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: Sohu.com (Nasdaq: SOHU), Sony Corp. (NYSE: SNE) and Grupo Aeroportuario del Sureste, S.A. de C.V. (NYSE: ASR).
See the latest posts to the Analyst Blog by visiting: http://at.zacks.com/?id=2673
Here are highlights from Tuesday’s Analyst Blog:
SOHU Reports Big-Time Results
Sohu.com (Nasdaq: SOHU) reported blockbuster financial results for the third quarter of 2007. Both the company's revenue and earnings exceeded market expectations because of strong growth in the online game and advertising businesses. Although SOHU faces fierce competition from different fields, the company manages to be a main player in almost each field.
With the Beijing 2008 Olympics sponsorship, SOHU has a well-known brand and rich website resources to leverage the great opportunities for online business in China. Therefore, we are upgrading the stock from Hold to Buy on SOHU shares.
The stock is trading at 66.9x our 2007 EPS estimate, which is similar to the industry mean. The stock is also trading at 45.2x our 2008 EPS estimate, which is lower than the industry mean. Using a P/E multiple of 55.0x our fiscal year 2007 earnings per share estimate of $1.18 yields a target price of $65.00, which we believe reflects the company's growth prospects.
Sony Struggles with PlayStation 3
We believe Sony Corp. (NYSE: SNE) will continue to struggle as it faces competition from innovative digital products and struggles to ramp production of PlayStation 3. In addition, Sony is facing increasing competition from low-cost manufacturers in Asia as the consumer market slows. We therefore maintain a Sell recommendation on SNE shares set a new $42.50 price target.
Sony is currently banking on its next-generation game console, PlayStation 3 (PS3), to drive its video game business. However, an overly complex design and high price tag resulted in long delays and a slow uptake by the market. We believe Sony has significantly damaged its position in the video game market and has lost substantial ground to Nintendo. Although the company has reduced the price by $100, the PS3 costs far more than the Xbox 360 or Wii game consoles.
Although Sony maintains strong distribution channels and a brand name, we would avoid the stock until the company demonstrates sustainable improvements in results. Our new price target reflects a P/E multiple of approximately 15.6x our estimated fiscal 2007 EPADR of $2.73 and 14.0x our estimated fiscal 2007 EPADR of $3.03, which we believe is a reasonable valuation for a company in Sony's position.
Mexican Airline ASR Upped to Buy
We are changing our current recommendation on Grupo Aeroportuario del Sureste, S.A. de C.V. (NYSE: ASR) from Hold to Buy. Third quarter results were very positive, including strong commercial revenues and improved operating margins. The opening of terminal 3 at the Cancun airport was the main reason for the great performance in the quarter.
The company has a long history of impressive results and strong cash flow generation. The short-term outlook is now more positive due to the increasing commercial revenues.
At its current price, ASR is trading at 20.1x our 2007 revised EPS estimate. This is below the industry mean and median P/E multiple.
First, second and third quarters showed some good figures and the short-term outlook for growth in non-aeronautical revenues is encouraging thanks to the new terminal at Cancun airport. The possibility of the construction of a new airport in the Mayan Riviera is concerning, but this is just a medium-term problem that will not change our short-term positive view.
We project that in the following months the stock will trade with a 2007 P/E close to the industry mean, between 23x and 24x our 2007 earnings estimates, in line with the company historical standards. Our target price is $70.25.
See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2645.
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