Analyst Upgrades

• Deutsche Bank upgraded Varian Semi (VARI) to buy from hold following the company's Q2 results and raised its target for shares to $42 from $27.
• Baird upgraded CommScope (CTV) to outperform from neutral following the Q1 report, citing improved visibility and growth. The firm raised its price target to $39 from $28.
• Needham upgraded Build-A-Bear Workshop (BBW) to strong buy from buy. The firm is more positive on the stock following the company's Q1 results and keeps a $13 price target.
• Spirit AeroSystems (SPR) was upgraded to outperform from neutral at Credit Suisse.
• Wynn Resorts (WYNN) was upgraded to neutral from underperform at Macquarie.
• UBS (UBS) was upgraded to market perform from underperform at FBR Capital.

Maxine Clark has had a stellar career in retail. She spent 19 years at May Department Store and eventually became the president of Payless Shoe Source. Then in 1997, she started an innovative retail concept, Build-A-Bear Workshop (BBW). The store allows kids to build their own dolls.

While the business has suffered recently because of the recession, Build-A-Bear Workshop is nonetheless a major success story. There are now more than 400 locations across the world. There is even a virtual world, called buildabearville.com.

MAJOR PAPERS:

• Build-A-Bear Workshop Inc's (NYSE: BBW) stock has been in a nose dive for most of the year, failing to reach sales targets. If there's no bid soon, reported the Wall Street Journal, this holiday season will be a miserable one for same store sales. Mattel Inc (NYSE: MAT) and Children's Place Retail Stores Inc (NASDAQ: PLCE) are considered possible buyers, as well as private equity firms.
• Cisco Systems Inc (NASDAQ: CSCO) and Haier Group, China's largest manufacturer of appliances, have agreed to work together on home networking in China and international markets, according to the Wall Street Journal.
• "Disney (NYSE: DIS) inspired" homes will be offered by KB Home (NYSE: KBH) beginning in 2008, following their successful collaboration with Martha Stewart Living Omnimedia (NYSE: MSO) homes two years ago, reported the Wall Street Journal.

OTHER PAPERS:

• Credit Suisse Group (NYSE: CS) is laying off about 150 workers from its mortgage-backed securities unit, a source told the New York Times.
• The EE Times reported that Chinese silicon foundry provider Semiconductor Manufacturing International Corporation (NYSE: SMI) has delayed the opening of its 300-mm wafer fab in Wuhan, China, according to an analyst.
• India's Wipro Limited (NYSE: WIT) has received a five year, $130M contract from British utility Thames Water to provide integrated IT services, reported the Economic Times.

Las Vegas Sands (NYSE: LVS) -- volatility elevated. LVS, a leading international developer of multi-use integrated resorts operated by Sheldon Adelson, is recently trading near its all time high. LVS has a market cap of $41.5 billion. Unconfirmed chatter is circulating that LVS could announce a potential secondary stock offering. LVS October option implied volatility of 48 is above its 26-week average of 40 according to Track Data, suggesting larger price fluctuations.

Build a Bear Workshop (NYSE: BBW) -- volatility elevated into EPS and Strategic Alternatives. BBW, a company providing make-your-own stuffed animal, interactive retail entertainment experience, is recently up 40 cents to $17.44. BBW is expected to report EPS on 10/18. On 9/11, Buckingham Research reiterated its Accumulate rating on BBW and lowered its price target on BBW to $25 from $29. Buckingham Research says, "the company is addressing weakness in the top-line with more frequent introductions of new product and more targeted marketing." BBW announced on 6/28/07 it retained Lehman Brothers (NYSE: LEH) to assist in potential strategic alternatives to enhance shareholder value. BBW September option implied volatility of 54 is above its 26-week average of 40 according to Track Data, suggesting larger price risks.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

MAJOR PAPERS:

• The Wall Street Journal (subscription required) reported that John Mackey, the CEO of Whole Foods Market Inc (NASDAQ: WFMI), used a pseudonym to blog about his company on Yahoo message boards for eight years, including panning rival Wild Oats Markets Inc (NASDAQ: OATS), which Whole Foods is trying to buy.
• Carl Icahn's American Real Estate Partners new offer of $37.25 a share for Lear Corp. (NYSE: LEA), supported by the Lear board, has been rejected by proxy advisory firm Institutional Shareholder Service, reported the Wall Street Journal.
• Barron's Online's (subscription required) "Inside Scoop" column reported that two institutional investors, Buckingham Capital Investment and Morgan Stanley, have sold about 3.2M shares of Build-A-Bear Workshop Inc (NYSE: BBW), as they feel the company won't get much more of a premium as a takeover target, if private equity is still even interested at all.
• JP Morgan Chase and Company (NYSE: JPM) and Goldman Sachs Group Inc (NYSE: GS) have obtained key roles advising Apollo Management on its expected IPO, reported the Financial Times (subscription required).

OTHER PAPERS:

• According to representatives from Congress, exclusivity deals like Apple Inc's (NASDAQ: AAPL) multi-year iPhone contract with phone provider AT&T Inc (NYSE: T) trap customers, forcing the users to stay with the providers as long as they want to continue using certain devices, reported AppleInsider.com.

Virtually all kids and more than a few adults are in love with stuffed animals. There is a St. Louis outfit that lets fans direct the production process.

Build-A-Bear Workshop (NYSE: BBW) is a specialty retailer of plush animals and related products, operating in the U.S., the U.K. and Canada. Company stores allow customers to design their own stuffed animals, complete with clothing, shoes and accessories. Party paraphernalia and children's fashions are also available. The firm operates a Web site, which allows for toy design online.

BBW shares took a hit in mid-June, when Build-A-Bear lowered its Q2 and 2007 EPS guidance ranges. Management cited increased advertising, performance-based bonus and language translation costs. Susquehanna Financial downgraded the shares to "neutral", but three other brokers reiterated "buy" to "strong buy" recommendations. The stock then re-gained half its losses late in the month, on word the firm had retained Lehman Brothers to assist it in an analysis of potential strategic alternatives to enhance long-term shareholder value. Susquehanna subsequently moved back to its "positive" rating and Matrix Research boosted the shares to "hold". The price has since been consolidating the gain in a bullish "flag" pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, brokers now recommend the issue with two "strong buys", four "buys" and three "holds". Analysts see a 20 percent growth rate, through the next year. The BBW P/E ratio (18.26), Price to Sales ratio (1.18), Price to Book ratio (3.20), Price to Cash Flow ratio (10.08), Sales Growth rate (18.43%), Return on Assets (10.90%) and Return on Investment (15.22%) compare favorably with industry, sector and S&P 500 averages. Institutions own about 95 percent of the outstanding shares. Over the past 52 weeks, the stock has traded between $19.65 and $32.08. A stop-loss of $22.75 looks good here. Note that the company is expected to report Q2 results at the end of July.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

There is no holiday break for the rumor mill as word of many a company's activity is bantered about.



BUILD-A-BEAR WORKSHOP INC (NYSE: BBW)

As the stock shot up 14% the other day, it was revealed that the warm and fuzzy big bear hired Lehman Brothers to "explore strategic alternatives." Some analysts think an LBO is what will happen, and range the valuation at from $34 to $36. Very recently the company reduced its second quarter per share profit expectations to 7 cents to 10 cents, down from 15 cents to 19 cents, because of slow sales at stores that have been opened for at least a year. Here's a bear to be bullish on.


COUNTRYWIDE FINANCIAL CORPORATION (NYSE: CFC)

It's troubled times for the nation's largest mortgage lender. Earlier in the week the shares began to fall when it was revealed that they may be a part of a government investigation into subprime loans. It certainly doesn't help that three former company executives pleaded guilty to conducting insider trading in shares of Countrywide. The heat is on.


THE STEAK N SHAKE COMPANY (NYSE: SNS)

Two Texas investment groups, HBK Investments and Lone Star Funds, who between them own about 9.5% of the company, are said to be interested in digesting the whole dang thing. The 490 restaurant chain that has operations in 20 states just saw their most recent quarterly profit drop 30% from the previous year, as same store sales fell 4.7%. Gentlemen that they are though, they'll only pursue the sizzle if the board cooks it up with them.



STILL FLYING AROUND


WENDY'S INTERNATIONAL INC (NYSE: WEN)

They say they may want to sell the company, and the latest firm to gobble up shares is Tudor Investment, purchasing a 6.1% stake.


TD AMERITRADE HOLDING CORPORATION (NASDAQ: AMTD)

Jana Partners and S.A.C. Capital Advisors, who have about an 8.4% combined ownership of AMTD, are keeping the pressure on for the firm to partner up with another brokerage firm, and have now formalized their demands.



BUZZ


DJO INCORPORATED (NYSE: DJO): MMI Investments purchased 9.4% of the company's shares. When they buy in, they usually see the company acquired...Pride International Inc (NYSE: PDE): Spin off of foreign assets, or a possible takeover, has attracted interest...Legg Mason Inc (NYSE: LM): Pershing Square Capital, whose activist leader William Ackman has tried to push around McDonald's Corporation (NYSE: MCD) and Wendy's, has taken a 1.5% share of the company.

MOST NOTEWORTHY: Continental Airlines, Inc (CAL), Molson Coors Brewing Co (TAP), Watsco, Inc (WSO), K-V Pharmaceutical Co (KV.A), Progressive Corp (PGR) and Color Kinetics (CLRK) were today's noteworthy downgrades:

• Goldman downgraded shares of Continental Airlines, Inc (NYSE: CAL) to Neutral from Buy on valuation, higher oil prices and a weak domestic market.

• Goldman also downgraded Molson Coors Brewing Co (NYSE: TAP) to Neutral from Buy based on the increase in analyst estimates, valuation and the potential for margin pressure in the summer.

• BB&T cut Watsco, Inc (NYSE: WSO) to Hold from Buy based on valuation and catalysts that are already reflected in the share price.

• Roth Capital downgraded shares of K-V Pharmaceutical Co (NYSE: KV.A) to Hold from Buy, telling clients they have learned that Par Pharmaceuticals Cos (PRX) has launched generics of 50, 100 and 200mg Toprol-XL. The firm expects a material impact to KV's 100 and 200mg strength generics.

• Stifel expects investor enthusiasm regarding Progressive's Corp (NYSE: PGR) recapitalization plan to fade as underwriting fundamentals deteriorate and cut shares to Sell from Hold.

• Color Kinetics (NASDAQ: CLRK) was downgraded to Hold from Sell at Needham on valuation...

OTHER DOWNGRADES:

• Citigroup cut The Phoenix Co's (NYSE: PNX) to Hold from Buy.

• KeyBank downgraded Lubrizol Corp (NYSE: LZ) to Hold from Buy.

• Goldcorp Inc (NYSE: GG) and Freeport-McMoRan Copper & Gold Inc (NYSE: FCX) were downgraded to Market Perform from Outperform at BMO Capital.

• Susquehanna downgraded Build-A-Bear Workshop, Inc (NYSE: BBW) to Neutral from Positive.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Shares of Build-A-Beat Workshop (NYSE: BBW) have been fairly lackluster performers since the company's IPO in 2004, but a new concept store called Ridemakerz could change all that, as Build-A-Bear owns 25% of the new venture.

Build-A-Bear has about 300 locations globally, offering children and their parents an opportunity to customize their own teddy bears. Ridemakerz, whose first location just opened last week, will offer fathers and sons a chance to build their own toy cars. According to the New York Times, "Customers select a chassis type (street or monster); body styles (stock or custom, a Ridemakerz brand hot rod, a Ford Mustang GT, or Dodge Ram pickup, to name a few options); paint schemes; sound effects (for example, sirens or race sounds) and style of locomotion (free wheel or radio control) ... After the 10- to 12-inch cars are assembled, there are ample customizing and accessorizing options: tire treads, grille guards, side pipes, snowboard racks and decals. Mr. Andreini estimates that a fully tricked-out vehicle will run about $75, including $25 for radio control. For the budget-minded, there's a stock tuner car for $12."

If this does catch on, and it seems likely that it will, the growth could be explosive. Build-A-Bear grew from one store to more than 300 in ten years and, with the support of Build-A-Bear already there, Ridemakerz could much more quickly.

With the huge popularity of NASCAR and cars in general, Ridemakerz could be the catalyst for shares of BBW to rapidly gain in value. The shares are trading right around their price from a year ago, indicating that much of the upside of Ridemakerz is not yet priced in.

To learn more about Ridemakerz, see the company's website.

MOST NOTEWORTHY: Level 3 Communications Inc (LVLT) and General Motors Corp (GM) were today's notable upgrades:

• Deutsche Bank raised Level 3 Communications Inc (NASDAQ: LVLT) to Hold from Sell with a $5.40 target based on the belief the company will meet 2007 expectations.

• General Motors Corp (NYSE: GM) was upgraded at Merrill Lynch to Buy from Sell based on increased confidence the company will leverage its liquidity and legacy assets, specifically its pension, to drive positive changes.

OTHER UPGRADES:

• MasterCard inc (NYSE: MA) was upgraded to Overweight from Neutral at JP Morgan on valuation.

• Prudential upgraded Brinker Int'l Inc (NYSE: EAT) to Overweight from Neutral.

• Following the company's strong Q4 report, Piper Jaffray upgraded shares of Shanda Interactive Entertainment Ltd ADS (NASDAQ: SNDA) to Outperform from Market Perform with a $29 target, citing improved fundamentals and increased confidence in the come-stay-play model, among other reasons.

• Dover Downs Gaming & Entertainment (NYSE: DDE) moved to Hold from Sell at Stifel Nicolaus, citing valuation.

• Prudential raised HealthNet Inc (NYSE: HNT) to Neutral from Underweight, with a $52 target.

• 3M Company (NYSE: MMM) was raised to Buy from Hold with an $86 target at Soleil Securities following last nights $7B buyback announcement, which the firm believes will act as a positive catalyst.

• Bear Stearns upgraded Applebee's Int'l Inc (NASDAQ: APPB) to Peer Perform from Underperform following the company's announcement that it hired a financial adviser to explore strategic alternatives.

• Credit Suisse upgraded Build-A-Bear Workshop (NYSE: BBW) to Outperform from Neutral, with a $37 target.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).