Ambarella, Sprouts Farmers Market, Apple, Fitbit and Nike highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL - September 12, 2016 - Zacks Equity Research highlights Ambarella ( AMBA ) as the Bull of the Day and Sprouts Farmers Market ( SFM ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Apple ( AAPL ), Fitbit ( FIT ) and Nike ( NKE ) .

Here is a synopsis of all the five stocks:

Bull of the Day:

Ambarella ( AMBA ) was my "Stock to Double" pick in early June for a special Zacks report when it was trading under $45 right before their first quarter earnings.

Here's what I wrote on June 2...

Ambarella will be the tech comeback story of the next year. The primary driver will be their state-of-the-art HD and Ultra HD video chips solutions.

That's because Ambarella's video compression and image processing semiconductors use proprietary technology to capture stunning footage with low bandwidth and power usage.

Qualcomm is reportedly working on similar technology, but no one is competing yet with AMBA's secret sauce.

But isn't AMBA still just a GoPro story?

While customer GoPro struggles with product sales, has delayed launch of the Hero 5, and is discontinuing some cameras as they are forced to drop prices to unprofitable levels, the fate of Ambarella is not tethered to this single user of its chips.

Case in point, the new Xiaomi Yi 4K Action Camera. As GoPro suffers from excess channel inventory and delayed product launches, Xiaomi is challenging GoPro for market leadership with the launch of their YI 4K Action Camera which uses Ambarella's A9SE processor and offers lower power and longer battery life than the Hero4 Black.

In addition, the YI 4K includes an accelerometer and gyro for image stabilization, higher speed Wi-Fi, lens distortion correction, slow motion support, Bluetooth, and a touchscreen display. Best of all, the YI 4K is priced at $250 vs. $499 for the GoPro Hero4 Black.

The sports/action camera market is still Ambarella's primary revenue source, but other important product segments are also growing including automotive, security and surveillance, police wearables, and drones.

And virtual reality (VR) applications are around the corner in what should be another growth market because VR has a high video appetite that only AMBA processors may be able to feed.

Summary thesis: Ambarella has very few competitors that can meet the company's ability to deliver high-quality 4K video with using less than 2W of power. With a market cap back down under $1.5 billion, I think the company entertains a very attractive buy-out proposition near $40 per share.

Bear of the Day :

Sprouts Farmers Market ( SFM ) first became a Zacks #5 Rank Strong Sell on August 23 when it was trading above $23.

Last Wednesday September 7, shares plunged nearly 14% to close below $20 as the organic grocery retailer delivered a profit warning and lowered guidance for the third-quarter and full-year 2016.

The news not only impacted SFM stock, but rippled throughout the supermarket industry, sending Whole Foods Market , SuperValu and Kroger shares all down between 4% and 5%.

Behind the Guidance Cut

Sprouts drastically slashed its third-quarter comparable sales (comps) guidance to come in flat with last year from the previous forecast of 3-4% growth.

The company also slashed its earnings and comps view for full-year 2016. The company now anticipates earnings per share in the range of 83-86 cents against 92-94 cents projected earlier. Further, the company's comps growth guidance for the year was substantially lowered to 1.5-2.5% from the earlier forecast of 3.5-4.5%.

The drastic guidance cut was due to a lingering deflationary environment, increased competition and industry dynamics that have led to more promotions throughout the grocery business.

Deflation at the Grocery Store?

It's odd for consumers to hear about "deflation" causing problems for food retailers when it seems the shopping cart bill is always getting harder to keep under control. But the day after Sprouts warned, we heard the same message from SuperValu and Kroger, including cuts in their guidance.

Sprouts may be a quality up-and-coming contender to Whole Foods in the natural/healthy grocery space.

But until the Zacks Rank turns around for it, and the industry, best to shop for other stocks.

Additional content:

Apple Needs the Series 2 Watch to Sell Well, But Will It?

At its highly anticipated keynote event on Wednesday, Apple ( AAPL ) unveiled the Apple Watch Series 2, the second generation of its smartwatch device. The Series 2 boasts a plethora of new features, and the tech giant will hope the new product can reinvigorate slumping Watch sales.

Weak Sales

Apple is firmly in control of the smartwatch market, but that doesn't mean that Apple Watch sales have lived up to expectations. The company remains tight-lipped on specific sales numbers for the device, but it did say at Wednesday's keynote that it is number one in worldwide smartwatch sales.

Nevertheless, a report from the International Data Corp (IDC) in July claimed that Apple Watch sales fell 55% in the second quarter. With global smartwatch sales falling 32% in the same time period, Apple definitely took a brutal hit, especially as competitors like Samsungsaw sales increase by 50% in the quarter (also read: IDC Says Apple Watch Shipments Drop 55% ).

Why have Apple Watch sales been slumping? Well, a variety of factors go into its worldwide sales performance, but it seems reasonable to assume that customers are either uninspired by the device or opting for a competitor's version of the smartwatch.

To remedy both of these problems, the Apple Watch Series 2 needs to be innovative, unique, and affordable. Now that Apple has officially announced the product, we can look to see whether the company has successfully tackled those three points.

Series 2 Features

The new generation of Apple Watches will include a dual-core processor that promises to be 50% faster than the original version. It also boasts a 2x brighter screen, making it Apple's brightest display to date. To help improve movement tracking, the Series 2 will feature a built-in GPS, and the new device will "learn" about you through a new algorithm that tracks your daily activity. Design wise, there will be new cases, including aluminum, stainless steel, and ceramic, as well as new watch bands.

Perhaps the "coolest" new feature of the Series 2 is its water-resistant capabilities. Apple promises that the watch will be "swim-proof," meaning it can handle depths of up to 50 meters. Almost no other major smartwatch manufacturers have a swim proof option, and even Fitbit's ( FIT ) fitness trackers can't be brought into the pool.

Apple also announced a partnership with Nike ( NKE ) ; executives from the fitness apparel giant were on-hand Wednesday to announce the Apple Watch Nike +, a fitness-focused version of the new smartwatch that makes it easier to incorporate into workouts and encourages users to go on runs and be active.

Alongside the announcement of the Series 2, Apple announced its latest Watch-based operating system, Watch OS3. The new OS will allow users to swipe the edge of their device to switch watch faces, and it will include new animated stickers, custom reply scribbling, improvements to typing, an activity sharing app, and an "SOS" app.

Once again, pricing remains a concern with the Series 2. The new version starts at $369, while the Series 1 will receive a processor upgrade and will retail at $269. In comparison, Fitbit's Blaze is just $199 and Samsung's Gear S2 starts at $249.99.

Bottom Line

With worldwide smartwatch sales slumping significantly in the second quarter, the demand for these types of devices is at a low right now. That means that any new product entering the market must be competitive in both design and price.

The Apple Watch Series 2 is now the most powerful smartwatch on the market and its swim-proof capabilities are unparalleled. With that said, it's still a very pricy device, and many of its comparable competitors are more affordable.

This doesn't feel like the outright win that Apple needed to ensure long-term Apple Watch success, but it should inspire some shoppers heading into the holiday season. I expect Apple to be more open about its Watch sales if things do pick up, so investors should pay attention to that.

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