Zacks Bull and Bear of the Day Highlights: Hurray! Holding Co. Ltd., Dell, Inc., Cemig, Copel and CPFL.
For Immediate Release
Chicago, IL – June 1, 2009 – Zacks Equity Research highlights Hurray! Holding Co. Ltd. (HRAY - Analyst Report) as the Bull of the Day and Dell, Inc. (DELL - Analyst Report) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Cemig (CIG - Analyst Report), Copel (ELP - Analyst Report) and CPFL (CPL - Analyst Report).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.
Here is a synopsis of all five stocks:
Bull of the Day:
We upgrade our recommendation to a Buy for Hurray! Holding Co. Ltd. (HRAY - Analyst Report), a leading provider of wireless value-added services (WVAS) and digital download content in China, following large-scale 3G (TD-SCDMA) wireless network deployments and the company's transformation to an entertainment content developer.
Hurray! also has a respectable net cash position on its balance sheet and operating margins appear to be improving due to cost reduction measures.
We believe the company may be in the midst of a favorable turnaround, with share priced at an attractive level near the company's net cash position. Wireless demand for mobile entertainment services may also result in higher revenue levels over the next six- to twelve-months.
Bear of the Day:
Dell, Inc. (DELL - Analyst Report)reported discouraging 1Q10 results with revenue and EPS falling below our estimates, and significant declines from the year-ago quarter. The rapid decline in corporate profits, highly illiquid capital markets and the recessionary outlook are likely to dampen corporate capital spending. This is likely to have a major impact on Dell's server business.
Adding to this is the continued decline in consumer spending as shown by the decrease in sales of PCs and cell phones over recent months. The company's marketing model of being the lowest priced supplier to the consumer in a declining market is likely to reduce margins over the coming quarters.
Although Dell is cutting costs, introducing new products and financing customers, given the uncertainty of the length of the current world-wide recession, we believe Dell will continue to struggle, posting inconsistent results in future quarters. We maintain our SELL rating with a new six-month target price of $8.00.
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Brazilian Deflation & Utilities
In the second half of 2009, the economic recovery in Brazil should help to stop IGPM deflation. According to the weekly focus survey conducted by the Brazilian Central Bank, the market expects IGPM to reach 1.69% for 2009.
The interesting point about the IGPM is that this index is used to calculate the tariff adjust for electric utilities in Brazil, like Cemig (CIG - Analyst Report), Copel (ELP - Analyst Report) and CPFL (CPL - Analyst Report). During 2008, IGPM inflation was under pressure in the first three quarters of the year due to the strong economic growth, and in September, October and November it was under pressure because of the sharp devaluation of the Brazilian real. That was great for electric utilities.
Just as an example, CPL recent released the final indexes for the tariff Revision of CPFL with an annual Tariff increased 21.22% for CPFL Paulista, effective as of April 8, 2009. Short-term earnings of Brazilian electric utilities will be positively affected in the following quarters by this adjustment. However, for 2010 it will be quite different.
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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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