Analyst Actions: Fannie Mae, Amazon.com, VeriSign, Qwest

FANNIE MAE (FNM)

KEEFE BRUYETTE CUTS FNM TO MARKET PERFORM FROM OUTPERFORM

Analyst Frederick Cannon says Fannie Mae on Friday posted a $2.54 second quarter loss, much wider than the 79 cents consensus and his 89 cents estimate. He notes Fannie also stated a number of measures to preserve capital, including limited portfolio loan growth, a dividend cut, and expense cuts. Cannon feels scaling back on portfolio growth is especially important as it means the benefit to Fannie from widening credit spreads is limited, capital raises are dilutive to future earnings. The analyst widened his $2.77 2008 loss estimate to a $7.00 loss and cut his $1.07 2009 EPS forecast to a $1.50 loss, reflecting the second quarter earnings miss and increased credit loss assumptions going forward. he cut his $48 price target to $10

AMAZON.COM, INC. (AMZN)

CITIGROUP REITERATES BUY

Analyst Mark Mahaney says the Kindle is developing into a major product cycle for Amazon. Although Amazon hasn't disclosed Kindle sales, says collection of datapoints leads him to double his 2008 unit assumption from 190,000 to 380,000. Mahaney thinks Kindle is becoming the iPod of the book world. He now sees Kindle-related revenue of $1 billion by 2010, up from his prior $400-$750 milion estimate; Mahaney notes this could amount to 4% of Amazon's total revenue -- impressive given the size of the company's revenue base. Mahaney notes Kindle's apparent success highlights the very significant, consistent innovation focus Amazon has kept over the past five years, and helps hedge the company against digitization of media products. The analyst sees $1.49 2008 EPS, rising to $1.91 in 2009. He has a $97 price target.

VERISIGN, INC. (VRSN)

JEFFERIES UPGRADES TO BUY FROM HOLD

Analyst Katherine Egbert says if VeriSign uses its entire cash balance to repurchase maximum number of shares before Oct. 1, it could add 3 cents to EPS this year. Egbert notes although it already appears to be pretty much factored into consensus, it still could provide a short-term boost. The analyst says the push-out of the sale of two large communications businesses is due to buyer uncertainty over valuation, according to industry sources. Notes previous management left little cushion on timing, so delay not a surprise. Says strategic buyers could return when they regain confidence that comparable valuations are stable, recent stock market rallies help. Ups $35 price target to $38. Sees $1.00 2008 EPS, $1.53 in 2009.

QWEST COMMUNICATIONS INTERNATIONAL INC. (Q)

CITIGROUP UPGRADES TO BUY FROM HOLD

Analyst Michael Rollins says he believes Qwest remains ripe for both an operational and financial restructuring to improve returns to shareholders. Says his follow-up analysis of second-quarter results show improvements in Qwests enterprise revenue trajectory, following months of investments in its sales organization. These improvements, in his view, should help to offset some of the headwinds from mass markets, as Qwest continues to experience pressure on the consumer wire-line segment and wireless revenue falls precipitously as Qwest migrates to an agency relationship with Verizon Communications (VZ). Rollins raised his 2008 EPS estimate from 38 cents to 41 cents, and his 37 cents forecast for 2009 to 39 cents. He maintains a $6 target price.

CIENA CORP. (CIEN)

MORGAN KEEGAN UPGRADES TO OUTPERFORM FROM MARKET PERFORM

Analyst Simon Leopold says he believes Ciena faces several headwinds that lead him to cut estimates to reflect what he considers conservative assumptions. However, he also thinks the Streets more bearish sentiment, based on various factors that he considers mostly old news, has been overdone. Leopold says, with new product cycles coming and an attractive valuation, he envisions a turn of sentiment before the end of this year. Notes Ciena has an established footprint that provides a foundation based on continued network traffic growth. To reflect what he considers a realistic bear case scenario, he cut his $1.65 fiscal 2008 [Oct.] EPS estimate to $1.61, and his $1.87 fiscal 2009 forecast to $1.56.