CHICAGO, Oct. 14, 2011 /PRNewswire/ -- 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: Baidu (Nasdaq: BIDU), Briggs & Stratton (NYSE: BGG), Onyx Pharmaceuticals (Nasdaq: ONXX), Goldman Sachs (NYSE: GS) and JPMorgan (NYSE: JPM).
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Here are highlights from Thursday's Analyst Blog:
3 Stocks with Bullish Catalysts
Doing some technical and fundamental screening on the Zacks Research Wizard this morning, I came across three widely diverse names each with very interesting and unique opportunities. Let's not waste any time with my usual background preamble and get right to them so you can see if you want to participate.
Baidu (Nasdaq: BIDU) is one of a handful of stocks that did not experience the dreaded bearish "death cross" of its 50 and 200-day moving averages this past summer. But during the late September sell-off it finally did fall through the longer term trend marker and now those averages are poised to cross negative just above $130.
What's bullish about this? Well, for starters, the stock made a strong bounce off of a key support level at $100 and getting back above $120 is encouraging. Second, Baidu maintains a Zacks #1 Rank (strong buy) because analysts keep raising their earnings estimates.
Baidu is projected to grow profits at 50% in 2012 after a nearly 90% pace this year. Though the stock remains expensive on a valuation basis with a forward P/E of 45, this kind of earnings growth is what keeps institutional investors in this stock.
Baidu is scheduled to report earnings on October 20 and short-term I think the stock has risk to test lower, especially with the weight of its moving averages overhead. If it blasts above $135 on its earnings report, I will look for a pullback to buy. Otherwise, I am getting ready to initiate bullish options positions on a dip to $110.
Briggs & Stratton (NYSE: BGG) has been beaten down during this stock swoon but it looks like a recovery could be on the horizon. The stock made a nice double-bottom just above $12 in the past two months and is breaking above its current downtrend line, which interestingly enough coincides nicely with its 50-day moving average.
What's nice about this is that if BGG can make a solid close above its 50-day, there's a lot of head room for it to run up to its 200-day above $18.
What's the fundamental catalyst for the giant of small engines? BGG recently moved up to a Zacks #1 Rank but not on the back of any rising estimates. It was simply that the downward estimate revisions of two months ago finally dropped out of the equation. In other words, all the bad news may finally be priced in.
90 days ago, consensus estimates for the year were at $1.55. Those got clipped just over two months ago to $1.20. And 2012 estimates were cut from $1.71 to $1.47. As you can see, the 15 to 20% haircut in earnings was met with a 35% drop in the stock from $20 to roughly $13.
But next year's $1.47 still represents 23% earnings growth. With a forward P/E multiple of 12 times, there's a fair case to be made for a move back toward $18. But, before making a move here, I would wait until after their October 20 earnings report, with consensus expectations calling for a quarterly loss of 21 cents.
BGG missed their EPS number by 22% last quarter and warned about this quarter back in July, and that's when the downward revisions rolled in. The company needs to prove it's not getting worse and then we can bank on their growth projections.
Onyx Pharmaceuticals (Nasdaq: ONXX) is a $2 billion biotech company currently focused on developing innovative products for the treatment of cancer. On Wednesday, the company announced it had settled a lawsuit with biopharma partner Bayer over details of their collaboration on the cancer drug Nexavar and shares shot up 8% on five times the average volume.
The traded volume of the up move was the first thing that caught my eye. And for a biotech without profits in sight, we want to see if this was merely short-covering on the news event or the birth of a sustainable trend. It's also worth our time to examine how meaningful the company event is for its business going forward.
Speaking of chart patterns, note that ONXX began a meaningful surge last week as it bounced off the bottom of a channel just above $29 which had marked the lows since mid-August.
The 3-day price move to $34 was not only on decent volume but began on the back of analyst estimate revision action that bumped the stock up to a Zacks #2 Rank (buy) on October 4. The consensus now is that they will lose only $1.79 this year, not the $1.94 analysts projected a month ago.
It was almost as if somebody last week knew what was coming with Bayer this week. The only other news event I could find that day was an SEC Form 4 filing for an insider planned sale of shares at $29.75!
Following this week's announcement concerning Onyx agreements with Bayer, major Wall Street banks and brokerages were out with upgrades and fresh price targets. Goldman Sachs (NYSE: GS), JPMorgan (NYSE: JPM), and BMO Capital Markets all have revised price targets on ONXX in the neighborhood of $44 to $48. And BMO upgraded ONXX to outperform, saying the net result is that the company is "a more attractive M&A candidate" for Big Pharma.
Biotech Stocks: Bipolar Payoffs Instead of Profits
What was interesting as the news was being digested on Wednesday morning was that the stock initially gapped up over $2 on the open from below $32 to $34. But then it traded all the way down to $30.50 as uncertainty over the details of new agreements between the two companies was sorted out.
Probably the main point of concern was the future of revenue potential for Onyx regarding another oncology drug, regorafenib. It was decided that this is a Bayer compound, and Bayer will have the final decision-making authority for global development and commercialization. Onyx will receive a royalty on any future global net sales of regorafenib in oncology.
Investing in unprofitable biotech companies is always a wild card transaction dependent on complicated research, lengthy clinical trials, and FDA rulings. A recent example is Dendreon (Nasdaq: DNDN) which broke biotech investor hearts once again in August, including mine.
But with the clear Wall Street institutional interest in this name, especially as an M&A candidate, one can follow the volume trail on the breakout above the channel highs at $35, also home of its 200-day moving average. Here we are no t waiting on trials or FDA events, or even profits. We are just following the money and volume flow.
I am looking for a move in ONXX to at least $40. The company reports earnings November 2 and any further upward revisions to estimates (i.e., they will lose less money) will only aid the cause.
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