Zacks Equity Research highlights PeopleSupport (NYSE: PSPT) as the Bull of the Day and Avnet, Inc. (NYSE: AVT) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Eni S.p.A. (NYSE: E) and Navarre (Nasdaq: NAVR). 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 PeopleSupport (NYSE: PSPT). PeopleSupport is well positioned to benefit from the fast-growing offshore BPO (business process outsourcing) market. The company’s rapid revenue growth and investments production capacity in the Philippines and Costa Rica resulted in a negative earnings surprise in the fourth quarter and significant near-term margin contraction. The news drove the stock down to reasonable valuation levels as earnings momentum investors exited their stock positions. The company’s long-term prospects are still promising despite the loss of the Vonage contract and the stock appears to be attractively valued at current levels.
Bear of the Day:
Our Bear of the Day recommendation is for Avnet, Inc. (NYSE: AVT). Avnet is one of the largest distributors of electronic components and computer products. March quarter revenue and EPS fell short of consensus expectations. Weak microprocessor sales and EMS demand continue to exert a negative impact on TS and EM revenues, respectively. Besides, the weakness in Asia, we remain concerned about the high level of debt. We are reiterating our SELL rating in view of various issues in the core business, the high level of debt and the rich valuation.
We are maintaining our Hold recommendation on Eni S.p.A. (NYSE: E) ADRs [American Depositary Receipts] after the company's first-quarter results. We continue to believe that the company's positive production-growth profile, capital discipline, and attractive dividend are adequately reflected in its premium valuation relative to its European peers. We are increasingly concerned with Eni's high valuation, relative to its historical norms, and as production growth slows, the stock could come under significant pressure. The ADRs have recently underperformed the peer group, in our view reflecting valuation concerns.
Navarre's (Nasdaq: NAVR) fourth quarter sales were $3 million ahead of our forecast, but its EPS [earnings per share] were $0.01 below our estimate. Sales were strong in its FUNmation business, while growth was flat in the distribution business. Management also established fiscal year 2008 guidance. It expects sales of $670-$690 million (the decline is due to exiting the independent music business) and EBITDA [earnings before interest, taxes, depreciation and amortization] of $34-$36 million. Still, Navarre remains a low-margin business that is littered with numerous risks that could make the road ahead a bumpy ride. All told, we maintain our Hold rating on the stock. Our target price of $4.25 assumes the stock can trade at P/E [price-to-earnings multiple] of 10x our fiscal 2009 EPS estimate.
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.
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