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For Immediate Release
Chicago, IL – October 8, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include RadioShack Corp. (RSH - Analyst Report), Sprint Nextel Corp. (S - Analyst Report), Verizon Communications Inc. (VZ - Analyst Report), Vodafone Group plc. (VOD - Analyst Report) and Akamai Technologies Inc. (AKAM - Analyst Report).
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Here are highlights from Friday’s Analyst Blog:
RadioShack to Underperform
The nightmare of RadioShack Corp. (RSH - Analyst Report) persists as the company continues with its disappointing performance. Second-quarter 2012 financial results were well below the Zacks Consensus Estimates.
Management has suspended its dividend in order to reduce its debt burden. Adverse product-mix toward low-margin devices and a volatile macro-economic scenario in the U.S. are taking a toll on the company’s financials. RadioShack’s core consumer electronics retail business is on a secular downtrend and is unlikely to be revived in the near future.
Consumers increasingly prefer online purchasing to visiting retail stores. Loss of foot traffic has severe negative impact on RadioShack’s business. Most of the consumers prefer tablets and smartphones, which are less profitable for the retail industry. We do not find any immediate growth catalyst and therefore downgrade our recommendation on RadioShack to Underperform.
RadioShack is facing bottom-line pressure for its lucrative wireless platform. In the previous quarter, the company suffered a net loss of $21 million.
Moreover, the company delivered a weak bottom line due to costs associated with transition from an adverse product mix toward low-margin smartphones, T-Mobile to Verizon Wireless partnership, and underperformance of its businesses with Sprint Nextel Corp. (S - Analyst Report).
Although management remains confident in achieving future business from Verizon Wireless, it believes that Verizon business needs more consumer awareness and spend increasing amount for marketing. Verizon is a joint venture between Verizon Communications Inc. (VZ - Analyst Report) and Vodafone Group plc. (VOD - Analyst Report).
We expect the wireless division revenue to remain almost the same in 2012. RadioShack also forecasted its net income to decline further in 2012.
Akamai’s Strategic Expansion
With the growing demand for Akamai Technologies Inc.’s (AKAM - Analyst Report) cloud based services in the Latin American countries, the company is opening a new services and support center in Costa Rica. Through this initiative the company will deliver its cloud infrastructure solutions.
Expansionary initiatives to cater to Argentina, Brazil, Chile, Colombia, Mexico and Peru bode well for the company’s long-term prospects as these countries have recorded a steady growth in online usage in recent times. Brazil and Mexico accounted for the highest online usage. Market research firm Gartner expects IT spending in Brazil and Mexico to exceed $140 billion and $56 billion in 2012, respectively. Moreover, Gartner expects Latin America to generate approximately $326 billion in IT spending this year.
Akamai’s cloud infrastructure solutions have been seeing robust demand. In the last concluded quarter, this segment comprised 58% of its total revenue, an increase of 22% on a year-over-year basis.
According to Gartner, the global cloud services market is expected to grow 19.6% in 2012 to $109.0 billion. Moreover, the cloud management and security services segment is estimated to reach $3.3 billion in 2012. Gartner expects Argentina, Mexico and Brazil to be some of the strongest markets this year. This tremendous growth potential will benefit Akamai, especially in the enterprise segment where cloud technologies are being adopted rapidly.
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