The Zacks Analyst Blog Highlights: Twitter, Facebook, Google, Omnicom Group and Chesapeake Energy

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Jun 09, 2014, 09:30 ET

CHICAGO, June 9, 2014 /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 the Twitter Inc. (NYSE:TWTR-Free Report), Facebook (Nasdaq:FB-Free Report), Google (Nasdaq:GOOGL-Free Report), Omnicom Group (NYSE:OMC-Free Report) andChesapeake Energy Corporation (NYSE:CHK-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Friday's Analyst Blog:

Twitter Buys Namo Media

Amid growing rumors of buying a music service provider, Twitter Inc. (NYSE:TWTR-Free Report) recently acquired native-ads developer Namo Media for an undisclosed amount (probably less than $100.0 million). Following the news, Twitter's share price increased 3.01% (99 cents) to close at $33.89 on Jun 5, 2014.

Namo Media specializes in developing native-ads, which can be featured as a promoted tweet on Twitter or suggested post on Facebook (Nasdaq:FB-Free Report). Native ads are high quality content ads that are developed in collaboration with brands and online publications.

According to IPG Media, native ads are viewed for the same amount of time as editorial content and are much more likely to be shared than a banner ad. Native ads are more engaging than sponsored or banner ads, which make them an effective tool for advertisers to reach an audience.

Twitter will integrate Namo Media to its MoPub mobile ad-exchange, acquired in October last year for approximately $350.0 million. Namo Media's native mobile platform will help consolidate Twitter's position to attract more advertising dollars amid intensifying competition from the likes of Facebook, Google (Nasdaq:GOOGL-Free Report) and Pinterest.

Twitter's top line is significantly dependent on ad revenues, which contributed 90.2% of revenues in the first quarter of 2014. Mobile advertising revenues were more than 80.0% of total advertising revenue in the quarter, up from 60.0% in the year-ago quarter.

Twitter launched a number of new products for advertisers during the quarter. The company allowed marketers to create tailored audiences from email lists and customer relationship databases. Twitter also enabled advertisers to target TV conversations for Spanish-language television and connect with users through Promoted Accounts in search.

Although Twitter's management remains optimistic about future user growth, slowing user base is a major concern, as it can keep advertisers away from the service, thereby hurting top-line growth.

In such a scenario, acquisitions such as Namo Media expand Twitter's product portfolio. This will help it to attract big advertising agencies in the long run.

Twitter's recent deal with Omnicom Group (NYSE:OMC-Free Report) is also expected to be a major growth driver. The deal boosts Twitter's status as an advertising platform that will help it to attract new advertisers.

Nevertheless, user growth concerns, intensifying competition and higher operating costs are the major headwinds in the near term, which will remain an overhang on the stock.

Currently, Twitter has a Zacks Rank #3 (Hold).

Chesapeake to Sell Transportation Assets

Chesapeake Energy Corporation (NYSE:CHK-Free Report) is seemingly focused on divesting its assets to streamline its business and reducing debt. In this regard, this U.S. gas giant recently announced that it would dispose its crude oil trucking assets to Rose Rock Midstream, L.P. (RRMS).

Per the agreement, Rose Rock Midstream would acquire 124 trucks, 122 trailers and miscellaneous equipment operating in Texas, Oklahoma and Ohio; and take around 200 Chesapeake employees under its wings. The partnership would also provide term transportation agreement at market rates with Chesapeake Energy Marketing, Inc., a subsidiary of Chesapeake. The transaction is expected to close in the second quarter of 2014.

The trucking assets sale follows Oklahoma City-based Chesapeake Energy's plans to separate its oilfield services unit – Chesapeake Oilfield Operating LLC – announced in May. The segment is involved in drilling, hydraulic fracturing, rig relocation and other related services. The to-be-divested business generated revenues of $2.2 billion last year – approximately one-eighth of total company revenue. Oilfield services business employs 5,200 of Chesapeake Energy's 10,800 employees and owns 118 rigs.

Post spin-off, the new unit would be christened Seventy Seven Energy Inc. The oilfields services unit could surface as a smaller player in the services market. The business is likely to fetch higher returns as companies push customers for price increases.

The company estimates that the oilfield services business would at one go take away $1.1 billion of debt from its books. Chesapeake will also receive a $400 million dividend to write-off intercompany debt from the oilfield services segment. However, the new entity needs to be recapitalized, which, along with the spin-off process, is expected to be completed this month.

Chesapeake Energy's divestitures are not only aimed at reducing costs and debts, but also at enhancing the market value of its assets. Overall, the company estimates funds in excess of $4 billion to be generated in 2014 from its spin-off and asset divesture plans. Year to date, the company has generated around $925 million through asset disposal. For 2014, Chesapeake expects capital expenditure in the range of $5.0–$5.4 billion. At the end of the first quarter, Chesapeake − the largest U.S. natural gas producer after ExxonMobil Corp. (XOM) − had a cash balance of just over $1 billion. Long-term debt stood at $12.7 billion, representing a debt-to-capitalization ratio of 39.0%.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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