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Business
Zacks Bull and Bear of the Day Highlights: Allegheny Energy, Novatel, H&R Block, NetEase.com and Neurocrine Biosciences
© Business Wire 2008
2008-09-05 12:11:02 - - Zacks Equity Research highlights Allegheny Energy (NYSE: AYE) as the Bull of the Day and Novatel Wireless (Nasdaq: NVTL) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on H&R Block (NYSE: HRB), NetEase.com, Inc. (Nasdaq: NTES) and Neurocrine Biosciences (Nasdaq: NBIX). Full analysis of all these stocks is available at
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Here is a synopsis of all five stocks:
Bull of the Day: Allegheny Energy (NYSE: AYE)
We expect that the company's regulated delivery utility business will provide steady earnings growth, while the generation business will provide an additional boost to earnings. Accordingly, we maintain a BUY recommendation on AYE common stock with a six-month target price of $51.75.
Price appreciation to our near-term valuation target, coupled with the reinstated regular quarterly cash dividend of $0.15 per share after a gap of five years, which we deem sustainable and secure, represents annualized total return potential of 26.5%.
Bear of the Day: Novatel Wireless (Nasdaq: NVTL)
Novatel did not provide any specific time frame, or visibility, when improved opportunities from its new products can be derived. In addition, the market for wireless data access equipment has recently become more competitive as several large vendors launched innovative products with attractive pricing.
Novatel's second quarter 2008 preliminary earnings results were significantly below our estimates. We downgrade our recommendation to a Sell as we assess appropriate signs for improved conditions.
Latest Posts on the Zacks Analyst Blog:
H&R Block (NYSE: HRB)
We reiterate our Hold rating on shares of H&R Block following the release of Q1 financial results. Although the fallout from the mortgage business implosion will likely be felt for some time to come, and we continue to have significant concerns regarding other aspects of HRB's business, we believe that negative and positive aspects of the company's outlook are now roughly balanced. Steps have been taken by the management to refocus the company on its core tax businesses, and the emphasis on expense reduction should result in improved margins going forward. Our price target of $23.50 per share represents a multiple of 15x our 2009 EPS estimate.
NetEase.com, Inc. (Nasdaq: NTES)
NetEase.com is one of the leading providers of online gaming, advertising, web-based communication services, and a variety of interactive content in China.
NetEase is currently trading at 16.8x estimated 2008 EPADR of $1.56, a discount to the industry. Rolling our valuation to fiscal 2009 EPADR estimate of $1.74, the company is trading at 15.1x, which is far below the industry average. NetEase faces intense competition in the gaming and advertising market. Delayed product launches and growing operating expenses have hurt profitability.
Neurocrine Biosciences (Nasdaq: NBIX)
We have long stated that Neurocrine Biosciences' stock is stuck in a tight trading range until investors get an update on both elagolix and indiplon. We got the first update in early September when the management released very positive phase II data from the PETAL study on GnRH (gonadotropin-releasing hormone) antagonist elagolix. This encouraging data for the treatment of endometriosis should lead to the signing of a major partnership for pivotal trials in 2009.
As for insomnia drug indiplon, we assume the product is eventually discontinued in the U.S. However, with elagolix now taking center stage, Neurocrine is well positioned to outperform in 2009. We still believe that investors can be patient while additional elagolix becomes available, but we are moving our price target to $8, from $6, on the increased likelihood that a deal for elagolix gets done in the next several months.
Get the full analysis of all these stocks by going to 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.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
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Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Zacks.com
Mark Vickery
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