Its $35 target price is 10.7x our 2008 earnings estimate.

Celgene Valued at a Premium

Celgene Corp. (CELG) is a fully integrated biotechnology company focused on discovery, development and commercialization of drugs in the area of cancer and immune/inflammatory diseases. The acquisition of Pharmion brings three medically meaningful products -- Thalomid, Revlimid and Vidaza -- into market for hematology and oncology, which will drive growth in 2008 and beyond.

However, we are concerned about the tough competition from Velcade and other products for MDS and MM. Label expansion on Revlimid and Vidaza into other hematological cancers should offer upside for Celgene.

We believe all this is currently reflected in the stock. We maintain our Hold rating on Celgene shares with a price target of $60. Celgene has all the makings of a Buy-rated stock such as solid new product story, decent pipeline and incredible 84% four year earnings growth. Our target price corresponds to a 45.5x P/E to our estimated 2008 EPS of $1.32, 31x P/E to 2009 EPS of $1.92 and 27x P/E to 2010 EPS of $2.24.

AstraZeneca a Hold on Generics

AstraZeneca PLC (AZN) is engaged in the research, development, manufacturing and marketing of ethical (prescription) pharmaceutical products. The company ranks among the top pharmaceutical companies in the world based on revenues and global sales force. It is a leader in cardiovascular, cancer and gastrointestinal drugs.

Key drugs such as Crestor, Seroquel and Symbicort will continue to be the driving force of growth until the company can commercialize its pipeline. Generic competition will eat into revenue growth, but productivity initiatives should pay off in the form of healthier margins and mid-single digit earnings growth for the next few years.

Although we believe the company is faced with some significant hurdles, we think that AstraZeneca offers a compelling case for growth beyond our current expectations. We think the shares trade at a relatively attractive level given the potential that management can deliver on its goals and significantly add to topline growth through pipeline successes.

We believe the stock offers fair valuation and rate the shares a Hold with a $47 price target, representing 9.9x our 2008 EPS forecast of $4.77. This is well below the large-cap pharmaceutical peer-group average of 13.6x.

Phase Forward Richly Priced

Phase Forward (PFWD) provides the software and services to assist clients in improving the efficiency of their clinical trials. The company offers a suite of applications that allow users to rapidly create electronic case report forms (eCRFs) and facilitate fast data entry and cleaning through an intuitive interface. Its Web-based architecture enables clinical trials at locations around the world.

Management had earlier stated that it will no longer provide bookings guidance and backlog metrics and indicated that 75% of 2008 revenues will come from beginning backlog. Going forward, management narrowed its revenue guidance for 2008 and now expects to report revenues between $167 million and $169 million, compared to the previous forecast of revenues between $165 million and $169 million, while non-GAAP EPS is anticipated around $0.48-$0.49.

The company recently acquired privately held Clarix for $40 million in cash. We continue to believe that shares are richly valued and that the current risk/reward profile warrants a Hold rating. We also maintain our target price of $18, representing a P/E multiple of 37.5X our FY2008 EPS estimate, higher than the industry median multiple.

Digital River Down to a Trickle

Digital River, Inc. (DRIV) provides e-commerce solutions for software publishers and retailers worldwide. The company delivers software and other digital goods online for over 40,000 customers. Because of its extensive network of partnerships, the company has collected valuable data on purchasing behavior and is able to offer direct marketing services to a broad array of clients. Digital River provides an outsourcing solution that allows its clients to promote their own brands while leveraging the company's investment in infrastructure and technology.

Despite uncertain macroeconomic conditions, management raised its guidance for 2008 and now expects revenues to come around $410 million, up from earlier projection of $401 million. Non-GAAP EPS is estimated around $2.00 (at 27% tax rate), up from the previous forecast of $1.89 (at 31% tax rate).

We have adjusted our revenues and EPS estimates accordingly for Q3 and FY2008. We are maintaining our Hold rating on the stock with a target price of $31.

Methanex Pressured from Chile

Methanex Corp. (MEOH) is the world's largest producer and marketer of methanol. The Menlo Park, California-based company is benefiting from improving fundamentals and lower costs, along with declining average gas costs. It also has strong cash flow that drives dividend increases and stock buybacks. However, problems with the company's Chilean facilities force us to rate the stock a Hold.

The company is hard hit by elimination of natural gas supplies from seven Argentine suppliers as well as an increase in export duty for gas by the country to 100%. However, the company may have found a way out by seeking alternative sources of natural gas or by directly participating in exploration projects. It is now anticipating increasing quantities of Chilean gas and expects to spend about $100 million in capital over the next 3 years. About 62% of the natural gas for the Chilean facilities is currently sourced from suppliers in Argentina.

Methanex is currently valued at 6.8x our 2008 earnings of $2.44, which is at a sharp discount to the industry median of 10.3x. We believe that the stock should trade at 7.0x our 2008 earnings. This implies a price target of $17.

Grupo Televisa Lowered to Hold

Grupo Televisa SA de CV (TV) has been posting great operating results in recent years. New investments in the telecom sector and the gambling business are quite encouraging and should keep on growing in the following quarters. However, the economic crisis in the U.S. and Europe will affect not only the media company's international business, but also its Mexican operations in the very short term.

A considerable share of the company's income comes from its U.S. operations, including the sale of content, website and cable television. We believe TV is in a better position to face the economic crisis if compared to other Mexican companies, since it has a strong cash position. However, it will be hard to avoid the effects of the adverse scenario. We are changing our current recommendation on TV from Buy to Hold.

Currently, Grupo Televisa trades at 11.9x our 2008 earnings estimates, with a small premium to industry mean and median. We understand TV should trade around 12.5x our 2008 earnings estimates in the short-term, lower than the company's historical standards, but with a premium over the industry and the S&P due to TV's strong cash position. Accordingly, our target price is $18.25.

HSBC Not Joining U.K. Bailout

We are continuing our Hold on HSBC Holdings, Plc (HBC). The company will report its third quarter trading update on November 10. We are maintaining our EPADS estimates at $6.75 for 2008 and $7.50 for 2009.

Earnings should reflect strong loan and deposit growth, especially in emerging markets, and improved productivity, partially offset by increased impairment charges due to problems in credit markets. Importantly, HSBC announced that it does not intend to take part in the UK government's recapitalization program for banks as it already has sufficient capital.

In its first half report, HSBC posted net earnings of $7.7 billion, down 22% year over year. Weaker US profits due to higher impairments in consumer finance loans and additional write-downs in Global Banking and Markets offset solid results in HSBC's emerging markets and European businesses.

At its current price, HSBC is trading at 12.4X and 10.8X P/E multiples of 2008 and 2009 consensus estimated earnings, respectively.