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Street Talk: Abby advice
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November 14, 2000: 10:35 a.m. ET
Goldman's oracle bullish; analysts rate Bristol-Myers Squibb, AmeriSource
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NEW YORK (CNNfn) - Wall Street analysts sought to soothe investors' ragged nerves Tuesday, with a prominent strategist calling the market's recent dip a buying opportunity and other analysts boosting stocks in some worrisome industries.
Analysts also focused on health, rating two drug companies and a natural-foods retailer.
Goldman Sachs strategist Abby Joseph Cohen tried to soothe investors' nerves, saying she thought the S&P 500 index is 15 percent undervalued on a 12-month view and that equity valuations are the most attractive they've been all year.
Cohen said she thinks U.S. economic and profit growth are slowing to sustainable rates and that a sharp rise in core inflation is less likely, making a raise in interest rates by the Federal Reserve also less likely.
Cohen suggested a market weight position in technology and telecommunications stocks.
Speaking of tech stocks...
SG Cowen analyst Richard Chu cut his price target for Hewlett-Packard (HWP: Research, Estimates) and lowered earnings estimates.
But Chu also said, "One strike, far from out," after the computer maker reported third-quarter results that fell short of Wall Street expectations.
For 2000, Chu cut his earnings estimates to $2 a share from $2.17 and to $2.40 from $2.55 for 2001.
"(We) believe that (Hewlett-Packard's) CEO will tighten operations execution," SG Cowen said in a research note. "Business is trending in the right direction, underlying franchises are strong, and what is missing is attention to operational execution, a situation that we believe will be rectified. We think this is an attractive place to put new money."
Shares of Hewlett-Packard rose 75 cents to $34.88 in early trading Tuesday.
Credit Suisse First Boston reiterated its "strong buy" rating and $87 price target on Cisco Systems (CSCO: Research, Estimates), the world's largest provider of computer-network equipment.
Cisco is aiming to be the No. 2 company in optical networking -- behind Nortel Networks (NT: Research, Estimates) -- by the end of 2002, up from a seventh position, CSFB said.
Shares of Cisco were up $2 to $53.38.
ABN AMRO analyst Dave Kang started coverage of fiber-optics maker Corning (GLW: Research, Estimates) with a "buy" rating.
In a report, he set a $12-month price target of $114.
"While maintaining its status as the dominant supplier of premium fiber and cable, Corning has emerged as one of the premier players in the red-hot optical networking space," Kang wrote.
Corning shares were up $4.13 to $63.13.
Lehman Brothers reassured investors about semiconductor company Applied Materials (AMAT: Research, Estimates), reiterating its "buy" rating and $121 price target.
"There has been speculation that Applied Materials will provide pessimistic guidance on its Nov. 15 conference call," Lehman said in a research note. "We think such speculation is premature."
"Applied Materials' suppliers have seen normal short-term volatility in the company's ordering pattern, but nothing that suggests a downturn," Lehman said. "If the company provides fiscal year 2001 guidance, we think it will call for growth that is consistent with the strong outlook for its competitors."
Get your fresh Hot Stocks.
Lehman Brothers analyst Daniel Fletcher cut his price target for high-speed
communications network service provider Global Crossing (GX: Research, Estimates).
In a report, Fletcher cut the 12-month price target to $28 from $50. He kept his "outperform" rating on the shares.
After markets closed Monday, Global Crossing said its third-quarter loss widened as the cost of building its high-speed communications networks offset surging data sales.
"With ample evidence of extreme competition in U.S. (long-distance) and data markets, we believe current 2001 expectations will prove aggressive and we are reducing our estimates and target," Fletcher wrote.
He revised his outlook for 2000 to a loss of $2.53 per share from a loss of $2.15. His estimate for 2001 is a loss of $2.80 a share.
Global Crossing shares were up 81 cents to $18.44.
To your health
ABN Amro pharmaceutical analyst Mario Corso reiterated Bristol-Myers Squibb (BMY: Research, Estimates) as a "buy" and set a 12-month target of $75.
Corso said he reiterated his rating in a research note "given the manageable generic outlook, coupled with one of the stronger late stage research and development pipelines in the sector, and strategic changes coming to enhance growth prospects."
Checks with numerous major U.S. oncology centers have revealed that generic Taxol for breast cancer is not widely available yet, and current contracts should maintain significant use of the brand, Corso said.
"Thus, we believe that fourth-quarter U.S. Taxol sales can top flat forecasts, and expected sales declines of 30 percent next year could be pessimistic," said Corso.
Corso added he saw upside potential for the company's Glucophage family of diabetes drugs. He said the Bristol-Myers franchise has garnered a 4 percent market share in recent months with the addition of new formulations of Glucophage, which recently lost its marketing exclusivity.
The family's original member Glucophage will face generic competition next year. But it has been joined since August by Glucovance, which is a combination of Glucophage and another drug, and Glucophage-XR, a once-daily version of older Glucophage, which is typically taken twice a day.
Merrill Lynch cut its intermediate-term rating on drug distributor AmeriSource (AAS: Research, Estimates) to "accumulate" from "buy," but raised its long-term rating to "buy" from "accumulate."
Merrill Lynch, saying the long-term upgrade reflects its current view on AmeriSource stock "following recent exceptional performance," also raised its price target on the shares to $55 from $46.
Merrill said that, though it's lowering its intermediate-term rating, "we are not trying to send any message to investors about our view of the company's prospects, which are solid in our view."
"We simply believe that a less aggressive intermediate-term rating is justified given the stock's strength," Merrill said. "Through operational excellence, high customer satisfaction, and strong financial returns, AmeriSource consistently demonstrates that it is both a great company and investment vehicle."
Lehman Brothers started coverage of natural-foods retailer Whole Foods Market (WFMI: Research, Estimates) with a "buy" rating and a $60 price target.
"As long as the economy remains healthy, we think Whole Foods will have considerable opportunity to add new stores in new markets and penetrate existing ones further," Lehman said.
Lehman Brothers reiterated its "neutral" rating on Minnesota Mining & Manufacturing (MMM: Research, Estimates), saying, "We believe that 3M's earnings next year will be adversely affected by a slower economy, higher energy costs, and a weak euro."
Net managers
Credit Suisse First Boston said analyst Adam Waldo lowered the rating on Web site management company StarTek (SRT: Research, Estimates) to a "buy" from a "strong buy" and cut the 12-month price target to $48 from $78 after the company reported third quarter results.
Waldo also said he now expects StarTek to earn $1.35 a share in 2000, down from $1.50. He also lowered the earnings outlook for 2001 to $1.63 a share, down from $2.
StarTek said Tuesday it earned $4.95 million, or 35 cents a share, in the third quarter of 2000, compared with $3.04 million, or 21 cents a share, in the year-earlier period. The results topped Wall Street's estimates by a penny.
However, revenue declined 1.5 percent and missed CSFB's projection by 5 percent, Waldo wrote. Management attributed this to continued project deferrals at a large software client.
StarTek lowered the bar for the rest of 2000 and for 2001.
Shares of StarTek were down 44 cents to $20.19.
Credit Suisse First Boston said analyst David Dusenbury downgraded Internet operating and development company CMGI (CMGI: Research, Estimates) to a "hold" from a "buy" rating following a stream of restructuring announcements.
On Monday CMGI said it planned to sell its entertainment Web site iCast and free Internet access company 1stUp.com. This comes on the heels of the previously announced closing of MotherNature.com and Furniture.com.
"While initial plans have been constructed and executed, we are unclear what CMGI will look like when it completes its transitions to an operating company, therefore making it difficult to see near-term upside," Dusenbury wrote in a research note. "While the shares of CMGI continues to reach new lows, the fact is we find it difficult to find support levels for the stock."
Shares of CMGI were up 13 cents to $14.63.
Cendant and Avis
Credit Suisse First Boston said it cut its 2001 earnings estimate on franchising firm Cendant (CD: Research, Estimates) to 91 cents from 95 cents to reflect the spinoff of the company's individual membership segment.
CSFB also trimmed estimates because of a higher share count beginning in 2001 and a higher litigation settlement interest expense in 2002, according to a research note.
Analyst Henry Diamond wrote in a research note that Cendant's planned purchase of car rental company Avis Group Holdings (AVI: Research, Estimates), announced Monday, was a "great deal for Cendant."
"Cendant, in our opinion, continues to present a compelling value and growth story," he wrote. "We maintain our 'strong buy' rating."
Shares of Cendant were down 16 cents to $11.34.
Diamond raised his earnings forecast on Avis, but cut his investment recommendation to "hold" without giving the previous rating.
 Diamond raised Avis' 2000 earnings estimate to $3.19 a share from $3.11 and his 2001 forecast on the company to $4.00 from $3.65.
The analyst downgraded Avis given the company's limited upside potential following the Cendant deal.
In the Cendant deal, Avis shareholders will receive $33 cash per share for each of the 25.6 million outstanding shares that Cendant does not already own, and Diamond thought this was a bit of a discount.
"We had expected a deal to be done in the mid $30's, so $33.00 was at the low end of our expectations," Diamond said.
Avis shares were up 6 cents to $31.94. 
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