Still Buy Cablevision

S&P likes the firm's sale of a 20% stake in its Rainbow programming unit. Also: opinions on Reebok and National Semi

Cablevision (CVC ): Maintain 5 STARS (buy)

Analyst: Howard Choe

The cable company's sale of 20% (non-voting interest) of Rainbow Media to Metro-Goldwyn-Meyer is positive as Cablevision not only gets an attractive sum but also gains access to one of the world's richest film and television libraries. MGM's content will greatly complement Rainbow's already potent programming networks and could be a great source of content for premium cable services such as video-on-demand and pay-per-view. The deal should close in two months. Cablevision will retain control and operate the unit, and plans to issue tracking stock for Rainbow subject to a February vote. The deal bodes well for both Cablevision and Rainbow.

Reebok (RBK ): Maintain 4 STARS (accumulate)

Analyst: P. Seligman

The sports-apparel manufacturer posted Q4 EPS $0.11 vs. $0.01, before nonrecurring charges, two cents above our estimate and four cents above the Street's expectations. Reebok sees 2001 revenue up 5%-7% on strong global demand for athletic footwear, strengthening apparel and stronger Rockport sales, but revenues will be partly offset by adverse foreign currency exchanges. Reebok sees its gross margin down 100 basis points, also on foreign currency, but its operating margin will grow wider as selling, general and administrative costs decline as a percentage of sales. The lower estimated 2001 tax rate should also help lift Reebok's EPS. We are raising our 2001 estimate by a dime to $1.68. Based on earnings momentum, we still see Reebok as a good growth story at 17 times our 2001 estimate.

National Semiconductor (NSM ) Maintain 3 STARS (hold)

Analyst: Megan Graham-Hackett

The chipmaker preannounced a Q3 EPS shortfall, and sees revenues of $475 million-$480 million, vs. our $535 million estimate. The company sees EPS of $0.20-$0.22 vs. the mean of $0.31. National Semi says turns orders were half of what they expected in Q3, and that these are orders placed and delivered within the quarter. The company also says distributors are not ordering due to uncertainty over contract manufacturers' component inventory levels, adding that it sees improvement in wireless chip orders next quarter. Its PC inventories appear to have already corrected. We are cutting the company's fiscal 2001 (May) EPS estimate $0.47 to $1.93. Shares are trading at 13 times our estimates.

Copper Mountain (CMTN ): Reiterate 2 STARS (avoid)

Analyst: Ari Bensinger

The DSL solutions firm posted breakeven Q4 vs. year-ago $0.12 EPS, in a range of recent downward guidance. The results reflect continued weak spending from competitive local exchange carriers. Copper Mountain needs to diversify from high concentration in these customers into international and incumbent telecom service providers. With the U.S. economy uncertain, we expect the company's challenging environment to increase in 2001. Copper Mountain has reduced its outlook significantly, and forecasts Q1 sales of $8-$10 million vs. $60 million in the prior period. The company also will squeeze margins.

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