Science & Technology
Science and Technology
Science and Technology 
Tue, February 10, 2009
Zacks Bull & Bear of the Day Highlights: Sohu.com, Alkermes, ViroPharma, Sanderson Farms and Nordstrom
CHICAGO--([ BUSINESS WIRE ])--Zacks Equity Research picks Sohu.com, Inc. (Nasdaq: [ SOHU ]) as Bull of the Day and Alkermes (Nasdaq: [ ALKS ]) as Bear of the Day. In addition, the analysts at Zacks Equity Research discuss the latest on ViroPharma (Nasdaq: [ VPHM ]), Sanderson Farms (Nasdaq: [ SAFM ]) and Nordstrom Inc. (NYSE: [ JWN ]).
Full analysis of all these stocks is available at: [ http://at.zacks.com/?id=2678 ]
Bull of the Day
Sohu.com, Inc. (Nasdaq: [ SOHU ]) is the 2nd-largest Internet portal and one of the most well-known online brands in China. Sohu's pipeline for its new online games remains strong and is expected to drive meaningful growth in late 2009 and 2010.
We are encouraged by the company's growing cash balance as well as its debt-free balance sheet. Additionally, Sohu generated record total revenues and net income for the 6th consecutive quarter during Q408 with impressive margins.
We believe that the current stock price does not fully reflect the company's intrinsic value. Concerns related to online ad spending and China's macro economy in 2009 remain. As such, we maintain our Buy rating on the shares of SOHU with a lower 6-month target price of $64.00.
Bear of the Day
We downgrade Alkermes (Nasdaq: [ ALKS ]) [ shares ] from Hold to Sell based on the financial performance in fiscal 3rd quarter of 2009 ended December 31, 2008 and the bleak outlook of the company in the next few quarters. Our price target is $8.00.
Alkermes reported fiscal 3Q09 results on Feb 5, 2009 that were less than our expectations.
We expect revenue in the 4Q09 will continue to decline by 44% to $34.7 million. Total revenue for the fiscal 2009 should decline by 18% to $197 million excluding the $120.7 million one-time revenue from Cephalon. Revenue will grow slowly during the fiscal 2010 to 2013 periods.
The company faces tough challenges in the coming quarters following a series of negative business developments, and the outlook is not rosy.
Recent Analysis from the Analyst Blog
ViroPharma's Phase 3 Setback
This morning, ViroPharma (Nasdaq: [ VPHM ]) announced that its phase III trial evaluating maribavir as a prophylaxis in allogenic stem cell, or bone marrow, transplant (SCT) patients did not achieve its primary endpoint of a reduction in cytomegalovirus (CMV) disease within 6 months.
We are clearly disappointed in the outcome of the phase III maribavir SCT trial. Maribavir was key to our investment thesis given the expected launch of a generic Vancocin product potentially during the second half of 2009.
As a result, we are downgrading our rating to Hold and taking our price target down to $8 per share.
Sanderson Farms Stays Plucky
Sanderson Farms (Nasdaq: [ SAFM ]) is the 4th largest poultry processing company in the U.S. The improved efficiencies at the company's poultry complexes in Georgia and Mississippi, along with the new facility in Waco, Texas, should improve unit operating costs and increase production levels in fiscal 2009.
However, grain costs increased substantially in fiscal 2008 resulting in a loss. Even though grain prices have declined, the Hold rating is maintained.
Due to the company's volatile earnings and losses reported in fiscal 2006 and 2008, the stock is best valued on a price-to-sales basis. During the last five years, the stock has traded in the range of 0.26 to 0.94 times sales.
Nordstrom Upgraded Pre-Earnings
Seattle-based specialty retailer Nordstrom Inc. (NYSE: [ JWN ]) operates a chain of department and outlet stores. We are upgrading Nordstrom shares from Sell to Hold.
We think that the federal government's stimulus package could lead to an explosive rally in JWN shares. This is not to say that we have become more bullish on Nordstrom or retailers in general; we have not. We continue to believe that consumer discretionary spending will not return to the levels of the last several years.
In the short term, however, investors will look past longer-term concerns and focus on the trillions of dollars being spent by the government to prop up consumer spending. Our target price is $15, or about 12x our fiscal 2009 EPS estimate. Nordstrom is scheduled to report fourth quarter results on Feb 23.
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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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