Analyst Picks and Pans: CBS, VRSN, DRYS, BEBE

CBS Corp. (CBS)

Jefferies & Co. reiterates hold

CBS Corp. said May 7 that it sees signs of life in the moribund ad market -- but the hopeful talk hasn't convinced everyone a snapback is at hand. "While we're modeling some improvement (in the second half of the year), we expect a more prolonged recovery," Jefferies & Co. analyst Brian Shipman told investors in a May 8 note.

CBS posted a $55 million loss for the first quarter on May 7, missing Wall Street forecasts. But CBS Chief Executive Leslie Moonves signaled that the worst of the advertising downturn may be over, telling analysts on a conference call, "We are seeing early signs of improvement in the advertising marketplace both locally and nationally."

Shipman struck a more cautious tone. He said, "Though fear-induced cuts to ad (spending) may be behind us, advertisers remain in a weakened state, and will likely continue to conserve cash, and for the most part won't increase (spending) until" next year.

VeriSign Inc. (VRSN)

Jefferies & Co. reiterates buy

VeriSign, which provides Internet infrastructure services like domain name registration, earned $65 million, or 34 cents per share, in the quarter compared with a loss of $8.1 million, or 4 cents per share, a year ago. Revenue rose 8% to $255 million from $235.3 million.

In a May 8 note to clients, Jefferies & Co. analyst Katherine Egbert called the stock "a solid bet" whether there is a quick economic recovery or not. She also boosted her price target to $30 from $25.

DryShips Inc. (DRYS)

Oppenheimer downgrades to perform from outperform

Oppenheimer analyst G. Scott Burk said DryShips announced another ATM offering, with plans to sell up to $475 million of stock from time to time. Burk noted that at its current price of about $10 per share (before the May 8 open), this implies another 47.5 million shares added, or dilution of about 26% to current shareholders.

Burk recommends trimming positions in DryShips, though he expects the damage from this offering to be less than the $500 million offering in January, given the improved market and dry bulk environment. He eliminated his $10 price target.

Bebe Stores (BEBE)

FBR raises estimates

FBR analyst Adrienne Tennant said on May 8 that Bebe posted a third-quarter pro forma loss per share of $0.04, vs. Wall Street's $0.08 loss forecast. She said channel checks show the cleanest levels of inventory she's seen in Bebe stores in several quarters; she believes this position will allow the company to maintain

its minimal promotion stance relative to peers, and mitigate markdown pressure. She believes the return to the helm of CEO Manny Mashouf (in January, 2009) after a five-year hiatus is being positively felt.

The analyst raised her $0.14 fiscal 2009 (June) EPS estimate to $0.19, and her $0.15 fiscal 2010 forecast to $0.19. She has a $10 price target on the stock.

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