Bear Stearns upgraded LeapFrog Enterprises (LF ) to outperform from peer perform.
Analyst Jennifer Childe says channel checks suggest LeapFrog's products are selling very well at the retail level. She notes management confirmed all of the $25 million to $26 million of missed third-quarter sales were made up during the first few weeks of the fourth quarter. Childe says she's confident that if LeapFrog's technology-based educational products continue to sell well at the retail level, the company will report a strong fourth quarter.
She thinks recent insider selling, including nearly two million shares sold by Michael Milken, may be spooking investors. Yet, at only 21 times her $1.55 2004 earnings per share estimate, the shares are inexpensive relative to their estimated three-year growth rate of at least 25%. Childe sees $1.27 2003 earnings per share.