The utilization of CarMax Auto Finance to keep funding retail sales in a deteriorating credit environment adds further uncertainty to the company's earnings, which is still material to CarMax. Currently, the shares are trading at 19.2x our fiscal 2009 EPS estimate of $0.82, which is at a significant premium to the industry median of 9.6x. Our FY2009 estimated EPS and a P/E of 17.0x give us a target price of approximately $14.

Wait & Watch Story for Primedia

Primedia, Inc.'s (PRM) advertising revenue for its core Apartment Guide business appears to be stabilizing, as the softening housing market slows condo conversions, and shrinks the business customer base. Meanwhile, we expect cost cutting efforts, including the consolidation of six PRM offices in New York City into one, to bolster declining earnings before interest, taxes, depreciation and amortization (EBITDA).

The management is taking a number of steps to improve revenue growth and profitability of the company. It is upgrading editorial talent, reducing draw (number of copies printed for sale) and reinvesting the savings into higher quality copies. Early indications are mixed however, and it is a wait-and-watch story.

We expect the slowing economy and battered housing market to turn revenue growth negative in the company's two other businesses (New Homes and DistribuTech), which together generate one-third of its revenue. And we don't foresee a meaningful near-term recovery in weak industry wide ad trends or the company's revenue. We rate the stock a Hold with a six- month target price of $5.75.

Buy Sempra Energy on Value

Impressive results in the first quarter, led by strong performance in its utilities pipelines and storage business, conclusion of general rate cases, operational REX-West, launch of its commodities joint-venture, and completion of its Baja California liquefied natural gas (LNG) terminal, collectively support the bullish outlook for Sempra Energy (SRE).

Looking ahead, with the initiation of a $1 billion share repurchase program, new solar power contracts and a recently increased $1.40 annual dividend, we see consistent growth in earnings power. However, we note that the company may face difficulties from a higher level of capital expenditures. Nevertheless, in a valuation call given a discount in forward earnings valuation, we maintain our Buy recommendation on SRE with a six-month target price of $60.75, or 16.4x our 2008 EPS estimate and 13.3x our forward 2009 estimate.

SRE appears to be relatively well-positioned to benefit from core electric and natural gas operations, wholesale energy commodities marketing and trading, development of LNG resources, and earnings accretive acquisitions.