S&P Picks and Pans: eBay, AT&T, RIMM, Xerox, Capital One

S&P REITERATES STRONG BUY OPINION ON SHARES OF EBAY INC.

EBAY; $28.94

EBAY is indicated down about 9% in pre-market trading, following yesterday’s 7% rise, after posting fourth-quarter marketplaces revenues 2% below our forecast and giving conservative guidance owing to pending fee changes and an uncertain economy. Nonetheless, at such levels, EBAY trades at about 16X our 2008 EPS forecast, a notable discount to historical levels, and even to our 2008 revenue growth rate forecast. We view EBAY as extremely attractive. We are encouraged by announced management changes and expect incoming CEO John Donahoe to focus on the customer experience and shareholder value. /S. Kessler

S&P MAINTAINS STRONG BUY OPINION ON AT&T SHARES

T; $36.53

AT&T posts fourth-quarter EPS of 71 cents vs. 61 cents, before one-time items, one cent below our estimate due to fewer-than-expected shares repurchased. Revenue and operating income matched our forecast and exhibited encouraging trends despite, in our view, competitive pressure in wireline resulting in higher access-line losses. Wireless net adds of 2.7 million were well above our 1.5 million estimate, while directory and Uverse made further progress. AT&T’s reiterated 2008 revenue and operating income guidance is in line with our forecast. We will update following morning conference call. /T. Rosenbluth

S&P UPGRADES OPINION ON SHARES OF RESEARCH IN MOTION TO BUY, FROM HOLD

RIMM; $93.00

RIMM shares are down 18% this year, we think on concerns that macroeconomic challenges and exposure to weaker financial services firms will lead to slower growth. We believe our estimates reflect these concerns, and were encouraged by demand for smartphones from wireless customers at AT&T and other carriers during the holiday season. We see demand growing stronger. We leave our RIMM estimates for fiscal 2008 [Feb.] and fiscal 2009 at at $2.23 and $3.10. With upside to our 12-month target price of $110, based on P/E-to-growth [PEG] at 1.4X, we view RIMM shares as attractive. /T. Rosenbluth

S&P MAINTAINS HOLD OPINION ON SHARES OF MASTERCARD

MA; $186.33

Ahead of MasterCard’s fourth-quarter results, scheduled for January 31, we expect operating EPS of 71 cents vs. 31 cents. We expect transaction volumes to remain solid despite a general slowdown in consumer spending, as consumers shift to greater credit usage. We continue to expect MasterCard to emphasize international growth as U.S. gross dollar volume shows signs of decelerating. Although we forecast an increase in advertising and marketing spend by MasterCard during fourth-quarter, the discretionary nature of the expense would have allowed the company to pull back spending if overall results looked disappointing. /F. Braden, CFA

S&P MAINTAINS BUY RECOMMENDATION ON SHARES OF XEROX CORP.

XRX; $14.22

Xerox reports fourth-quarter EPS of 41 cents vs. 38 cents [before 16 cents restructuring charge], in line with our estimate. Revenue rose 11%, reflecting acquisitions and currency benefit. We think the company is on track for gradual sales and margin improvements as it moves customers towards greater use of color products. Xerox expanded its aggressive stock repurchase program with a $1 billion authorization. We are maintaining our EPS estimates of $1.35 for 2008, and $1.50 for 2009. We are lowering our 12-month target price to $18 from $20, based on a more conservative target P/E. /T. Smith, CFA

S&P MAINTAINS HOLD OPINION ON SHARES OF CAPITAL ONE FINANCIAL

COF; $44.20

Capital One reports previously announced fourth-quarter operating EPS of 85 cents vs. $1.17, in line with our estimate. Results were hurt by higher loan-loss provisions in all segments. We believe COF is taking action, especially in its auto business, to reign in growing credit costs, however, we expect some of these actions to hamper top-line growth. We further expect U.S. credit card margins to decline from lower fee income. We are reducing our 2008 EPS estimate by 5 cents to $6.31, but we are keeping our 12-month target price of $48, 7.6X that estimate, a steep discount to Capital One’s historical average. /F. Braden, CFA

S&P REITERATES SELL OPINION ON LENNAR SHARES

LEN; $15.60

Lennar posts November-quarter loss per share of $7.92 vs. a loss of $1.24, including writeoffs of $1.1B in land, land options, investment in joint ventures and goodwill. We believe more writedowns are likely in fiscal 2008 [Nov.] with Lennar’s high level of joint venture investments. In November-quarter, there was a year-over-year decline of 39% in new orders, 30% in contract cancellations and 50% in revenues. We see a 33% sales decline in fiscal 2008, and we are raising our loss estimate to $7.35 from $2.75. Applying 0.5X price-to-book, near peers, to a value of $24, we are keeping our 12-month target price at $12. /K. Leon, CPA