S&P Keeps Buy on eBay

Also: Analysts' opinions on America West and Allstate. Plus more

eBay (EBAY ): Reiterates 5 STARS (buy)

Analyst: Scott Kessler

Late last week, eBay announced that it had acquired a 25% stake in Craigslist, an online community featuring classifieds and forums, for an undisclosed sum. We expect the companies to initially share expertise and resources. Craigslist currently generates revenues from employers posting classified ads.

We think this investment makes perfect sense for eBay and will enable it to broaden its portfolio and to better consider new offerings and businesses. We note that eBay has made minority investments in the past that have eventually become full-scale acquistions.

America West (AWA ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: James Corridore

In an article published over the weekend, CEO Doug Parker said he sees no fundamental industry improvement over the next six months, but that America West won't change its growth plans or strategy. We think the airline has transformed itself into a low-cost airline and has improved its chances to survive in the long term. However, given our view of oil prices, industry overcapacity, and continued price wars in transcontinental markets, we no longer think this is a good time to be adding to positions. We have cut our 12-month target price to $7 from $10/

Allstate (ALL ): Maintains 5 STARS (buy)

Analyst: Catherine Seifert

We tentatively estimate industry-wide insured loss from Hurricane Charley to be $5 billion to $10 billion, vs. $25 billion (in today's dollars) from Hurricane Andrew. But we note that since Andrew, insurers have tightened underwriting, flooding from Charley isn't covered by many homeowner policies, and much of the hurricane exposure has been shifted to a state-sponsored catastrophe fund. Though we expect Allstate's third-quarter results to suffer, we're not yet changing our $5.50 2004 EPS estimate. We still view Allstate as an undervalued franchise, and we have a $59 target price.

Earthlink (ELNK ): Maintains 5 STARS (buy)

Analyst: Scott Kessler

Earthlink sold off late Friday, we think in part because of continued weakness in the shares of primary competitor United Online, down 42% this month through August 13. A number of United Online xexecutives filed to sell hundreds of thousands of its shares late last week, even after most of this month's decline had already occurred. We continue to believe Earthlink is a compelling value with p-e's of 11 for 2004 and 10 for 2005, and some $3.20 per share in net cash and investments. Also, we expect digital-subscriber line offerings with Verizon to gain traction in the third quarter. Our 12-month target price is $13.

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