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Zacks Bull & Bear of the Day Highlights: China Mobile, St. Joe Co., Avis Budget, OPNET and Red Robin
CHICAGO--([ BUSINESS WIRE ])--Zacks Equity Research picks China Mobile (NYSE: [ CHL ]) as Bull of the Day and St. Joe Co. (NYSE: [ JOE ]) as Bear of the Day. In addition, the analysts at Zacks Equity Research discuss the latest on Avis Budget Group (NYSE: [ CAR ]), OPNET Technologies (Nasdaq: [ OPNT ]) and Red Robin Gourmet Burgers (Nasdaq: [ RRGB ]).
Full analysis of all these stocks is available at: [ http://at.zacks.com/?id=2678 ]
Bull of the Day
China Mobile's (NYSE: [ CHL ]) market valuation has declined in recent months which we believe is mostly related to general global equity market weakness and risks associated with the impending overhaul of the telecom sector by China's government. However, it remains our view that the emerging and restructured competitive entities will have unanticipated challenges deploying and advancing services to levels and coverage delivered by China Mobile, the incumbent.
Accordingly, we assess that successful expansion into low-penetration rural regions of China, along with effective network optimization strategies and customized mobile value-added services, establishes China Mobile as the dominant mobile provider, far ahead of its nearest competitors. China Mobile currently commands 70% share of the Chinese wireless market.
Regardless of additional competition, significant opportunities remain due to a substantial untapped user market, not to mention new valued-added offerings and the 3G deployments to follow. We maintain our Buy rating even as we factor in potential impacts of a competitive landscape and a comparatively weaker economy.
Bear of the Day
St. Joe Co. (NYSE: [ JOE ]) is currently focusing on increasing liquidity through the sale of non-core assets, reducing headcounts, and reducing cap-ex expenditures in response to a rapidly deteriorating residential Florida real estate market.
In addition, JOE has eliminated most of its long term debt and opened a new $100 million line of credit. There are no signs that the housing situation will get better in the next six months and we think the worst is yet to come. Near term, we would stay away from companies with exposure to the residential building business. While we think the company is a good long-term investment due to its extensive land holdings in one of the fastest growing states, we are maintaining our near-term Sell recommendation.
The company is trading at 165x our 2009 EPS estimates.
Recent Analysis from the Analyst Blog
Avis Budget at Reasonable Levels
The near-term outlook for the Avis Budget Group (NYSE: [ CAR ]) is difficult to ascertain. The truck rental business is experiencing pricing pressure and the economy is weakening. Revenue enhancement and cost cutting initiatives have been implemented that should fuel significant financial improvements.
However, earnings visibility is limited, especially with a deteriorating economy and declining enplanements. Also, historical valuation data is unavailable for Avis Budget Group. Management has twice lowered guidance for 2008 in view of weaker-than-expected enplanements and lower commercial travel volumes. The Hold rating is maintained for Avis Budget Group.
OPNET a Small-Cap Tech Play
OPNET Technologies (Nasdaq: [ OPNT ]) is a provider of management software for networks and applications. With its analytical capabilities, OPNET solutions provide powerful modeling tools to rapidly troubleshoot and resolve performance problems and even prevent problems before they occur. By comparison, traditional solutions are more reactive in nature.
With encouraging results in the first half of fiscal year 2009, new license revenue growth has accelerated to its highest levels ever. We believe that changes in OPNET's sales process are paying off, and the company will be able to post growth going forward.
Red Robin Staying in the Red
Seattle, Washington-based Red Robin Gourmet Burgers' (Nasdaq: [ RRGB ]) traffic began declining long before the onset of rising gas prices in October 2007, which began choking business in the casual dining sector a victim of poor site selection in new markets.
We believe shares of RRGB will continue to underperform both the larger market and the restaurant industry. In spite of their poor performance, the company has retained and even added to these sites as it repurchased 45 franchises since 2005. Moreover, 2009 consensus EPS estimates are 10% higher than ours, and we think our estimate may prove aggressive if the economic slowdown is deeper or more protracted than we currently anticipate.
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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.
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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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