For Immediate Release
Chicago, IL – December 5, 2011 – Zacks Equity Research
highlights Tenet Healthcare (THC) as the Bull of
the Day and China Life Insurance (LFC) as the Bear
of the Day. In addition, Zacks Equity Research provides analysis on
Groupon Inc. (GRPN), Google
(GOOG) and Amazon (AMZN).
Full analysis of all these stocks is available at
http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Bull of the Day:
We are upgrading our recommendation on Tenet
Healthcare (THC) to Outperform based on its strong
operating performance in the recent third quarter, which surpassed
the Zacks Consensus Estimate, driven by strong results in all lines
of the business, especially the robust performance in outpatient
volumes and higher admissions.
New debt financing has improved Tenet's maturity profile and is
also likely to reduce the company's future interest payments
significantly. Moreover, we believe that volume growth can
substantially help boost the earnings outlook of Tenet in future,
while also facilitating growth through the acquisitions.
Our six-month target price of $5.50 per share equates to about
12.8x our earnings estimate for 2011. With no dividend supplement,
this target price implies an expected total return of 18.3% over
that period.
Bear of the Day:
China Life Insurance's (LFC)
third-quarter earnings witnessed a steep decline from the
comparable period of last year. High surrenders, low premium income
and increased impairment losses led to a decline in the net income,
while increased unrealized losses in the investment portfolio led
to reduced shareholders equity.
Additionally, China Life inherently faces substantial interest
rate, market and currency risk. Although the company has a strong
brand name, it has to deal with considerable competition on the
domestic front, which limits earnings growth. However, the debt
issue is expected to improve solvency margin, while high liquidity
will enable the company to take the high surrender rate in its
stride.
Our six-month target price of $35.00 equates to 19.2x our
earnings estimate for 2011. Combined with the $0.81 per ADR annual
dividend, this target price implies an expected negative total
return of 7.1% over that period. This is consistent with our
Underperform recommendation on the ADRs.
Latest Posts on the Zacks Analyst Blog:
Daily Deals: The Future in Retail
What has become commonplace for tech companies and others aiming
to lower costs is now seeping into the retail segment as well. The
idea is the same: outsource routine functions to a specialized
party, making them responsible for volumes that could generate
higher profits than those shared with them.
This is what the tech companies had been doing previously, although
they outsourced the manufacturing function, which is easier to
understand given the tangible nature of goods produced. Also, the
outsourcing of manufacturing was to lower-cost regions, so the cost
advantage was significant. Naturally, the impact on profits was
also greater, enabling them to pour funds into R&D and thereby
increase product differentiation.
Background
Things are different in retail, however, especially for the small
retailers that have been more willing to experiment. Here, store
location is of paramount importance, since adequate space is
required to stock and display wares, and also attract customers.
Therefore, the primary concern for the small retailer is real
estate that suits his or her needs.
After selecting the location, there are only a handful of things
that the retailer could do to differentiate his or her store from
the one next door. This lack of differentiation makes it impossible
for retailers to generate high margins, forcing them to compete on
price instead.
The retailer’s next focus is the generation of traffic. Here, he or
she is limited by the physical location of the store. As a result,
there is reason for retailers to be interested in companies that
send customers to their stores directly. And this is what the
specialized companies like recently public Groupon
Inc. (GRPN) and LivingSocial have been doing.
Google (GOOG) Offers and Amazon
(AMZN) Local are other similar services.
Business Model of the “Specialized” Players
The concept started pretty crudely, with the daily deals companies
offering coupons that promised huge discounts. The coupon was
priced in a manner that could induce the buyer to spend more.
However, the system didn’t really work, because many customers did
not spend the full coupon value and the initiative failed to
generate repeat customers.
While the basic concept remains the same, most companies are now
changing the rules of the game. They are tracking customer
preferences through their registered credit cards to determine the
kinds of products that induce a particular customer to repeat the
purchase. This information is then being used to create customer
profiles.
Customer profile data is perhaps the most valuable asset that these
companies possess -- this is their bread and butter. Therefore,
companies with a larger customer base (people purchasing coupons)
and number of partners (retailers signing up for the service) stand
a greater chance of creating valuable information. This clearly
makes Groupon the leader in the space since its user and partner
bases are both significantly higher than other players.
Moreover, the selection is also broader these days, with electronic
goods, events, services and travel joining retail and restaurants.
The inclusion of electronic goods is a big positive because this is
an area that is expected to attract the largest percentage of
consumer discretionary dollars in the next few years.
Get the full analysis of all these 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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Continuous analyst coverage is provided for a universe of 1,150
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AMAZON.COM INC (AMZN): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
GROUPON INC (GRPN): Free Stock Analysis Report
CHINA LIFE INS (LFC): Free Stock Analysis Report
TENET HEALTH (THC): Free Stock Analysis Report
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