The Zacks Analyst Blog Highlights:Groupon, Amazon, eBay, Google and Hanesbrands

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Jun 04, 2014, 09:30 ET

CHICAGO, June 4, 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 Groupon (Nasdaq:GRPN-Free Report), Amazon (Nasdaq:AMZN-Free Report), eBay (Nasdaq:EBAY-Free Report), Google (Nasdaq:GOOGL-Free Report) and Hanesbrands Inc. (NYSE:HBI-Free Report).

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

Here are highlights from Tuesday's Analyst Blog:

Groupon Down on Likely Revival of Sales Tax

Shares of Groupon (Nasdaq:GRPN-Free Report) plummeted 6.46% ($0.38) to close at $5.50 on Jun 2, 2014 following the reported revival of an Illinois sales tax law.

Earlier, Illinois had imposed a tax on out-of-state Internet retailers, which was originally targeted at Amazon (Nasdaq:AMZN-Free Report).That is why it is often referred to as the "Amazon tax."

However, the Illinois Supreme Court had struck down the tax in Oct. 2013, citing a federal law that barred the imposition of taxes on out-of-state retailers that had no physical presence in the concerned state.

This federal law was passed in 2011 and it drove away many Internet retailers from Illinois, thus leading to a decline in job opportunities in the state.

Following the dismissal of the law, Illinois legislators have modified the proposal in a manner that sales taxes can be imposed on out-of-state retailers that issue promotional coupons and other materials through mail, radio or television.

It is likely that this amended bill may adversely impact Chicago-based daily deals site Groupon, which started offering coupons in the state only last year.

Despite impressive revenue growth at the online coupon and deal site, the company's shares have dropped a massive 54.0% in 2014 alone. The factor primarily responsible for the aforesaid phenomenon has been the lack of profitability.

Groupon's policy of launching new products on a regular basis and the growing popularity of its mobile app continues to attract consumers. The company reported strong holiday season sales with billings up 30.0% from the year-ago period.

Groupon noted that more than 50% of the transactions (55.0% of North America) were carried out through mobile devices with its offering of more than $100.0 million in Groupon Credits attracting customers.

Groupon's latest acquisition of TicketMonster will help it to strengthen its position in the mobile commerce market. At the same time, it will provide significant traction to Groupon in the Korean market, one of the fastest growing e-commerce markets in the world.

However, we believe that the market is becoming more competitive due to growing interest of technology stalwarts such as eBay (Nasdaq:EBAY-Free Report) and Amazon. Google (Nasdaq:GOOGL-Free Report), which had recently launched a coupon business called Zavers, has now decided to exit because of the lack of profitability. Moreover, a volatile macroeconomic environment and continued investments to expand its merchant base are expected to impact Groupon's near-term results.

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

Hanesbrands Benefits from Innovate-to-Elevate

On May 30, 2014, we issued an updated research report on Hanesbrands Inc. (NYSE:HBI-Free Report). This apparel retailer reported first-quarter fiscal 2014 results on Apr 24, 2014.

Hanesbrands' first-quarter fiscal 2014 earnings per share of 76 cents shot up 49.0% from prior-year quarter. Earnings also beat the Zacks Consensus Estimate of 58 cents by 31.0%. Profit was driven by higher margins backed by the success of the Innovate-to-Elevate strategy.

Increased supply chain operating efficiencies, lower selling, general and administrative costs, and successful integration of the recently acquired Maidenform Brands also backed the profit swing. Although sales of $1.06 billion slightly missed the Zacks Consensus Estimate, it surpassed year-ago results by 12%.

Hanesbrands expects the business momentum to continue and upped its guidance for fiscal 2014. The company now expects earnings per share in the range of $4.80 to $5.00 instead of $4.60 to $4.80. The company also expects operating profits in the range of $665 to $685 million, up from $640 to $660 million.

Overall, we are encouraged with Hanesbrands' favorable pricing and successful implementation of the Innovate-to-Elevate strategy. Under this strategy, the company focuses on high-priced, high-margin products that can be supplied at lower costs. We commend the company's strong brand portfolio and continuous innovations. Moreover, the company is gaining shelf space at major retail stores through strategic deals with retail giants.

The Zacks Rank #2 (Buy) company plans to stick to the Innovate-to-Elevate strategy that has increased unit selling prices while lowering unit costs. The strategy has thus helped the company to increase its adjusted operating profit margin by 400 basis points over the past five years.

Further, Hanesbrands' focus on innovation, higher-priced and higher-margin products, lower cotton costs and prudent expense management bode well for further profit.

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

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