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The Zacks Analyst Blog Highlights: Amazon.com, Apple, Google, Microsoft and Lennar

Zacks Equity Research

For Immediate Release

Chicago, IL – March 19, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Amazon.com Inc. (AMZN), Apple Inc. (AAPL), Google Inc. (GOOG), Microsoft Corp. (MSFT) and Lennar Corporation (LEN).

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Here are highlights from Monday’s Analyst Blog:

Amazon’s Kindle Fire HD to Cost Less

Amazon.com Inc. (AMZN) slashed the price of Kindle Fire high-definition (HD) 8.9 tablets in order to make the device more affordable and thrive in the highly competitive environment. The online retailer also announced the availability of its 8.9 inch Kindle Fire HD tablets across the U.K., Germany, France, Italy, Spain and Japan.

The company stated that the WiFi version of the Kindle Fire HD 8.9 inch tablet will now be available in the U.S. for $269 instead of $299 while the price of the 4G version will come down to $399 from $499.

The Kindle Fire HD 8.9 inch is a large-screen version of Amazon's Kindle tablet used for web browsing, email, gaming, watching TV shows, reading magazines and more. It comes with dual band Wi-Fi connectivity and MIMO technology that speeds up video streaming and downloading. The device also includes an upgraded version of Immersion Reading that allows the user to hear narration by a popular actor while reading a book.

The company entered the tablet market with the shipping of Kindle Fire in late 2011. The tablet market is getting more competitive by the day. Apple Inc. (AAPL) leads the race so far with record unit shipments of its iconic iPad but Amazon’s lower-priced Kindle Fire has also seen very strong demand. Other players like Google Inc. (GOOG) and Microsoft Corp. (MSFT) have also stepped in to grab a share of the pie.

Though Amazon’s unit sales are far behind Apple’s iPad and Samsung Galaxy tablets, we believe that the lower rates will definitely create a price war in the tablet market and will continue to pressure the high-volume Android OEMs like Samsung, ASUS and even Google.

We view Amazon’s expansion into the tablet market as a defensive move, designed to protect its leading share of the e-reader market and maintain sales of books and other digital products through the Kindle platform. Even if Amazon does not make big money from tablets, it will increase the number of customers buying both physical and digital products from the company, such as movies, music, games and apps, thus increasing its revenues.

At the same time, we think there is a certain amount of uncertainty regarding Amazon’s investment plans, which could continue over the next few quarters. While it is true that these investments are going to drive the next phase of its growth, near-term earnings will remain under pressure.

Amazon currently retains a Zacks Rank #3 (Hold).

Earnings Preview: Lennar Corp.

Lennar Corporation (LEN) is set to report its first quarter 2013 results on Mar 20 before the market opens. Last quarter it posted a 30.23% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Lennar’s fourth quarter earnings beat the Zacks Consensus Estimate and, the year-ago figure on the back of double-digit growth in homebuilding revenues and solid operating margins. Double-digit growth in revenues in the quarter was driven by both pricing and volume growth in a stabilizing housing market.

However, the ever-rising cost of construction is a matter of concern for Lennar. LEN has also been witnessing weak performance from the Rialto sector since the past few quarters.

Earnings Whispers?

Lennar has witnessed solid year-over-year growth in new home orders, average selling prices and home closings in all the quarters of 2012. Margins have also been above average despite rising costs, driven by strong operating leverage.

Lennar expects to continue to achieve further profitability in fiscal 2013, despite expectations of higher input costs, on the back of rising home prices, strong liquidity position, solid backlog position, strategic land acquisitions and new community openings.

The backlog conversion ratio is expected to decline to around 75% in the first quarter and thereafter improve to approximately 90% per quarter thereafter. Gross margin is expected to be between 23% and 24% on an average in fiscal 2013 compared to 22.7% in 2012.  

The Zacks Consensus Estimate for the first quarter stands at 14 cents. Estimates have seen a mixed movement after announcement of the fourth quarter results. The Zacks consensus estimate for fiscal 2013 has moved up by 0.6% to $1.58 over the past 90 days.

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