S&P Keeps Buy on VeriSign

Plus: Analyst comments on ValueClick's newest acquisition, and what Callaway needs to do to get out of the rough

VeriSign (VRSN ) : Reiterates 4 STARS (buy)

Analyst: Scott Kessler, Megan Graham-Hackett

VeriSign preannounced a third quarter revenue shortfall but keeps EPS guidance at 27 cents, above our 26 cent estimate. New revenue guidance is 6% below the company's prior forecast, due to a shortfall in the mobile-content segment: seasonal churn was higher than expected due to a lack of new content and regulatory restrictions in the U.K. While we see these issues impacting fourth quarter results, we expect strength in the Internet and communications businesses will continue to offset such factors. Our 2005 EPS estimate remains $1.05. We see stock buybacks as indicative of VeriSign's financial strength; our target price remains $30.

ValueClick (VCLK ) : Reiterates 3 STARS (hold)

Analyst: Scott Kessler, Todd Rosenbluth

The company completed its acquisition of Fastclick, a provider of online advertising services, earlier than we had anticipated. The company expects that Fastclick will add $22 million in revenues and $2.4 million in EBITDA for 2005, inclusive of stock-based compensation costs. Related to the acquisition, ValueClick has also issued approximately 15.6 million shares of common stock. We think the company has done a good job of consolidating online advertising companies, enabling it to become a multi-faceted provider of various Internet marketing products and services. We would hold the shares.

Callaway Golf (ELY ) : Reiterates 2 STARS (sell) Opinion

Analyst: Gary McDaniel

Callaway Golf announced a restructuring plan aimed at trimming $70 million in annual costs by 2007 and provided a preliminary sales figure of $215 million for the third quarter, well above our $148 million estimate, and stated earnings per share, excluding charges, would range from 1 cents to a loss of 5 cents. We are raising our September quarter earnings per share estimate to breakeven from a loss of 1 cents. Although we were encouraged by new CEO Fellow's initial attempt at savings, we believe much more needs to be done to restore Callaway's profitability and are unconvinced his growth plans can be realized given the stagnant state of golf markets. We maintain our $12 target price.

General Maritime (GMR ) : Starts coverage with a 2 STARS (sell)

Analyst: Royal Shepard

Via an active acquisition program, General Maritime has evolved into a leading operator of mid-sized crude tankers. However, its 70% exposure to the volatile spot market is high, in our view. Also, the company lacks refined products fixtures, currently in high demand because of the idled U.S. refinery capacity. Primarily reflecting lower average charter rates, our 2005 earnings per share estimate is $4.75, off 44% from 2004. Our 12-month target price of $32 blends a p-e at 6.5 times 2006 estimate, a price 6.0 times estimated 2006 earnings before interest, taxes, depreciation and amortization, and discounted cash flow using 11.8% weighted average cost of capital and 3% terminal growth rate.

National Fuel Gas (NFG ) : Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: Yogeesh Wagle

After the recent rise in share price, about 14% in September, we believe National Fuel Gas's stock appropriately reflects bullish commodity pricing trends. We expect a resumption of growth in fiscal year 2006 (ending September) to earnings per share of $2.06, driven largely by exploration and production volume and price gains. We believe the company should continue to generate 5% to 7% long-term earnings per share growth, driven by additional investments in E&P, pipeline and storage operations. Our 12-month target price rises by $2 to $36, valuing the shares at a slight discount to utility peers with larger E&P operations.

Bebe Stores (BEBE ) : Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Marie Driscoll, CFA

We see Bebe's brand strength and awareness growing as it raises ad spend to 4% of sales from 3.3%. We think monthly comparables will likely slow from 26% in fiscal year 2005 (ended June) to a still-healthy 10% pace in 2006, and regard the recent selloff as a buying opportunity. Near-term monthly comparables may disappoint the consensus estimate of 13% for September, which we view as high. But given growth opportunities via store expansion, licensing, accessories, and bebe sport, we recommend purchase. Our 12-month target price of $24, cut from $30, reflects lower peer-group multiples.

International Speedway (ISCA ) : Cuts to 3 STARS (hold) from 5 STARS (strong buy)

Analyst: Gary McDaniel

We are increasingly concerned about the strategic focus of International Speedway's management. We view the planned purchase of a Colorado racetrack, expected to close next week, as lackluster. This comes on the heels of the company's agreement to acquire Action Performance (ATN ), an unimpressive operator, in our view, in a business we see as risky and tangential. The Action Performance deal is subject to approvals and expected to close by year-end. With the heightened risk profile we see, we are cutting our target price to $57 from $68, blending our discounted cash flow model with peer and historical analyses.

Encana (ECA ) : Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Charles LaPorta

Since its creation from the merger of two large Canadian exploration & production companies, Encana has divested $10 billion of noncore assets, including the recently announced divestiture of Ecuador properties for $1.42 billion. In our view, this has transformed Encana into a premier North American onshore, mostly natural gas producer, with the company using sale proceeds for share repurchases. We are raising our 2005 and 2006 earnings per share estimates to $4.25 and $5.20, from $3.45 and $3.35. Our 12-month target price rises $20 to $67, based on enterprise value 7.0 times estimated earnings before taxes interest depreciation and amortization, a premium to peers.