CHICAGO, May 20, 2011 /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: China Unicom (NYE: CHU),
China Mobile (NYSE: CHL), China Telecom Corp. (NYSE:
CHA), Apple Inc. (Nasdaq: AAPL) and Hot Topic Inc.
(Nasdaq: HOTT).
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Here are highlights from Thursday's Analyst Blog:
China Unicom to Underperform
We are downgrading our recommendation to Underperform from
Neutral on China Unicom (NYSE: CHU) based on the
disappointing first quarter profit level as well as higher cost
expectations.
China Unicom, China's second
largest mobile operator, missed the Zacks Consensus earnings
estimate by 4 cents. Net income
plunged more than 80% year over year due to higher handset
subsidies as well as increased costs related to 3G service
deployments and network expansion.
The company is aggressively involved in marketing and
promotional activities since the launch of its 3G services,
resulting in higher marketing expenses. Selling and marketing
expenses rose 19.3% year over year in the recently concluded first
quarter.
China Unicom's 3G and fixed-line broadband business have been
increasing at a faster pace since last year. These businesses are
expected to be under pressure due to increasing depreciation and
amortization expenses; networks, operations and support expenses;
as well as selling expenses for the remainder of this year. We
believe these expenses will have an adverse effect on the company's
future profitability, free cash flow and margins.
China Unicom is offering handsets at subsidized rates with lower
3G service plans for multi-year contracts to retain existing
customers and add new ones. This will weigh on the company's future
overall average revenue per user. In addition, China Unicom's GSM
average revenue per user remains under pressure due to aggressive
price competition and a high monthly average churn.
Further, we remain concerned about the precipitous decline in
the landline business. Revenue from fixed-line business continues
to face downward pressure due to the ongoing fixed-to-mobile
substitution effect and intense competition. China Unicom remains
significantly challenged by aggressive nationwide 3G service
rollouts by its peers, China Mobile (NYSE: CHL) and China
Telecom Corp. (NYSE: CHA).
However, for the short term (1-3 months), the stock retains a
Neutral rating with a Zacks #3 Rank. We believe China Unicom will
continue to make significant progress in expanding economies of
scale in 3G, broadband and other businesses that will likely
improve its overall revenue and profitability.
3G remains a compelling opportunity and represents the single
biggest driver of the company's long-term growth. Additionally, the
company has the exclusive right to distribute the Apple
Inc.'s (Nasdaq: AAPL) iPhone in China and is in talks with Apple to sell the
iPad tablet by the end of 2011.
Hot Topic Reports In Line
Hot Topic Inc. (Nasdaq: HOTT) reported first quarter
fiscal 2011 earnings of 0 cents a share, in line with the Zacks
Consensus Estimate. However, it improved substantially from the
prior-year loss of 4 cents a share.
Earnings per share in the reported quarter exclude approximately
17 cents of expenses related to the
implementation of the previously announced cost reduction plan and
strategic business changes. Including the said expenses, loss per
share came in at 17 cents a
share.
Total revenue declined 0.8% year over year to $161.3 million, marginally beating the Zacks
Consensus Estimate of $159.0
million. However, the company reported a same-store
sales increase of 0.2%, reversing the fall of 8.7% in the first
quarter of fiscal 2010.
The Hot Topic segment reported same-store sales decline of 1.3%
in the quarter. Though in the red, comparables improved
considerably from a drop of 12.3% in the prior-year quarter. Sales
for the period decreased 3.1% to $116.1
million.
The Torrid concept recorded same-store sales growth of 4.8%,
flat with the year-ago quarter. Sales improved 5.5% year over year
to reach $45.3 million for the first
quarter of fiscal 2011.
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