Zacks Equity Research highlights Cytori Therapeutics, Inc. (Nasdaq: CYTX) as the Bull of the Day and Georgia Gulf (NYSE: GGC) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Coventry Health Care, Inc. (NYSE: CVH), Hanesbrands, Inc. (NYSE: HBI) and NVIDIA Corp. (Nasdaq: NVDA).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.
Here is a synopsis of all five stocks:
Bull of the Day: Cytori Therapeutics, Inc. (Nasdaq: CYTX)
We believe that 2008 should be an exciting year for Cytori as the company has begun to record product sales revenues from early-adopter Celution System placements in Europe and Asia. Management sees product sales between $10 and $12 million in 2008, in-line with our model at $11.4 million.
Ultimately, the clinical data will determine the pace at which product sales ramp in the next several years. We have been encouraged by the small clinical data seen so far using Cytori’s technology. We think the company is in store to report a solid second quarter, and the Street has yet to take notice of the upside that exists over the next few years.
Today’s price represents a very attractive entry point in our view. We are upgrading the name to Buy and moving our price target to $16 per share.
Bear of the Day: Georgia Gulf (NYSE: GGC)
Georgia Gulf overpaid for Royal Plastics, a supplier of housing products. The acquisition was entirely financed with debt, and the company is in danger of violating debt covenants. The remaining product lines of the company are suffering from over capacity. Rising feedstock and energy costs, coupled with weak demand for the company’s products aggravated net losses in the first quarter of 2008.
Going forward, demand for GGC’s products is expected to remain weak due to the downturn in the US housing and auto markets. As a result, we have a Sell rating with a target of $3.50.
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Coventry Health Care, Inc. (NYSE: CVH)
Coventry Health Care lowered sharply its operating earnings outlook for the second quarter and fiscal 2008, citing unexpectedly high costs, including higher than expected claims in its Medicare Advantage private-fee-for-service business and heavy outpatient utilization in its commercial plan observed during the current quarter so far.
With the number of acquisitions executed in recent years, we believe the company will continue to benefit from ongoing operating improvements and margin expansion. Coventry should continue to focus on lowering overhead costs in recently acquired plans, while maintaining pricing discipline in its existing business. The acquisition of First Health diversifies Coventry’s payor mix, and we believe it will deliver a national capability to Coventry and a solid platform for entering new markets.
Hanesbrands, Inc. (NYSE: HBI)
Since its spin-off in September 2006, Hanesbrands has reduced debt by $285 million. The firm’s business model requires only modest sales growth to create substantial EPS growth. Earnings are being driven by brand-building and cost-reduction initiatives.
But the management is reporting non-GAAP EPS, excluding unusual actions, which may be distorting perceived earnings. Also, the company operates in the highly competitive apparel essentials market, which generally lacks pricing power. We maintain our Hold recommendation.
NVIDIA Corp. (Nasdaq: NVDA)
As the only remaining major independent player in the market for Graphic Processing Units (GPUs) used in PCs, NVIDIA is well-positioned to benefit from increased graphics requirements. We are positive on the company's Computer Unified Device Architecture (CUDA) initiative, which should drive additional uses for its installed base of GPUs.
However, product-related transitional issues have taken a toll on gross margins, and we continue to be cautious on the outlook for consumer spending. Enterprise-level capital spending is highly sensitive to changes in the economy and this is likely to cut into the future demand for PCs should the U.S. economy slow as expected. We therefore maintain a Hold rating on the shares.
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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.
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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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