter earnings per share (EPS) of 26 cents vs. 28 cents is in line with our estimate. We think the 8% rise in share price this morning was on relief that some sell-side estimates as low as 11 cents were unfounded. That earnings fell despite a 9% sales rise is to us a sign of rising cost pressure, including higher transport costs. Big 5 Sporting Goods guides for second quarter EPS of 23 cents to 27 cents vs. 27 cents, compared with our 30 cents estimate. With our view that consumer spending will moderate as 2006 goes on, we are keeping our 2006 estimate of $1.23, at the low end of Big 5 Sporting Goods $1.23 to $1.33 guidance. Our 12-month target price remains $15.

Barr Pharmaceuticals (BRL) : Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: Herman Saftlas

Barr Pharmaceuticals receives a "non-final" rejection notice from the patent office on its application for the reissuance of its patent on Seasonale extended regimen oral contraceptive, which we estimate will account for about 8% of sales in fiscal year 2006 (ending June). While Barr Pharmaceuticals is expected to attempt several defensive tactics, we think this rejection clears the way for Watson Pharmaceuticals (WPI) to launch its generic Seasonale in early September. We are lowering our 12-month target price by $10 to $60.

Harmonic (HLIT) : Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Ari Bensinger

We like Harmonic's market position supplying equipment for cable and satellite equipment, which are fiercely competing to win new customers. However, we think the company is struggling to execute in a more competitive operating environment as the industry transitions towards next generation encoding capabilities. Our 12-month target price remains $5, or 1.5 times our 2006 sales estimate, below peers. This is warranted by recent sales and earnings disappointments, and by profitability ratios that are well below the industry average. But with shares near our target price, we would hold.

NVR (NVR) : Ups to 2 STARS (sell) from 1 STAR (strong sell)

Analyst: William Mack-CFA

Sharp recent declines in the price of the shares offset some of our concern about demand for homes, which we think will continue to weaken overall. We believe it is only a matter of time before the fundamentals for this builder also suffer, since its key markets in close proximity to Washington DC remain under pressure. Even though our 2006 and 2007 EPS forecasts remain at $108.00 and $110.00, respectively, we continue to apply to next year's forecast a 6 times price-to-earnings, about in line with the average we use to value its peers. Our 12-month target price for NVR remains $660.

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