Activision Blizzard, Chico's FAS, China Petroleum & Chemical, CNOOC and Braskem highlighted as Zacks Bull and Bear of the Day
CHICAGO, Sept. 10, 2013 /PRNewswire/ -- Zacks Equity Research highlights Activision Blizzard (Nasdaq: ATVI-Free Report) as the Bull of the Day and Chico's FAS (NYSE: CHS-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the China Petroleum & Chemical Corp. (NYSE: SNP-Free Report), CNOOC Ltd. (NYSE: CEO-Free Report) and Braskem S.A. (NYSE: BAK-Free Report).
Here is a synopsis of all five stocks:
Video games have become a huge industry as both console gaming and mobile apps remain quite popular with consumers. In fact, the video game industry was recently valued at $67 billion, while growth is expected to put the total valuation at $87 billion in 2017.
Given these figures, it is pretty clear that the trend is quite solid in the video game space and that an allocation to this growing market may not be a bad idea. One targeted way to do this is with one of the top makers of games currently on the market, Activision Blizzard (Nasdaq: ATVI-Free Report).
ATVI is a company that has a big reach in the video game industry as it is the producer of some of the segment's most famous products. This includes the Call of Duty, Guitar Hero, and Warcraft franchises, in addition to a number of mobile games with operations across the globe.
The company has become a pretty big name thanks to many of these titles, pushing this California-based company to a $19 billion market capitalization. And with some new launches expected—a fresh Call of Duty game is due out soon while new consoles are coming online too—a further push up the charts is not out of the question.
It has been a very rough stretch for many retail names as of late, as the sector has definitely fallen out of favor with many investors. Trends in the space are apparently shifting, and a number of companies are being left in the dust.
While this is best exemplified by recent poor trading in Aeropostale and Abercrombie and Fitch, another sluggish performer that is probably worth avoiding in the space is Chico's FAS (NYSE: CHS-Free Report). This company has held up in a much tighter range as of late, but much like the others on the list, the bottom could be about to fall out for this retailer.
The main concern for Chico's has to be the declining level of growth for the firm. The past five years saw 17.9% in earnings growth, while the next five years are expected to see 15.3%. While this is admittedly still a strong level, it is very concerning how bearish analysts have been on the company as of late, suggesting that opinion is starting to turn on Chico's.
In the past 30 days, 11 estimates have gone down for the current quarter, while just one has gone up. Meanwhile for the current year period, 12 estimates have gone down in the past 30 days, while the consensus has fallen from $1.15/share to just $1.06/share right now.
You can't really blame analysts for their newfound bearishness either, especially after the most recent quarter's earnings report. Comparable-store sales fell 2.6%, while SG&A expenses rose by 3.7%, leading to a bit of a margin squeeze for Chico's for the most recent quarter. And with the broad trends hitting a number of retail names, the path lower was clearly the one of least resistance for this troubled company.
3 Emerging Market Oil Stocks Worth a Look
Following a series of twists and turns, investors scrounging for yield are looking at the emerging markets fearing that Treasury yields at home might run out of steam. In the first six months of 2013, the U.S. market showed resilience with its steady recovery vis-à-vis emerging counterparts.
Last week's U.S. macroeconomic data in the form of lower unemployment numbers, receding weekly jobless claims, and Q2 productivity data painted a positive picture for the U.S. economy.
The growth was also amply supported by the Fed's northward interest rate policy. However, with the imminent regulatory monetary tightening, investors are now looking elsewhere.
Now, with President Obama winning the support of key Republicans for his conflict with Syria, the oil bubble is slowly building up. Any chance of it bursting near-term seems unlikely with the Obama administration focusing on pooling international backup for military measures in Syria over its alleged use of chemical weapons.
As a result, much like the global oil and gas market during the 1990 Gulf War, the 1997 Asian crisis, the 1998 Russian economic crisis, and finally the 2008-2012 global financial crisis, the sector is set to witness upward oil prices. To add to this, higher demand from emerging economies adds to the pricing pressure.
Persistent supply disruptions due to unstable Middle Eastern geopolitics have taken a major toll on oil import-dependent emerging nations like India and Indonesia. The direct fallout of the Syrian military buildup was the spike in Brent crude prices, which is hovering around $116 per barrel after a steady rise over the past three months. In such a scenario, we believe any military action in Syria by the U.S. will push up crude oil price to around $125 per barrel in the near term.
3 Emerging Oil Winners
Given the oil market conundrum, our investment horizon now closely inspects oil-weighted companies and related support plays with a distinct focus on the emerging economies. Instead of putting all eggs in the domestic basket, we close in on an integrated trio of two Chinese majors, China Petroleum & Chemical Corp. (NYSE: SNP-Free Report) and CNOOC Ltd. (NYSE: CEO-Free Report) alongside the Brazilian behemoth Braskem S.A. (NYSE: BAK-Free Report).
We suggest investing in China Petroleum & Chemical Corp., also known as Sinopec, with a Zacks Rank #2 (Buy). The company is the second largest crude oil and natural gas producer, and the largest refiner and marketer of refined petroleum products, in China. On Aug 25, Sinopec posted better-than-expected earnings supported by outstanding results in oil and gas exploration on domestic growth.
Our bullishness is perked by its expected rise in refining margins in the second half of 2013. The stock is going for about 7.8x the estimate for 2013, which is in-line with its peer group average. The stock should not disappoint investors given the company's long-term expected earnings growth of 6.93%.
Another stock that investors may look forward to is Chinese offshore giant CNOOC Ltd., which currently carries a Zacks Rank #2 (Buy). It is China's dominant producer of offshore crude oil and natural gas. CNOOC is the only company permitted to conduct exploration and production activities with international oil and gas companies off the shores of China.
The company recently reported solid second quarter results on the back of higher overseas production from its February acquisition of Canadian energy producer Nexen Inc. alongside steady performances by the already operational oil and gas fields. We remain optimistic on CNOOC as its performance reflects its premium assets portfolio, excellent execution strategy, unique position as a pure oil play and potential transactions in the merger and acquisition space.
The stock boasting a solid ROE of 20.8% vis-à-vis only 8.1% of the peer group average is another big positive. The stock also has a long-term earnings growth expectation of 6.25%.
Our final pick is the largest Latin American petrochemical operator Braskem SA which currently holds a Zacks Rank #2 (Buy). The company is steadily improving backed by higher sales volume, improving operating performance and rising thermoplastic resin spreads.
The petrochemical operator is functioning at almost full capacity to cater to rising domestic demand for its products. Braskem is expected to witness earnings growth of 153.69% in 2013 and 117.54% in 2014. Moreover, a price-to-book (P/B) ratio of just 1.7 suggests that the stock is still undervalued.
We believe that these emerging market stocks with strong fundamentals and growth prospects are capable of offering investors solid returns.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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