April 28, 2000

NW stock watch

Each week, the Daily Journal of Commerce asks local analysts their views on Northwest stocks.

Stock prices reflect Thursday's closing. The Dow closed on Thursday down 57 points at 10,888, and the Nasdaq rose 144 points to 3,774.

Analysts use the following guidelines for their recommendations:

• Strong buy, buy or highest
• Buy/accumulate, mild buy, outperform, attractive or above average
• Neutral, hold, reasonably priced, average or market performer
• Mild sell, unattractive, below average or underperform
• Sell, lowest

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Drugstore.com

(DSCM, $8 1/4)
52-week high: $70
52-week low: $5 7/8

Like many Internet retail stocks, Drugstore.com has taken a beating in recent months. But US Bancorp/Piper Jaffray analyst Yudi Bahl said he is encouraged by this week's earnings announcement and issued a "buy" rating.

The Web-based drug store posted a first quarter net loss of $38.9 million, or 86 cents a share. Orders from repeat customers increased to 50 percent, up from 44 percent in the previous quarter.

"Sales increased 23 percent on a sequential basis to $22.7 million, above our forecast of $20.4 million," said Bahl. "The exclusive health and beauty tab on Amazon.com went live on April 17, providing Drugstore.com direct access to Amazon's 17 million customers. The company has experienced a measurable 20 percent increase in traffic since the launch of the tab."

Despite the risks in the e-tailing sector at the moment, and market sentiment, Bahl expects Drugstore will remain a leader in the industry. "We believe Drugstore.com's user friendly site, coupled with a broad product selection, rich content and customization features should allow it to become one of the powerful forces in online retailing."

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Starbucks Corp.

(SBUX, $37 1/16)
52-week high: $45 1/4
52-week low: $19 7/8

Following Starbucks' second-quarter earnings report after the bell on Thursday, US Bancorp/Piper Jaffray analyst Scott Ackerman said he maintains a "buy" recommendation on the coffee giant.

Starbucks earned $23.4 million, or 12 cents a diluted share, matching consensus estimate. Overall revenue rose 34 percent to $505 million, with same-store sales up 10 percent for the quarter.

The company plans to open 750 stores worldwide in the current fiscal year, but Ackerman said opening-costs will offset increased revenues.

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Microsoft Corp.

(MSFT, $69 13/16)
52-week high: $119 15/16
52-week low: $65

Analyst Jonathan Geurkink of Ragen MacKenzie rates Microsoft an "accumulate," noting that Microsoft should remain a core tech holding.

"The shortfall in revenue was primarily due to light demand for business PCs around the Y2K period; demand apparently picked up in March," he said. "Microsoft may be overly conservative about the outlook for PCs, as their somewhat gloomy forecast contrasts with that of the PC microprocessor makers."

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Boeing Co.

(BA, $39 13/16)
52-week high: $48 1/2
52-week low: $32

Asian markets appear to be strengthening, and European markets are holding steady, making Boeing a "strong buy," according to Dain Rauscher analyst Bob Toomey.

"The commercial order outlook continues to strengthen, with Boeing seeing pressures to the upside in its discussions with commercial customers regarding new orders," he said. "We raised 2000 estimates due to further expected commercial margin improvement. Boeing stock remains very undervalued."

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Albertson's, Inc.

(ABS, $31 7/8)
52-week high: $56 5/16
52-week low: $23 1/16

The ABS board has authorized a program to purchase and retire up to $500 million of the company's common stock between April 25 and April 30, 2001. Ragen MacKenzie analyst Laurie Breidenbach takes that as a good sign, and issued a "buy" recommendation.

"We continue to believe the stock is undervalued," she said. "Our price target is $40 to $45 over the next 12 months. Earnings are expected to build momentum throughout the year, with the most significant growth opportunities expected in the third quarter of 2000."

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Shopnow.com, Inc.

(SPNW, $6 11/16)
52-week high: $25 15/16
52-week low: $4 1/2

US Bancorp/Piper Jaffray analyst Timothy Klein maintains a "strong buy" on Shopnow. The company delivered solid revenues and quarterly visits to the site were up 158 percent sequentially.

"Driven by strong growth across all key network properties, Shopnow's 55 million visits far exceeded our 32 million estimate and provides a strong indication of future upside as they improve their ability to monetize this rapid growth in network traffic," Klein said.

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Costco Wholesale Corp.

(COST, $56 1/6)
52-week high: $60 1/2
52-week low: $32 11/16

Ragen MacKenzie analyst Lesa Sroufe rates Costco a "market perform," citing moderate earnings growth rate in the second half of 2000 and first half of 2001.

Costco's continued Internet spending, costs associated with expanding into Japan and elimination of the Discover and American Express cards contribute to Sroufe's rating.