The Zacks Analyst Blog Highlights:Google, Apple, Earthlink, Facebook and Everest Re Group
CHICAGO, Aug. 5, 2013 /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 Google Inc. (Nasdaq:GOOG-Free Report), Apple Inc (Nasdaq:AAPL-Free Report), Earthlink (Nasdaq:ELNK-Free Report), Facebook (Nasdaq:FB-Free Report) and Everest Re Group, Ltd. (NYSE:RE-Free Report).
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Here are highlights from Friday's Analyst Blog:
Google's First Smartphone: Moto X
In order to gain traction in the hardware market, Google Inc.'s (Nasdaq:GOOG-Free Report) Motorola Mobility introduced its new smartphone, Moto X, which is expected to be released in the U.S. by the end of this month. Following the news, Google's share price surged 1.86%.
Moto X is the first smartphone designed by Motorola since it was acquired by Google. Powered by its Android OS, Moto X will come with a 4.7 inch display, better screen resolution, a camera designed for a quick boot-up and a better battery life.
Features in the Moto X include design customization options whereby users can personalize their handset with their choice of colors and materials. It also has a Touchless Control feature, which uses Google Voice to add voice-recognition capabilities and turns on the phone even without touching.
The phone will cost $199 with a two-year contract and be available on all four major U.S. carriers and US Cellular.
Google had bought Motorola for $12.5 billion in 2012 and stated that it would continue to run as a separate unit, with its phones based on the Android OS. The deal was the biggest in its 13-year history and propped up Google's portfolio with more than 17,000 patents. To Google's misfortune, Motorola has been continuously losing market share to its competitors and has been unable to regain it.
In the last couple of years, the once-significant cell phone maker, Motorola Mobility, fell behind in the competitive smartphone market, which is now dominated by Apple Inc's (Nasdaq:AAPL-Free Report) iPhone and Samsung's Galaxy range, which runs on Google's Android platform.
According to a report by research firm IDC, Android and Apple's iOS operating systems together held approximately 92.3% of smartphone market share in the first quarter of 2013. Moreover, Apple and Samsung together hold a 62.2% share of the U.S. smartphone market, while Motorola has a mere 7.8%, which was down 7.1% from the prior quarter.
As a result, it becomes important for Motorola to introduce competitive products that can address the needs of its target market. We believe that the Moto X features position the phone at the lower end and expect Google to come up with better versions as time goes by.. At any rate, Motorola still has some way to go to retain its lost glory.
Google is a market leader in online advertising and its mobile strategy has been bang on target so far. Its Android OS has gone a long way toward cementing its position in the mobile segment.
However, the Motorola hardware segment has not done well. In the last quarter, the segment was down 2.0% sequentially and accounted for around 7% of revenues. Management did not say much about Motorola's future plans.
Google currently carries a Zacks Rank #5 (Strong Sell). Stocks that have been performing well in its sector and are worth considering include Earthlink (Nasdaq:ELNK-Free Report) and Facebook (Nasdaq:FB-Free Report). While Earthlink carries a Zacks Rank #2 (Buy), Facebook carries a Zacks Rank #1 (Strong Buy).
Everest Re Ratings Affirmed
Last week the rating agency, A.M. Best affirmed the issuer credit ratings ("ICR") of "a-" of Everest Re Group, Ltd. (NYSE:RE-Free Report). The company's debt ratings were also affirmed along with the ratings of its subsidiaries. All the ratings carry a Stable outlook.
This rating affirmation indicates Everest Re's strong balance sheet profile and better-than-average underwriting performance, along with its ability to perform favorably amidst tough market conditions, a seasoned management team and huge market share in the insurance and reinsurance industry.
Everest Re has adequate capital flexibility, which shields the company from market uncertainties. Moreover, its combined ratio, signifying an insurer's profitability, remained below the breakeven levels over the past decade.
The company also has a liquid investment portfolio that has a short duration maturity. It has kept its investment portfolio conservative by investing just 10% of the total investment money in equities. A low incidence of equity in the investment portfolio will protect the company from equity market volatility. The company has also successfully increased its cash flows year-over- year.
The rating agency noted that Everest is well-run by a seasoned and experienced management team, which has kept the company's operating costs under control and successfully delivered underwriting profitability year after year. The company is also well-diversified across different regions with a wide product portfolio, which helps it to garner a greater market share.
The rating agency also praised Everest Re for managing its enterprise risk effectively over the years. The company's effective risk management capability has helped it to reduce risk across its business, and at the same time enabled it to allocate capital efficiently.
Nevertheless, factors negating the positives include Everest Re's exposure to catastrophe losses, which impart volatility to its earnings. Though the company uses catastrophe models and has maintained risk limits to control catastrophe losses, occurrence of such incidents reduce the company's earnings.
Everest Re also carries net asbestos and environmental (A&E) exposure of approximately $426 million, which has been going down recently. Reserves against these policies are monitored on a quarterly basis and the current review shows that the company has adequate reserves against these liabilities.
Going forward, the rating agency is likely to give a positive review to Everest Re's ratings if it continues to deliver consistent underwriting profitability as well as maintain strong capital profile.
However, reduced profitability and capital levels, along with greater-than-expected exposure to catastrophe loss and declining capital reserves may compel the agency to provide a negative rating.
Everest Re currently retains a Zacks Rank #2.
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