Zacks Equity Research highlights Priceline.com (Nasdaq: PCLN) as the Bull of the Day and Alcatel-Lucent (NYSE: ALU) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Cirrus Logic (Nasdaq: CRUS) and O’Charley’s (Nasdaq: CHUX). Full analysis of all four stocks is available at http://at.zacks.com/?id=2676.
Here is a synopsis of all four stocks:
Bull of the Day:
Our Bull of the Day recommendation is for Priceline.com (Nasdaq: PCLN). Priceline.com’s fourth quarter results were ahead of expectations. Fourth quarter sales were $26 million above our forecast, and earnings per share were $0.18 ahead of our estimate. What’s more, management’s outlook for the first quarter and full-year 2007 was bullish. Priceline.com’s international business expansion and increased retail offerings continue to be the primary drivers of its overall growth. Due to the better-than-expected results, we are upping our estimates for 2007. We maintain our Buy rating and increase our DCF-based target price from $48 to $60.
Bear of the Day:
Our Bear of the Day recommendation is for Alcatel-Lucent (NYSE: ALU). The combined Alcatel-Lucent reported dismal fourth quarter results, with pro-forma revenues declining 12% on a constant currency basis. The company continues to face severe pressure from its competition as the uncertainty surrounding the merger has caused customers to take a wait-and-see attitude towards purchases. The restructuring efforts may also take longer than expected as the company tries to combine two companies with very different cultures. Based on all these issues, we have downgraded shares of ALU to a Sell from our previous Hold rating and lowered our price target to $11 over the next six months.
Analyst Blog:
Cirrus Logic (Nasdaq: CRUS) is a fabless OEM [original equipment manufacturer] of analog, mixed-signal and digital processing integrated circuits. Third-quarter revenue was essentially in-line with consensus estimates. EPS [earnings per share] data is unavailable. Longer-term prospects look good. Gross margins are improving and operating margins should improve over time, with the potential of doubling from the current level at some point in 2008. We are keeping our BUY recommendation based on continued growth in earnings and potential margin expansion, and raising our target price to $10.
We are assuming coverage of O’Charley’s (Nasdaq: CHUX). After suffering declining sales, margins and investment returns, O’Charley’s CEO revamped management over the last two years, and together they are slowing unit development while implementing initiatives to improve average check, same-store sales, restaurant margins and return on invested capital (ROIC). Signs of improvement are apparent: the average check and restaurant margins are both improving. However, same-store sales are weak, due, we believe, to rises in both average menu prices and gas prices, while the cap ex [capital expenditures] from the rollout of the new format will require a significant boost in unit performance to increase ROIC.
Get the full analysis of all four stocks by going to http://at.zacks.com/?id=2649.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About the Analyst Blog
Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.
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