For Immediate Release
Chicago, IL – August 15, 2014– Zacks Equity Research highlights Lions Gate Entertainment (LGF-Free Report) as the Bull of the Day and Target (TGT-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Facebook (FB-Free Report), Google (GOOGL-Free Report) and Twitter (TWTR-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
The movie making business, though often insanely-profitable, can be very hard to break into for upstart companies. However, Lions Gate Entertainment (LGF-Free Report) has managed to crack the code and successfully compete with the likes of Disney, 21st Century Fox and others, thanks to its strong lineup of popular movie franchises.
LGF is a Santa Monica, California-based company that is probably best known for the Hunger Games film series, though the company also has the distribution and production rights for the Twilight series and Divergent too. Thanks to these successes, LGF has been on an absolute tear over the past few years, as its stock has soared by over 440% in the past half-decade, including a 130% gain in the past two years.
However, recent trading has been much less favorable for LGF, as the stock is pretty much flat over the past 52 week period. Still LGF has put up a very strong performance in the trailing three months, and there is plenty of reason to believe that this can continue, especially if we look at recent earnings, and current estimates.
For the most recent earnings report, LGF thoroughly crushed estimates, posting EPS of 27 cents a share, compared to an estimate of 13 cents per share. This made up for the previous quarter’s disappointing results, and helped to carry the four quarter average to a positive surprise of 81%.
Bear of the Day:
The hits just keep coming for the discount retail industry, largely thanks to a number of weather issues. First, it was the ‘polar vortex’ in January and a number of bad storms across the Northern part of the country, and this was followed up by a summer polar vortex that has kept temperatures very mild and summer pretty much non-existent.
Discount retailers have struggled in this environment as those selling clothes have really missed out on some key shopping seasons, while changing consumer tastes haven’t helped matters either. Instead, it appears as though only luxury companies have been able to weather the storm and keep their stock prices moving higher.
This trend away from discount retail has really been evident in the past few weeks of earnings season. We have seen several key department stores miss earnings, while the behemoth of Wal-Mart just slashed their guidance as well. Given this, a slightly higher end discount retailer Target (TGT-Free Report), may be the next to succumb to the trend and could be a company to avoid ahead of its next quarterly earnings update.
Target has had a rough time beyond general weather issues as it is still reeling from its data breach last year that shook consumers’ confidence in the company and their security systems. This really dragged down TGT shares, and the company is still trying to recover from that debacle.
Facebook to Introduce Cross-Device Tracking System
Facebook (FB-Free Report) will now track shopping-related activities of its users in order to provide more relevant information to advertisers.
With the introduction of the cross-device tracking system on Facebook, advertisers will now get to know minute details such as when an ad for a particular product was first viewed by the user and whether it was finally purchased. Moreover, it will also enable advertisers to know about the devices from which the respective purchases were made.
However, this tracking will be enabled only on those devices that are logged on to Facebook. We believe that this initiative will beef up its ad revenues in the near future. Ad revenues contributed about 92.1% of total revenue in the just concluded second quarter of fiscal 2014.
However, this, in turn, has raised privacy concerns worldwide. This is not the first time though that the social media giant has been accused of breaching privacy. Recently, Facebook drew a lot of criticism when the results of an experiment conducted by it in 2012, to influence the moods of its users, were revealed in public.
It is also acquiring startups to target ads that will beef up ad revenues going forward. Recently, it acquired LiveRail, a startup that specializes in the delivery of online video ads to desired demographics.
Per EMarketer, the U.S. market for digital-advertising is set to grow 42% in 2014 to $5.96 billion. According to Gartner, ad market spending is expected to hit $42.0 billion in 2017.
As Facebook’s ad business matures, top-line growth is expected to suffer. Facebook’s rapid pace of acquisitions is also expected to weigh down on profitability and cash balance in the near term. Intensifying competition from the likes of Google (GOOGL-Free Report) and Twitter (TWTR-Free Report) remains a major concern.
Nevertheless, we believe that Facebook’s growing mobile user base, Instagram’s increasing popularity, frequent launch of new products and international expansions will boost the company’s top line and profitability going forward.
Currently, Facebook has a Zacks Rank #2 (Buy).
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