Zacks Bull and Bear of the Day Highlights: Apple, XL Group Plc, Urban Outfitters, Gap and Abercrombie & Fitch
CHICAGO, March 19, 2012 /PRNewswire/ -- Zacks Equity Research highlights Apple, Inc. (Nasdaq: AAPL) as the Bull of the Day and XL Group Plc (NYSE: XL) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Urban Outfitters Inc. (Nasdaq: URBN),Gap Inc. (NYSE: GPS) and Abercrombie & Fitch Co. (NYSE: ANF).
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Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Apple, Inc. (Nasdaq: AAPL) reported a stellar first quarter that was primarily driven by strong holiday season sales based on the ramp in demand for the new iPhone 4S. Robust sales in the iPad and Mac series also chipped in, registering a strong quarter for the company.
We believe Apple remains the biggest growth story in the technology sector, primarily on account of its superior product pipeline, Apps, strong iCloud revenues, the iPad 3, a loyal customer base and international expansion going forward. Despite the legal complexities and increasing competition in iPad and iPhone segments, we are optimistic about the company's growth prospects in the long term.
Moreover, we also expect Apple to succeed in developing markets due to the growing affluence of the middle class in key markets. Thus, we upgrade our rating from Neutral to Outperform with a target price of $654.00.
We are downgrading our recommendation on XL Group Plc (NYSE: XL) to Underperform from Neutral based on the weak fourth quarter performance. The company posted a loss, comparing unfavorably with the Zacks Consensus Estimate. XL delivered lower numbers largely due to higher catastrophe losses, lower levels of positive prior-year loss development and higher tax expenses.
A soft property and casualty environment will continue to restrict top-line growth. Moreover, the current interest rate environment and exposure to the credit market will hurt investment income to some extent.
Our six-month price target of $20.00 per share equates to about 10.8x our earnings estimate for 2012. Combined with the $0.44 per share annual dividend, this target price implies an expected total negative return of 7.1% over that period. This is consistent with our Underperform recommendation on the stock.
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Urban Outfitters Upgraded
We recently upgraded our recommendation on Urban Outfitters Inc. (Nasdaq: URBN), the retailer of apparel, footwear and accessories, to Neutral with a price target of $30.00, given its initiatives to reposition itself as it enters into fiscal 2013. Earlier, we had an Underperform rating on the stock.
The Drivers
Being a multi-brand and multi-channel retailer, Urban Outfitters offers a flexible merchandising strategy. The company also has a significant domestic and international presence with rapidly expanding e-commerce activities. It remains committed to improve comparable-store sales performance, adding new brands and optimizing inventory level.
Further, to increase customer count, the company plans to augment store openings in North America and Europe, open retail outlets in Asia, enhance online and mobile marketing endeavors, increase wholesale distribution in Europe and Asia, and considerably expand direct-to-consumer business worldwide. Moreover, the company's debt-free balance sheet also augurs well for future growth.
The company also remains rationale in opening new stores, having opened 33, 46 and 57 stores in fiscal 2010, 2011 and 2012, respectively. It now plans to open 55 to 60 stores in fiscal 2013. Urban Outfitters hinted that it is targeting a low double-digit square footage growth. With a current total store count of 429, there still exists room for more.
Urban Outfitters has been trying to manage its inventory at an appropriate level, which has long weighed down on the company's margins. The company in order to clear its inventory was compelled to offer discounts that hurt its margins.
Total inventories were $250.1 million at the end of fiscal 2012, which reflects an increase of 8.9% year over year, and appears to be in a much better shape. Further, management's effort of driving traffic through store expansion, product enhancement, direct-to-consumer efforts and online initiatives bode well for the company.
Urban Outfitters, which competes with Gap Inc. (NYSE: GPS) and Abercrombie & Fitch Co. (NYSE: ANF), currently holds Zacks #3 Rank that translates into a short-term Hold rating, and correlates with our long-term recommendation.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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