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Stock Analyst Update

Morning Stock Notes: 1/4/00

Notes on Compaq, Dell, CNET, Baan, and Papa John's.

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Investor enthusiasm for Compaq (CPQ) might be getting a bit ahead of itself. Yesterday, the company's stock rose almost 15% on news that the PC maker leads in consumer PC market share for both the third quarter and last 12 months. But news about Compaq's third-quarter performance and market share isn't really new. The company reported at quarter end that its consumer PC sales were very solid. It's on the corporate side that Compaq has struggled, causing its overall market share to weaken. In fact, while Compaq still is the worldwide leader in PC market share, Dell (DELL) has been gaining market share quickly and surpassed Compaq in domestic PC shipments in the third quarter.

CNET  (CNET) stock is up 7% in early trading, after the latest endorsement for "bricks-and-clicks" integration by an Internet company. This morning the company announced a deal with radio station AMFM for all-tech broadcasts in the San Francisco area, with plans for a national rollout. Like AOL's (AOL) goal in its WalMart (WMT) deal, this will help CNET (which already has TV operations) reach an underserved offline market. With a forward P/E of more than 200 (based on 2000 earnings), however, the stock is already being priced as the multimedia giant it aims to be.

All is apparently not well at enterprise software maker Baan  (BAANF), as it surprised Wall Street this morning by announcing a major restructuring--the second such charge in the past 12 months--which will lead to a loss of roughly $250 million in the fourth quarter. This will be the sixth consecutive quarter that Baan reports a loss and suggests that the company's recovery is not fully underway, as Wall Street was led to believe. CEO Mary Coleman also resigned after taking the position only last May. Coleman's resignation is significant: She was perceived as the driving force behind Baan’s shift from ERP software into e-commerce. HSBC added pressure to the stock by downgrading it to a rarely seen "sell." Investors wasted no time running for the exits, pounding the stock by more than 30% in early-morning trading.

Monday evening, a Judge ruled that Papa John’s  (PZZA) can no longer use its main advertising slogan "Better Ingredients, Better Pizza." Because of the ruling, the company will now have to come up with another catchy slogan. The ruling comes at a bad time for the firm. Its same-store sales were weaker than expected for December and its stock dropped 41% in 1999. Nevertheless, Papa John's is a solid, growing company with excellent profitability and financial health, as illustrated with its Morningstar grades A-plus and A in those areas, respectively. Indeed, what is "better" is that investors can now buy into a good company at a historically low stock price.

Morningstar Analysts does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.