CHICAGO, July 6, 2011 /PRNewswire/ -- Zacks Equity Research highlights: BHP Billiton (NYSE: BHP) as the Bull of the Day and Sears Holdings Corp. (Nasdaq: SHLD) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Microsoft (Nasdaq: MSFT), Baidu (Nasdaq: BIDU) and Google (Nasdaq: GOOG).
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Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
BHP Billiton (NYSE: BHP) is a diversified resource company with operations around the globe. Over the longer term, we view the economic recovery and ongoing industrialization in the emerging markets quite positively, as it is expected to improve the demand and price of the company's products.
BHP Billiton's commitment toward its long-term growth through key investment strategies appears encouraging and expected to raise organic revenue. Moreover, the progressive dividend policy and capital management program enhance shareholders sentiments. The company's diversification into potash development strengthens our outlook on the stock.
Thus, we upgrade our recommendation from Neutral to Outperform. Our $115.00 target price, 14.8x fiscal 2012 EPADS reflects this view.
Sears Holdings Corp. (Nasdaq: SHLD) disappointed with its overall first-quarter 2011 results. The company posted a quarterly loss of $1.39 per share that plunged drastically from the prior-year quarter earnings of $0.16 primarily due to sluggish top-line performance. Management's cost cutting initiatives for enhancing profits were of no use.
Moreover, intense competition and exposure to adverse foreign currency translations may undermine the company's future operating performance. Furthermore, rising debt and declining cash and equivalents may adversely impact the company s future expansion and operational activities.
Currently, we are maintaining a long-term Underperform recommendation on the stock. Our target price of $62.00 is based on P/CF multiple of 6.3x.
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Baidu vs. Google: Searching for Growth
Ever use the Bing search engine? I probably wouldn't if it weren't placed in front of me so often. And having used it more and more recently, I would have to say that I find it interesting and useful in its own ways.
Maybe I'm not that picky about web search. I actually enjoy the mystery of the hunt for information, knowledge, and connections and would be leery of an always-the-same structure to my search results.
It's bad enough that my big brother-esque email provider is "watching" and directs ads at me about stuff he's hoping I'm interested in buying. I shudder to think what else he can do with our email. And I find it slightly ironic he might judge others for censorship.
Bing for Growth?
So, since I am all for competition and lack of uniformity, I was pleased to read this weekend's news about Microsoft (Nasdaq: MSFT) getting a competitive foothold in the world's biggest Internet market of any single country. As you probably have heard already, they inked a deal with Chinese search giant Baidu (Nasdaq: BIDU) to provide English language results.
Baidu is responsible for about three-quarters of search from China's 450 million people online. While Google (Nasdaq: GOOG) grabs about 20% of that market share, Microsoft's Bing has barely made a dent.
This is a huge step in the right direction for the aging (in web time) tech behemoth, especially since Google has backed off and Baidu seems to have many government-sanctioned benefits to help sustain its near monopoly. With Baidu currently doing about 10 million English language searches per day, Bing could begin to bring some growth for Microsoft in Asia.
Google vs. Baidu
Speaking of growth, which is the better web search giant to buy? When Google was still a solid growth stock, I always tried to buy the dips. For instance, last September when GOOG pulled back to $450, I recommended for TheStreet.com readers a January 2011 450/500 bull call spread for about $25. That spread earned a nearly 100% profit as the stock soared quickly back above $500.
Now this was actually a time where growth was leveling-off for GOOG since its last trip to $600. I didn't know it at the time, but GOOG was starting to earn some sell ratings from the Zacks Rank since its fall from grace in the spring of 2010 on the heels of the exit from China.
In other words, analyst EPS estimates were starting to level-off, if not come down, from projections which always seemed to guarantee a forward P/E multiple below 20. And this was reflected even more in earnings misses in the June quarter of last year and the March quarter of this year, after which the stock took a dive both times.
GOOG Takes a Dive
The writing was on the wall after the last quarterly report that institutions were in "distribution" mode. In mid-April, I recommended several put trades to subscribers of the options letter I wrote for based on the logic that the stock was "broken" and would not recover the $550 level any time soon.
There will always be opportunities to trade GOOG from the chart and valuation, and combining these entry points with the Zacks Rank which currently sits at #4 (sell). But the one to watch now is Baidu, whose chart is a thing of beauty and whose current Zacks Rank is #1 (strong buy).
But if Google is projected to earn over $35 next year, that gives it a mid-teens forward P/E multiple. Why should we buy BIDU currently trading at over 35 times? Because it's the trend in analyst estimates that makes the difference. While GOOG estimates continue to come down and the growth rate slows, BIDU is seeing steady upward revisions to earnings estimates and the growth rate makes analysts and investors lick their chops.
BIDU Rides a Wave
Baidu shares continue to climb strongly on the support of their 50 and 200-day moving averages. But that's just the consequent effect of the real driver. The underlying cause of the ascent is the earnings growth trend that attracts institutional buying.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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