Alaska Airlines, Statoil, Google, 21Vianet Group and Rackspace Hosting highlighted as Zacks Bull and Bear of the Day
CHICAGO, Dec. 15, 2014 /PRNewswire/ -- Zacks Equity Research highlights Alaska Airlines Group (NYSE:ALK-Free Report) as the Bull of the Day and Statoil (NYSE:STO-Free Report)as the Bear of the Day. In addition, Zacks Equity Research provides analysis onGoogle (Nasdaq:GOOGL-Free Report), 21Vianet Group, Inc. (Nasdaq:VNET-Free Report) and Rackspace Hosting, Inc. (NYSE:RAX-Free Report).
Here is a synopsis of all five stocks:
2014 has been a stellar year for the airline industry to say the least. Consolidation has reduced competition, an improving economy is allowing people to fly more, while the oil plunge is slashing the costs for jet fuel.
This confluence of factors has led to amazing performances for the industry. Many stocks have seen gains in excess of 50% YTD, while several names are approaching or are at multi-year, if not all-time, highs.
One stock that definitely fits in with this trend, though it has still been overlooked by many, is undoubtedly Alaska Airlines Group (NYSE:ALK-Free Report). This company has seen its shares surge by 50 percent so far in 2014, and if you look at some of the trends underpinning this company, there is plenty of reason to believe that more strength is ahead for this airline.
For those of you that are unfamiliar with Alaska Airlines, it is important to note that the company is actually based in Seattle, Washington, though it does have a huge operation in Alaska. In fact, ALK makes up about 60% of total passengers carried at Anchorage's main airport (Ted Stevens), while it also has a big presence at Seattle-Tacoma (51%) as well.
While the company is facing stiff competition from Delta in Seattle, the company still has plenty of opportunities for expansion by striking into new markets, while also defending its hub in Washington State. In particular, ALK has hit back at Delta at their Salt Lake City hub, so don't think that Alaska isn't stealing share from its larger counterpart too.
Beyond that, there is always the possibility of a merger for Alaska, which could also help the company to stretch into even more markets. Both Hawaiian Airlines and JetBlue would arguably make sense for an ALK merger, and it would strengthen their position against the so-called 'legacy carriers' as well.
Yet even if a merger doesn't happen, ALK appears well-positioned for growth in the near term thanks to expansion from its Northwest U.S. hub, and low oil prices which should boost profits. Analysts seem to agree (and do not appear too fazed by Delta's move into Seattle), as earnings estimates have been soaring as of late for ALK stock.
Norway has been very fortunate when it comes to natural resources. The country exploited vast North Sea oil deposits and has funded a number of programs in the country, while also establishing the Government Pension Fund which has grown into a massive investment vehicle with close to $1 trillion under management.
At the heart of this development is Statoil (NYSE:STO-Free Report), a partially state-owned owned Norwegian oil company which has roughly one-third of its total shares public, and the rest owned by the Norwegian Government. This company has grown into a juggernaut in the European oil market, and is now one of the largest oil firms in the world.
However, despite its size, STO has been hard hit by the recent oil crash too, as shares for the company have collapsed in the past few months. In fact, STO has fallen by 40% in the time frame, crashing far below what the broad energy sector (as represented by XLE) did in the same time frame as the sector fell about 20% overall.
It also doesn't help that as oil priced crashed, the Norwegian currency took a big hit too. The currency has crumbled over 15% in the past three months, making it that much harder for U.S. investors to see gains in Norwegian stocks like Statoil.
But anytime an otherwise solid company collapses in a very short time frame such as what we have seen in Statoil, investors might think that a bargain opportunity is presenting itself to investors. After all, the forward PE is below nine and the company is still profitable. However, if investors look to recent earnings estimate revisions by analysts tracking the company, you can definitely come to the conclusion that we aren't out of the woods just yet with STO.
Additional content:
Google Won't Pay Google Tax
A new Spanish law, to go into effect on Dec 16, requires Google (Nasdaq:GOOGL-Free Report) to pay for the news snippets displayed on its popular Google News service. The law applies to all news aggregators and will not affect Google search results, which will continue to display snippets from Spanish publishers.
It is generally believed that the Spanish newspapers association (AEDE) is behind the move, as members include large newspaper owners that have seen online news channels eating into their print media businesses. But even non-member publishers are to receive a share of the spoils, as the amount will be collected and distributed by CEDRO, which is a quasi-government organization.
Non-compliance by publishers to charge aggregators may not hurt them, but non-compliance by aggregators could result in huge fines of up to €600,000 ($744,000) for each violation.
Google has said that it would have to shut down the service in Spain, since it does not serve ads on Google News pages, which therefore do not generate revenues for the company. On the other hand, it sends traffic to publishers' pages, thus helping them make money.
But shuttering the service means that Spanish publishers' content will not be available on any Google News service not only in Spain but worldwide, which will impact their sales.
It seems like a regressive move on the part of Spanish regulators, who also don't seem to have considered the effect of similar policies in other countries. Germany for example also passed a similar law, but gave publishers the right to choose whether they wanted to charge the aggregator or not.
Most publishers decided not to charge Google, and Google removed the snippets from the few that did (Axel Springer is a notable example). But Axel Springer saw a huge decline in traffic (40% of total traffic to its sites and 80% of traffic from Google News, according to the WSJ), which saw them revert back to the old policy in a matter of weeks.
Google's legal problems in Europe have escalated in recent times, as the EU has taken exception to its control over online activity. Google has acquired this control by becoming the foundation of this activity, first, by its dominance in search, and second, by its popular Android operating system. Google has used this power to solidify its position and expand into adjacent markets.
It's not as if any other company wouldn't do the same thing if they could, but there aren't any such companies today, which is the main problem. And that's the reason the EU is leaning on Yandex, which has a popular search engine and some other competing services, to frame policy that could support smaller players.
Google currently holds a Zacks Rank #4 (Sell). Better ranked stocks in the industry include 21Vianet Group, Inc. (Nasdaq:VNET-Free Report) and Rackspace Hosting, Inc. (NYSE:RAX-Free Report). All these stocks carry a Zacks Rank #2 (Buy).
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