E-Commerce China Dangdang (NYSE:DANG-Free Report) is a $1 billion Chinese online retailer offering various consumer products through its website dangdang.com, including books and entertainment, beauty and personal care products, home and lifestyle items, and baby, children and maternity products.
Headquartered in Beijing, the company is best known as the country's largest online seller of books in both Chinese and foreign languages. If Alibaba is considered the Amazon and eBay of China (Alibaba outpaced their combined transaction volume in 2013 by over 30%), DANG might be the early Amazon of the late 1990s.
In late February, DANG surprised investors and delivered its first profitable quarter since 1Q11, earlier than the market had expected. The company made solid progress in 4Q, especially in inventory management and operation efficiencies. The number of active/new customers and orders all reached record highs, and mobile now contributed ~13% of total orders in 4Q.
Analysts at Oppenheimer & Co. said this after the company's quarterly report...
"The healthy product mix shift to margin-rich categories and continuous scalability & efficiency enhancement drove margins up, and we expect this upward trend to continue in 2014 and beyond. We are also appreciative of DANG's strategic partnership with rivals, including Alibaba's Tmall and No. 1 Shop, which strengthens its sales network. We increase our PT to $15 from $11, based on 0.7x 2015 EV/sales."
Groupon (Nasdaq:GRPN-Free Report) became a Zacks #5 Rank in February after another disappointing quarterly report. Since then, the stock has fought to stay above $8 but cannot seem to regain investor confidence as it tests $7. And the only estimate revisions since they were slashed 2 months ago have been slight notches downward.
I thought it was a good time to revisit the piece I wrote back then to recall why Wall Street analysts and investors were so underwhelmed and why the stock remains a #5 Rank. Here was how I approached a business I am not even sure I understood well enough to invest in...
"In the fluid world where e-commerce and social media waters merge, it's sometimes hard for investors to figure out what's going on with the business models and the growth strategy. That was no where more evident in February when Groupon crushed investor hopes again with another disastrous quarterly report."
Can Microsoft Keep the Earnings Streak Alive?
We expect technology company Microsoft Corp. (Nasdaq:MSFT-Free Report) to beat expectations when it reports fiscal third-quarter 2014 results on Apr 24.
Why a Likely Positive Surprise?
Our proven model shows that Microsoft is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +4.84%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank: Microsoft currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 and 3 have a significantly higher chance of beating the earnings estimate. The Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.
The combination of Microsoft's Zacks Rank #3 and an Earnings ESP of +4.84% makes us reasonably confident in looking for a positive earnings beat.
What Will Drive the Better-than-Expected Earnings?
Though Microsoft's consumer PC business continues to witness a decline, its new products, strong position in international markets, solid execution and cost control measures are expected to post a positive earnings surprise in the to-be-reported quarter.
Additionally, Microsoft's focus in the tablet segment, adoption of new products, growth in cloud and partnerships, such as GoDaddy should help drive growth. Also, the company's strong net cash position — around $60.97 billion in the last quarter — provides enough flexibility to pursue any growth strategy, whether by way of acquisitions or otherwise. The positive trend is seen in the trailing four-quarter average surprise of 4.18%.
Other Stocks to Consider
Microsoft is not the only firm looking up this earnings season. We also see likely earnings beats coming from these companies:
Vertex Pharmaceuticals Inc. (Nasdaq:VRTX-Free Report), with Earnings ESP of +13.16% and a Zacks Rank #1.
Align Technology Inc. (Nasdaq:ALGN-Free Report), with Earnings ESP of +13.89% and a Zacks Rank #1.
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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