Despite Holiday Shopping Sprees, Sell Yahoo!

Also: opinions on Amazon and Global Santa Fe; plus others

Yahoo! (YHOO ): Keeping 1 STAR (sell)

Amazon (AMZN ): Keeping 2 STARS (hold)

AOL Time Warner (AOL ): Keeping 4 STARS (accumulate)

Analyst: Scott Kessler

Yahoo!'s shopping volume rose higher-than-anticipated 75% this past weekend. Amazon's unique audience for Black Friday was up 33% over previous Friday to 1.7 million visitors. AOL also provided nice e-commerce and subscriber growth numbers recently. Despite run-ups from recent lows reflecting anticipated improving fundamentals, S&P is still maintaining its focus on valuation. Discounted cash flow work shows Yahoo! is very overvalued, but AOL still has upside.

Pier 1 Imports (PIR ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Maureen Carini

The company says strong sales trends, which began at the end of September, has continued through November. The company is raising its Q4 EPS guidance from $0.19 to $0.21. Pier 1 sees November same-store sales rising 6% to 8%, and believes strong momentum will continue through the holiday season as consumers spend more time at home with their families. S&P is raising the fiscal 2002 (Feb.) EPS estimate from $0.77 to $0.86, and now sees $1.00 for fiscal 2003. While shares are attractive for long-term gains, S&P advises caution as shares are touching on the upper end of historical price-to-earnings valuation levels.

Global Santa Fe (GSF ): Initiates with 4 STARS (accumulate)

Analyst: Tina Vital

The company was formed via a merger on November 20, making it the world's second largest offshore driller, with about 103 rigs and a presence in each major market. While the expected synergies of $25 million by end of next year reflects little operational overlap between the two firms, the deal is highly complementary; and the merger offers multiple expansion and increased market share. Shares trade at a discount to peers at 12 times S&P's 2002 EPS estimate; the price-to-book multiple is near recent lows; and the company utilizes conservative financial policies. With the sector poised for a rebound next year, S&P says accumulate.

Forest Oil (FST ): Initiates with 3 STARS (hold)

Analyst: James Kartsonas

With exploration and production operations mainly in North America, and total reserves of 1.4 trillion cubic feet (61% gas), S&P looks for Forest Oil to benefit longer term from its promising Alaska operations. However, in the intermediate term, S&P expects the weak commodity environment to put pressure on the stock with only 20% of 2002 production hedged. S&P sees 2001 EPS at $3.09, and sees 2002's at $0.69. Shares are trading at a 10% discount to S&P's net asset value based on 2000 proven reserves, and 4.5 times the 2002 discretionary cash flow estimate.

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