The Zacks Analyst Blog Highlights:Google, Blucora, Facebook, Aol and Tower Group International

Jan 07, 2014, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Jan. 7, 2014 /PRNewswire/ -- 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 Google Inc. (Nasdaq:GOOG-Free Report), Blucora Inc (Nasdaq:BCOR-Free Report), Facebook (Nasdaq:FB-Free Report), Aol Inc. (NYSE: AOL-Free Report) and Tower Group International, Inc. (Nasdaq:TWGP-Free Report).


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

Here are highlights from Monday's Analyst Blog:

Google Slashes Price of Moto X

In order to improve traction in the hardware market, Google Inc.'s (Nasdaq:GOOG-Free Report) Motorola Mobility slashed the price of its flagship smartphone, Moto X.

Motorola Mobility has lowered the price of Moto X by 20% to $399 at all U.S. carriers. Powered by Android OS, Moto X comes with a 4.7 inch display, a camera designed for a quick boot-up, 16 gigabytes of memory, better screen resolution and 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 turn on the phone even without touching.

Google bought Motorola for $12.5 billion in 2012 and intends to run it 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.

The price cut, which comes only after four months of Moto X release, is considered by many analysts as an indication that the device is not performing well. However, it is not clear how Motorola will pay for the price reduction.

According to a data report from research firm Strategy Analytics, Motorola sold roughly 500,000 phones in the third quarter of 2013 after its release in Aug 2013, while its competitor Samsung sold more than 10 million Galaxy S4 phones within a month of its April release. The report clearly indicates that the Moto X has so far failed to ignite sales.

As a result, it becomes important for Motorola to introduce improved products at competitive prices to address the needs of its target market. We believe that reducing the price of Moto X will slightly put the company in a better competitive position versus its competitors including Samsung, whose flagship device, the Galaxy S4, is highly priced at $600.

Google is a market leader in online advertising and its mobile strategy has hit the target so far. Its Android OS has gone a long way toward cementing its position in the mobile segment.

Also, the Motorola hardware segment performed well in the third quarter, with revenues jumping 12.3% sequentially, but staying 56.5% below year-ago levels.

Google currently carries a Zacks Rank #2 (Buy). Stocks that have been performing well in its sector and are worth considering include Blucora Inc (Nasdaq:BCOR-Free Report), Facebook (Nasdaq:FB-Free Report) and Aol Inc. (NYSE: AOL-Free Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

Tower Group Downed to Underperform

On Jan 6, 2014, we downgraded our recommendation on Tower Group International, Inc. (Nasdaq:TWGP-Free Report) to Underperform from Neutral reflecting concerns regarding a number of negative issues confronting the company. These include mounting losses, reserve shortfall, job cuts, selling stake in Canopius and cancellation of the previously announced acquisition of American Safety Reinsurance, Ltd. (ASRe). Tower Group presently carries a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Tower Group has recently come across several headwinds that have largely impacted the company's performance. Last month, the company disclosed that it needs to add $75–$105 million to its reserves in the third quarter of 2013 to cover up for losses related to workers' compensation, commercial liability and commercial auto policies.  In Oct 2013, Tower Group increased its reserves by about $365 million in order to make up for losses incurred from 2009 to 2011. The company is also cutting down on its expenses by $21 million per year by slashing 10% of its staff count.

Tower Group experienced significant losses and reductions of statutory surplus in its insurance subsidiaries in the first half of 2013, and there are currently no commitments or assurances to raise additional capital, execute strategic alternatives or liquidate certain investments at prices sufficient to repay the outstanding balance under its credit facility.  Until the completion of a definitive executable plan to remedy statutory capital deficiencies and repay the credit facility, there is substantial doubt about the company's ability to continue as a going concern.

In 2013, Tower Group delayed reporting its financial results as it was caught up in calculating its reserve shortfall and settling other issues.

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

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