For Immediate Release
Chicago, IL - March 6, 2012 - Zacks Equity Research highlights:
Genuine Parts Co.
(
GPC
) as the Bull of the Day and
Sunoco, Inc.
(
SUN
) as the Bear of the Day. In addition, Zacks Equity Research
provides analysis on
Electronic Arts Inc.
(
EA
),
Apple
(
AAPL
) and
Zynga Inc
(
ZNGA
).
Full analysis of all these stocks is available at
http://at.zacks.com/?id=2678
.
Here is a synopsis of all five stocks:
Bull of the Day
:
Genuine Parts Co.
(
GPC
) saw a 15% increase in profit to $0.86 per share in the fourth
quarter of 2011, surpassing the Zacks Consensus Estimate by $0.03.
Meanwhile, total sales increased 7% to $3.0 billion, which was in
line with the Zacks Consensus Estimate. For full year 2011, the
company reported a 19% increase in profit to $565 million or $3.59
per share, beating the Zacks Consensus Estimate by $0.02.
Genuine Parts is a leading distributor of automotive and
industrial replacement parts, office products and
electrical/electronic materials in the U.S., Canada and Mexico. The
company has undertaken various initiatives to boost sales and
earnings, such as product line expansion, penetration into new
markets and acquisitions.
Therefore, we are maintaining our Outperform recommendation on
the stock with a target price of $77.00. This target price, 19.5x
our 2012 EPS estimate, reflects our Outperform recommendation.
Bear of the Day
:
A weak business model, geographically undiversified asset base
and operational hindrances compel us to downgrade
Sunoco, Inc.
(
SUN
) to Underperform from Neutral. Our pessimistic outlook on the
stock is fueled by the company's poorly performing refining and
supply segment, which registered a high loss along with lower
realized prices and throughputs in the fourth quarter of 2011.
Moreover, with the separation of the coke manufacturing
business, Sunoco exhibits a weak business profile and remains
susceptible to competitive risks. As such, we expect Sunoco to
perform below the industry, which gives investors little reason to
hold the stock.
We render a pessimistic outlook on the stock in the coming
quarters, which is the main reason for our downgrade of the rating.
Our $36 price objective reflects a multiple of 6.2X the trailing
twelve-month cash flow.
Latest Posts on the Zacks
Analyst Blog
:
EA's 'Simpsons' on Apple Devices
Video game developer and publisher,
Electronic Arts Inc.
(
EA
) recently launched a mobile version of the long-running animated
series "The Simpsons." The mobile game called
The Simpsons: Tapped Out
is currently available in
Apple's
(
AAPL
) App stores and can be played on iPhone, iPad and iPod touch for
free.
The Simpsons: Tapped Out
challenges gamers to build their own version of Springfield,
a city accidentally blown up by one of its residents, Homer.
Players are expected to complete a number of levels to unlock
virtual goods and money that they can use to beautify their city
according to their choice.
Moreover, with the help of EA's origin platform players can
visit his/her neighbors Springfield and is allowed help in
completing different tasks. This co-operative gaming mode is one of
the major attractions of
The Simpsons: Tapped Out
, in our view.
We believe that the popularity of "The Simpsons" brand, coupled
with its availability on Apple devices such as the iPhone 4S, will
benefit the new game going forward.
The Simpsons: Tapped Out
is EA's second free-to-play mobile game after it
launched
The Sims: Freeplay
during the third quarter of fiscal 2012.
To date, in fiscal 2012, the company has released mobile
versions of some of its well known titles such as
FIFA 12
, Madden NFL 12 and
The Sims 3 Pets
. EA is expected to release a mobile version of
Mass Effect 3
in the upcoming fourth quarter. We expect that EA will
continue to release mobile versions of its popular games going
forward in order to gain market share in the mobile gaming sector
over the long term.
Social and Mobile Gaming: Long-Term Trends
According to research firm IBISWorld, social gaming is expected
to reach $11.3 billion by 2016. According ABI research, mobile
gaming is expected to generate $16.0 billion in revenues at the
same time, a massive increase from approximately $5.0 billion
reported in 2011. As per Juniper Research, social and casual games
will account for a major chunk of mobile game downloads going
forward.
We believe that the social gaming market will further benefit
from the increased usage of smartphones and tablets going forward.
As smartphones and tablets become more powerful with faster
processors and improving telecommunication technologies (such as
4G), massively multiplayer online (MMO) games have become easy to
play on the move. This will further boost the demand for social and
co-operative games going forward.
Most of the social games are free to play (freemium) and
generate revenue primarily through the in-game sale of virtual
goods. According to market intelligence firm In-Stat, the worldwide
market for virtual goods was worth $9.0 billion in 2011 and is
expected to reach $15.0 billion by 2014. As per Juniper Research,
revenues from purchases of virtual goods totaled $2.1 billion in
2011 and are expected to grow to $4.8 billion by 2016.
On the other hand, advertising spending on mobile games is
expected to reach approximately $900.0 million by 2015. We believe
that the freemium model will continue to remain the primary revenue
contributor for social game developers over the long term.
EA Better Placed than Zynga?
We believe that social gaming is currently a duopoly market with
the major players being EA and
Zynga Inc
(
ZNGA
). With the launch of new social games such as
The Simpsons: Tapped Out
, EA has thrown a significant challenge to the dominance of
Cityville
,
Farmville
and other popular social games from Zynga. We note that
Zynga's
Cityville
and EA's
The Sims Social
are ranked #1 and #2, respectively, as the most popular games
on the social networking website Facebook.
We note that mobile revenues form approximately 5.0% to 7.0% of
both EA's and Zynga's revenue base and both the companies expect it
to play a big part going forward. We believe that it is extremely
difficult to point a winner right now as both the companies boast
significant market share, talented development teams and
significant product pipelines.
However, we believe that EA has a slight competitive edge over
Zynga owing to its well established product portfolio for the
mobile segment and its acquisition of Zynga's direct competitor
PopCap Games in July 2011. Moreover, Zynga's lack of revenue
diversification is a major advantage for EA going forward, in our
view.
We remain Neutral on both EA and Zynga. Currently, EA has a
Zacks #3 Rank, which implies a Hold rating on a short-term basis.
On the other hand, Zynga has a Zacks #2 Rank, which implies a Buy
rating in the short term.
Get the full analysis of all these stocks by going to
http://at.zacks.com/?id=2649
.
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.
About the Analyst Blog
Updated throughout every trading day, the
Analyst Blog
provides analysis from Zacks Equity Research about the latest news
and events impacting stocks and the financial markets.
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Continuous analyst coverage is provided for a universe of 1,150
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which gives them keen insights to developments that affect company
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APPLE INC (
AAPL
): Free Stock Analysis Report
ELECTR ARTS INC (
EA
): Free Stock Analysis Report
GENUINE PARTS (
GPC
): Free Stock Analysis Report
SUNOCO INC (
SUN
): Free Stock Analysis Report
ZYNGA INC (
ZNGA
): Free Stock Analysis Report
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