January 11, 2008

Analyst Actions: Starbucks, Circuit City, Intuitive Surgical, Leap Wireless

LEHMAN KEEPS OVERWEIGHT ON STARBUCKS

Lehman Brothers analyst Jeffrey Bernstein says with Starbucks' (SBUX) U.S. performance struggling in terms of traffic trends, Street sentiment extremely negative, and international strength not currently being awarded by investors, SBUX's board announced a series of initiatives to drive short- and long-term shareholder value.

He agrees that Howard Schultz, chairman and former CEO, would be the best person to oversee such significant changes in near-term growth and focus, while making no significant change to its long-term growth profile.

Bernstein notes that in the U.S., the pace of store openings is being slowed, in an effort to renew their focus on store-level unit economics. He has a $30 price target on the stock.

COWEN DOWNGRADES CIRCUIT CITY STORES

Cowen analyst Jonathan Cramer says he is downgrading Circuit City (CC) to neutral from outperform, as he has limited visibility into the timing of the company's turnaround.

Similar to sentiment accompanying his downgrade of Best Buy (BBY) today, he believes a turnaround will be challenging in the near term due to 1) maturing product cycles; 2) a lack of compelling new product cycles on the horizon; 3) a difficult consumer backdrop.

Cramer says for now, there's still value, but, there's no time horizon for when management, or an external catalyst, will unlock that value. He widens $0.48 2007 loss estimate to $1.38 loss, and cuts $0.10 2008 EPS estimate to $1.27 loss.

WACHOVIA CUTS INTUITIVE SURGICAL TO MARKET PERFORM FROM OUTPEFORM

Wachovia analyst Michael Matson says he's downgrading Intuitive Surgical (ISRG) because he now views the stock as fully valued and is concerned market expectations may have moved too high for ISRG.

Matson sees the possibility that ISRG may guide below consensus 2008 estimates (particularly revenue and systems placements), which in his view assume a high level of system sales contribution in the face of tough comps and a credit crunch that could slow hospital capital spending.

He notes his EPS estimates remain below consensus, even though he's raising them to reflect more bullish expectations for procedure growth: $4.58 2008 goes to $4.74, $6.00 2009 to $6.33.

BEAR STEARS REITERATES OUTPERFROM ON LEAP WIRELESS INTERNATIONAL

Bear Stearns analyst Philip Cusick says Leap Wireless (LEAP) had a holiday rebound after a tough summer. He notes the company's pre-announcement of 152,000 net adds in the fourth quarter beat his revised 102,000 estimate and actual third quarter adds of 36,000. He says 4.2% fourth quarter churn was significantly lower than his 4.7% forecast and third quarter's 5.2%, and only slightly up from 4.1% in the fourth quarter of 2006.

Cusick notes this was in line with the company's comment that churn in new markets is showing signs of maturing as the base ages. He believes the low-end wireless consumer could be under pressure but that he/she continues to purchase wireless service in line with seasonal trends. He has a $60 price target on the stock.

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