S&P Keeps Sell on Amazon.com

Plus analysts' opinions on Bear Stearns, Oracle, and more

Amazon.com (AMZN ): Reiterates 2 STARS (sell)

Analyst: Jason Asaeda

Amazon.com has received over 560,000 advance orders for Harry Potter and the Half-Blood Prince, which is scheduled for release on July 16. The book should provide a third-quarter sales lift but we think its 40%-discount price will limit its earnings contribution. While we see positives in Amazon.com's new product and service offerings, we still expect both sales and earnings growth to moderate in 2005 on competitive pressures and rising operating expenses. We are reiterating our 2005 operating earnings per share estimate of $0.78 and our 12-month target price of $33.

Bear Stearns (BSC ): Reiterates 5 STARS (strong buy)

Analyst: Robert Hansen, CFA

Bear Stearns posted May-quarter earnings per share of $2.56, vs. $2.49, above our $2.37 estimate. We are impressed by profit growth in an environment of flattening yield curve and widening credit spreads. We expect fixed income revenue to grow modestly, and see improved equity markets aiding clearing volumes, margin debt balances, and asset management fees in 2nd half of fiscal 2005 (ending November). We are keeping our fiscal 2005 earnings per share estimate at $10.00, based on our expectation of higher merchant banking gains and prudent expense growth. Our 12-month target price remains $130, 13 times that estimate, a discount to peers.

Oracle Corp. (ORCL ): Reiterates 4 STARS (buy)

Analyst: Jonathan Rudy, CFA

Ahead of May-quarter earnings expected to be released on June 29, we anticipate operating earnings per share of 22 cents, up from year-ago 19 cents. With results benefiting from the recent acquisitions of Retek and PeopleSoft, we anticipate that total revenues will increase about 25%, year over year, to $3.85 billion. We expect license revenues to rise about 25%, to $1.64 billion. We are maintaining our fiscal 2005 (ending May) and fiscal 2006 operating earnings per share estimates at 63 cents and 76 cents. With Oracle trading at a discount to peers on p-e and p-e-to-growth metrics, we believe the shares of this database market leader remain attractive.

Chiron (CHIR ): Reiterates 1 STAR (strong sell)

Analyst: Frank DiLorenzo, Robert Gold

Stock is down after Chiron cuts 2005 pro forma earnings per share guidance to $1.20 to $1.45 from $1.40 to $1.50, due to lower expected influenza vaccine sales. However, Chiron is still experiencing manufacturing interruptions in the U.K., and FDA concerns regarding its U.S. manufacturing process remain unresolved. As such, we think there remains risk to Chiron's revised guidance. In our opinion, the stock's valuation at a premium to peers is not sustainable, based on growth of existing products and value of the company's pipeline. We are putting our 2005 earnings per share estimate under review. Our target price is $29.

E*Trade Financial (ET ): Reiterates 5 STARS (strong buy)

Analyst: Robert Hansen, CFA

E*Trade posted a 2.4% year-over-year decline in total daily average revenue trades, 7,980 net new accounts, and a 12.3% rise in total retail assets and deposits in May. We are impressed with the company's growth in client assets and deposits but expect second-quarter revenue to fall, given weak trading activity thus far and lowered commission rates implemented in February. We are leaving our 2005 earnings per share estimate at $1.05 and our 12-month target price at $18, about 17 times our 2005 earnings per share estimate. We think E*Trade would make an attractive acquisition candidate, despite its efforts to acquire competitors.

Tommy Hilfiger (TOM ): Maintains 2 STARS (sell)

Analyst: Marie Driscoll, CFA

Tommy Hilfiger posted fiscal 2005 (ending March) pretax operating profit of $92 million, down 46% from fiscal 2004, and below its $115 million guidance. March-quarter profits have been delayed by U.S. Attorney's investigation of Tommy Hilfiger's buying office. U.S. wholesale revenues fell 40%, and Tommy Hilfiger sees another 20%-plus decline in fiscal 2006. International wholesale was up 29% (21% without foreign exchange gains). Retail rose 18% on low single-digit comp-store sales rise and more stores. Tommy Hilfger plans to spend $30 million in fiscal 2006 to support business development, and guides for $120 million to $124 million in pretax profit. We are maintaining our fiscal 2006 earnings per share estimate of 86 cents and our target price of $8.

Hovnanian Enterprises (HOV ): Upgrades to 4 STARS (buy) from 3 STARS (hold)

Analyst: William Mack, CFA

Evidence of continued strong demand for homes has increasingly convinced us that Hovnanian's aggressive land purchases in the past 18 months will lead to significant rises in unit sales volume. We have initiated a fiscal 2006 (ending October) earnings per share forecast of $8.85, based on expected minimal margin gains, 20% above our fiscal 2005 estimate of $7.35. We think the likelihood of higher sales prices and margins provides a cushion. We are raising our 12-month target price to $73 from $69, a 10 times p-e, as we think Hovnanian's favorable growth prospects merit about a 10% premium to peers.

Hornbeck Offshore Services (HOS ): Downgrades to 4 STARS (buy) from 5 STARS (strong buy)

Analyst: Stewart Glickman

Our downgrade is based on valuation. Shares of Hornbeck have had a nice run of late, up more than 40% year to date, and up 10% in June alone. We still think the company is well positioned to benefit from rising deepwater drilling activity in the U.S. Gulf of Mexico and its high proportion of technologically advanced vessels. Shares are trading at 9.5 times estimated 2005 EBITDA, in line with the 9.7 times peer average; but also at 8.8 times estimated 2005 cash flow, below peers' 9.5 times. Our discounted-cash-flow model shows shares as slightly undervalued. Blending valuations, our 12-month target price remains $31.

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