CHICAGO, Sept. 12, 2014 /PRNewswire/ -- 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 the Micron Technology (Nasdaq:MU-Free Report), SanDisk Corp. (Nasdaq:SNDK-Free Report), Stratasys Ltd. (Nasdaq:SSYS-Free Report), Cirrus Logic Inc. (Nasdaq:CRUS-Free Report) and Quiksilver Inc. (NYSE:ZQK-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Thursday's Analyst Blog:
Micron or SanDisk: Which Is the Better Stock?
The storage market boom is likely to continue with expanding storage needs and more options to address those needs. Since the market is dominated by a few large players, it makes sense to weigh the pros and cons of investing in these stocks. In this article we will provide a brief industry background before diving into the details.
Some Background
A number of factors are driving the storage market today, the most important of which are increased digitization of workloads, the move toward cloud computing, the move toward mobile computing that necessitates cloud storage, and growing volumes of unstructured data from social networking and other sites that are extremely valuable for online retailers and marketers.
Storage of unstructured data has become a major problem these days. Big Data storage needs include the ability to handle capacity and provide low latency for analytics work. Flash memory is gaining ground against traditional hard drives in this environment due to significant performance advantage and low power consumption.
The storage market is seeing a steady increase in demand, given fast-growing stored data volume, especially the explosive growth of unstructured data. NAND (non volatile storage technology) demand is expected to remain very strong again this year. Solid State Drive (SSD) demand will also increase and could even surpass manufacturing capacity, leading to periodic shortage and higher pricing in the near term.
We see the growth trend in NAND storage and particularly, SSD to be especially beneficial for companies like Micron Technology (Nasdaq:MU-Free Report) and SanDisk Corp. (Nasdaq:SNDK-Free Report), which have based their products on NAND technology.
Micron Looks Very Strong
Micron, a Zacks Rank #1 (Strong Buy) technology stock, has generated a strong 52-week return of around 94.6%. The company has a market cap of $34.24 billion and a long-term expected earnings growth rate of 13.4%.
The stock has delivered three positive earnings surprises in the last four quarters with an average beat of 30.3%. With respect to estimate revisions, there hasn't been much activity lately. But whatever revisions there are, they are positive. The company is expected to earn $3.57 per share in fiscal 2015 (fiscal year ends in August), which has increased from $3.23 per share three months back and compares to fiscal 2014 EPS estimate of $3.22.
Micron expects DRAM demand to increase at a CAGR of 25% over the 2014-2018 period, while supply is expected to increase at a CAGR of 21% during the same period. This strong demand should support prices.
It is worth mentioning that Micron ranks #3 as a NAND supplier, according to IDC.
SanDisk Guidance Disappoints
SanDisk on the other hand is a flash memory storage vendor, carrying a Zacks Rank #3 (Hold). The company recently acquired Fusion-io. Leveraging Fusion-io's hardware and software solutions, SanDisk will be able to enhance its existing flash memory storage portfolio.
SanDisk has generated a return of 64.8% over the last 52 weeks. The company has a market cap of $22.44 billion and a long-term expected earnings growth rate of 14.4%.
Nonetheless, four estimates for SanDisk for fiscal 2014 were lowered over the last 60 days. The Zacks Consensus Estimate also went down 3.1% to $5.54 over the same time frame on weak revenue guidance, primarily due to supply constraints.
Notably, SSDs constituted the primary share (40%) of SanDisk's total revenue. The top 3 players control 54% of the SSD market. Gartner expects the total addressable market (TAM) for SSDs to grow from $6.9 billion in 2012 to $22.3 billion in 2017 (i.e. a CAGR of 26%).
Conclusion
We believe that both the stocks have their share of pros and cons. But given the current scenario, we would bet on Micron because it is well-positioned to outpace the industry and is fundamentally strong enough to withstand risks.
Other Stocks to Consider
Investors may consider other stocks like Stratasys Ltd. (Nasdaq:SSYS-Free Report) and Cirrus Logic Inc. (Nasdaq:CRUS-Free Report), both of which currently sport a Zacks Rank #1 (Strong Buy).
Quiksilver Downgraded to Strong Sell on Dismal Earnings
On Sep 6, 2014, Zacks Investment Research downgraded the skateboarding- and surfing-inspired clothes retailer, Quiksilver Inc. (NYSE:ZQK-Free Report), to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Shares of the company have slumped 26.5% since it released disappointing third-quarter fiscal 2014 results on Sep 4. Along with dismal earnings, Quiksilver also hinted at continued troubles in the fourth quarter of fiscal 2014.
The top line tanked almost 19% year over year to $395.7 million mainly due to changes made in supply chain which resulted in late deliveries. Moreover, quarterly sales missed the Zacks Consensus Estimate of $440 million and the company's adjusted EBITDA almost declined to zero compared with the prior-year period adjusted EBITDA of $52.5 million.
During the quarter, the company benefited from the implementation of its 'Profit Improvement Plan', reflected by the lowered cost structure, higher gross margin and improved sales in the direct-to-consumer channel and emerging markets. However, these improvements failed to mitigate sales decline in the wholesale channel, especially in North America and Europe, with the kids apparel, DC Quiksilver and Roxy brands playing a spoilsport.
Going forward, the company expects the downtrend in sales to continue through the rest of the year and anticipates a continued fall in wholesale revenues in North America and Europe, with some respite from the emerging markets and e-Commerce sales.
Quiksilver's quarterly adjusted loss of 20 cents a share fared worse than the prior-year adjusted earnings of 7 cents as well as the Zacks Consensus Estimate of 3 cents. A glance at the earnings history shows that the company has missed the Zacks Consensus Estimate in 9 of the past 11 quarters, resulting in continued fall in its share price.
Further, Quiksilver's lackluster results triggered a downtrend in the Zacks Consensus Estimate, as analysts became less constructive on the stock's future performance. The loss per share as per the Zacks Consensus Estimate for the fourth quarter has been increased by 5.5 times to 11 cents from 2 cents in the last 7 days. Similarly over the same time frame, loss for fiscal 2014 has jumped over two folds to 57 cents per share from the earlier estimate of a loss of 24 cents, as per the Zacks Consensus Estimate.
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