Avago Technologies, Smith & Wesson, Apple, Stamps.com and Callidus Software highlighted as Zacks Bull and Bear of the Day

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Dec 30, 2014, 09:42 ET

CHICAGO, Dec. 30, 2014 /PRNewswire/ -- Zacks Equity Research highlights Avago Technologies (Nasdaq:AVGO-Free Report) as the Bull of the Day and Smith & Wesson (Nasdaq:SWHC-Free Report)as the Bear of the Day. In addition, Zacks Equity Research provides analysis onApple Inc. (Nasdaq:AAPL-Free Report), Stamps.com Inc. (Nasdaq:STMP-Free Report) and Callidus Software Inc. (Nasdaq:CALD-Free Report).

Here is a synopsis of all five stocks:

Bull of the Day:

In early December, Avago Technologies (Nasdaq:AVGO-Free Report) crushed the Zacks Consensus Earnings and Revenue Estimates mainly due to their wireless communications division, which saw 73% growth quarter over quarter. Further, growing demand for BAW filters in China and India helped boost growth as well.

Avago Technologies is a leading designer, developer, and global supplier of a broad range of analog, digital, mixed signal and optoelectronics components and subsystems with a focus in III-V compound semiconductor design and processing. The company serves four primary target markets, Wireless communications, Wired Infrastructure, Enterprise storage, and Industrial and Other.

The higher than expected wireless growth, 4G deployment and adoption of 4G smartphones in China and India, and high volume shipments and content gains due to Apple's IPhone 6/6+ have caused management to increase revenue guidance for Q1 2015. Management increased Q1 15 revenue guidance to $1.64 billion, up from the Zacks Consensus Estimate of $1.51 billion due to anticipated tailwinds throughout Q1 2015 from the sales of Apple's IPhone 6/6+.

Bear of the Day

Over the past several years, gun manufacturers have seen their sales boom due to several factors, but it appears as though the golden age of gun purchases is fading. In 2013, more than 21 million applications were put through the National Instant Criminal Background Check System, which was almost 8% higher than 2012, and marked the 11 consecutive year the number increased. But in 2014, gun manufacturers saw a sizable decline in overall gun sales, and background checks. This has caused a significant buildup in inventories, especially at competitors of Smith & Wesson.

Smith & Wesson (Nasdaq:SWHC-Free Report) is one of the world's leading producers of quality handguns, law enforcement products and firearm safety and security products. This 150 year old company also manufactures and markets Smith & Wesson handcuffs, and other specialized metal working products.

During the gun boom over the past two plus years, Smith & Wesson has performed very well, and has posted a four quarter average positive earnings surprise of 15.82%. But in the most recent quarter, management saw total revenues decline 21% year over year due to waning sales and difficult comps. Specifically, handgun sales dropped 15%, and long gun sales declined 50% year over year.

While sales have begun to slump, inventories have begun to grow. While the inventory situation is not as bad for Smith & Wesson as it is for their competitors, it will negatively impact Smith & Wesson nonetheless. This is due to the fact that the competition, who has a large inventory, has begun to increase promotional activity (sales) in order to reduce their inventory, which is slowing sales at Smith & Wesson.

Additional content:

Apple's iPhone 6 Mini Scheduled for 2015 Debut?

Apple Inc. (Nasdaq:AAPL-Free Report) has been reportedly planning to launch a mini version of the iPhone 6 in 2015. Rumors have been making the rounds ever since the company launched the large-screen versions of its flagship product – iPhone 6 and 6 Plus. However, latest updates suggest that the company is keen on launching a 4-inch version of iPhone 6 if it guarantees a minimum of 10 million units per year.

While iPhone 6 and 6 Plus sales are touching new highs, a section of iPhone users still prefer smaller iPhones. We believe that with more variety in iPhone 6 sizes, Apple would be able to target a vast user base of those willing to upgrade to the iPhone 6.

Further, with the prospective launch of the iPhone 6 mini, the company could offer a better budget option for those who have been avoiding switching to the latest iPhone 6 because of the hefty price tag. Although the price of the mini version has not been fixed, it is likely to be somewhere between the entry-level iPhones and the latest iPhone 6.

We believe that the launch will cash in on the market buzz created by strong sales of the new iPhones. Since the Sep 2014 release, the iPhones created record demand far exceeding that of the previous versions of iPhone. Apple intends to sell the new iPhones in approximately 115 countries in the near term, marking it the fastest roll-out in the history of the device.

In addition, the iPhone maker will launch the iWatch in early 2015, which is expected to be a major hit. The watch offers several features including Apple Pay and Siri support that distinguish it from other smart watches currently available. We believe that the nascent smartwatch market with a few well-established players presents a good opportunity for Apple.

Market research firm IDC foresees 2014 worldwide shipments of wearable computing devices to increase threefold from 19 million units in 2013 to 112 million units in 2018. Apple's loyal customer base is a huge competitive advantage. The company even hired executives from Tag Heuer, Burberry and Yves Saint Laurent to develop the sleek and fashionable look of the device. We expect Apple's iWatch to broaden its revenue base.

Apple currently sports a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other stocks in this technology sector worth considering include Stamps.com Inc. (Nasdaq:STMP-Free Report) and Callidus Software Inc. (Nasdaq:CALD-Free Report) with a Zacks Rank #1.

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