Schaeffer's Street Chatter Highlights the Following Stocks: EarthLink, Host Marriott, and Safeway.

CINCINNATI -- Today's "Street Chatter" from Schaeffer's Investment Research focuses on: EarthLink (NASDAQ:ELNK), Host Marriott (NYSE:HMT), and Safeway (NYSE:SWY). "Street Chatter" is a report that analyzes three newsworthy stocks that are generating a lot of attention on Internet message boards. "Street Chatter" is published on www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research.

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Street Chatter:

EarthLink

Internet service provider EarthLink (NASDAQ:ELNK) said Wednesday evening that it expects 2006 earnings to range from breakeven to a loss of $45 million, on revenue of approximately $1.3 billion. For the first quarter, the firm expects to bank $2 million to $9 million, posting $310 million to $315 million in revenue. Additionally, the firm's subscriber base in both the first quarter and by the end of 2006 is expected to stay on par with levels from the end of 2005 (5.3 million subscribers).

A strong technical performance against a backdrop of skepticism earns ELNK a Schaeffer's Equity Scorecard rating of 8.0, on a scale of zero to 10. This high reading suggests the likely path for the stock is pointed higher. Today's news sent the stock into a bit of a heavy-volume tailspin, however. By the day's completion, ELNK was down more than nine percent. On the upside, however, the stock was testing its 160-day moving average, which could act as a springboard to boost the stock higher. Could this be an ideal entry point?

If the stock begins to mount a recovery, the bears who utilized the short-selling stock-trading strategy could choose to quit while they are ahead by closing their positions. As the closure of a short sale naturally requires the purchase of the underlying shares, short-covering results in an influx of buying power into the shares. Currently, about nine percent of ELNK's float is sold short, for a short-interest ratio of 11 days to cover.

For the most part, analysts have remained on the sidelines with regard to ELNK. Even the trio of analysts that covers the stock names it a "hold." An upgrade or two from any of these analysts, or additional brokerage coverage, could spur some additional buying interest in the shares.

Click the following link to see a daily chart of ELNK since September 2005 with 160-day moving average: http://www.schaeffersresearch.com/wire?ID=15383 .

Host Marriott

Host Marriott (NYSE:HMT) is the top hotel real estate investment trust (REIT) in the U.S., according to Hoover's. Most of its 100 luxury and upscale hotels in North America operate under the Marriott and Ritz-Carlton brands and are managed by Marriott International. Other brands under the HMT umbrella include Four Seasons and Hyatt.

The company reported a 21-percent boost in fourth-quarter net income to $74 million, or 19 cents per share. Revenue rose 9.7 percent to $1.27 billion. Fund from operations totaled 44 cents per share, missing the Street's estimate of 51 cents per share. HMT expects comparable hotel revenue per available room to rise between seven and nine percent in the first quarter and between seven and 10 percent for the full year.

The stock's long-term trend is quite an impressive one. Since March 2003, HMT shares have more than tripled in value, using the support of their ascending 10-month and 20-month moving averages. Earlier this month, the stock reached a new all-time high above the 20 threshold.

Analysts have taken note of this outperformance; while this isn't necessarily surprising, it's not a fabulous contrarian indicator, as we tend to seek out bullish trade candidates that are rallying higher in spite of apathy (or downright pessimism) from Wall Street. At the present time, there are already 13 "buy" ratings on the stock, leaving just two "holds" and therefore precious little room for further upgrades.

In options trading, however, HMT has some room to move. In the March and April series combined (calls and puts), there are only about 500 open option contracts. In other words, this speculative contingent is one group that has yet to notice the shares. If options players begin to jump on the bandwagon, the equity could be fueled by some additional buying power.

And speaking of additional buying power, the equity's short-interest ratio of 11.3 days to cover bodes well for the intermediate term. With HMT flirting with new all-time high territory, many of the bears who opened a bearish stock-trading strategy might begin to close out their positions by repurchasing their sold shares. This activity yields additional buying action to propel the shares forward.

The stock's Schaeffer's Equity Scorecard rating of 6.0 implies a slight preference for the upside. Should a short-covering rally begin to take shape, this rating, as well as the stock's performance, could mount an advance.

Click the following link to see a monthly chart of HMT since March 2003 with 10-month and 20-month moving averages: http://www.schaeffersresearch.com/wire?ID=15379 .

Safeway

Safeway (NYSE:SWY) is among the top food retailers on the continent, with about 1,800 stores, most of which are located in the western, Midwestern, and mid-Atlantic regions of the U.S., along with western Canada. Including its eponymous line of supermarkets, SWY operates under the banners of Dominick's, Randall's Food Markets, and Genuardi's, and owns more than half of the online retailer GroceryWorks.com.

Thursday, the principal of produce said that fourth-quarter net income dropped to $173.5 million, or 39 cents per share, down from $202.7 million, or 45 cents per share, in the year-ago period. After being adjusted for items, earnings totaled 51 cents per share, or a nickel above the consensus estimate on Wall Street. Sales for the reporting period rose 5.8 percent to $12 billion. Looking forward to 2006, the grocer reiterated its outlook for per-share earnings of $1.55 to $1.65, surrounding analysts' expectations of $1.58 per share.

This positive turn in the earnings confessional has shot SWY shares more than five percent higher today on heavy volume. The move has pushed the stock above its 10-day and 20-day moving averages and to its highest point in more than two months.

While today's price action has been cause for celebration, SWY has spent most of this millennium in the doldrums. Since mid-2002, the stock has been sashaying sideways, capped by the 25 mark overhead. The shares are currently trying to break to the upside of this resistance zone, with little success.

Options players are apparently betting that the stock will overcome this hurdle. Looking at options in the March and April series, there are approximately three calls open for every single put. The standing Schaeffer's put/call open interest ratio (SOIR) reading of 0.36 is lower than 91 percent of the past year's readings, suggesting a fairly ample dose of optimism from the options-trading community. With technical resistance bearing down from overhead (note on the daily chart how the stock snapped back from the 25 mark earlier today), this type of complacency is unwarranted and should be concerning from a contrarian perspective.

One indicator on the side of the bulls is short interest, which rose almost 17 percent last month to 15 million shares, or 3.3 percent of SWY's float. The short-interest ratio of 5.9 days to cover is certainly notable, but are bears who implemented this stock trading strategy really going to start covering their bets at this point? There's the real question, and my honest guess is "no."

The decision is fairly split on Wall Street, which has collectively awarded SWY five "buy" ratings, six "holds," and two "strong sells." There is the potential for upgrades, but saddled with such lackluster price action, downgrades could be the more likely occurrence.

Click the following link to see a monthly chart of SWY since December 2000 with 10-month and 20-month moving averages: http://www.schaeffersresearch.com/wire?ID=15380 .

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About Schaeffer's Investment Research (www.SchaeffersResearch.com)

Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method .