Zacks Bull and Bear of the Day Highlights: Texas Capital Bancshares', China Life Insurance, Apple, Google and Amazon.com
Zacks
For Immediate Release
Chicago, IL – May 16, 2012 – Zacks Equity Research highlights Texas Capital Bancshares' (TCBI) as the Bull of the Day and China Life Insurance - ADR (LFC) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Apple Inc.’s (AAPL), Google Inc.’s (GOOG) and Amazon.com Inc. (AMZN).
Texas Capital Bancshares' (TCBI) first-quarter 2012 operating earnings per share surpassed the Zacks Consensus Estimate. The results were also significantly ahead of the prior-year quarter's earnings. Quarterly results benefited from an increase in the top line aided by an augmentation of both net interest income as well as non-interest income.
Texas Capital's business model remains a chief growth driver. The gain in market share from its competitors and organic growth is impressive. Credit quality improvement is also encouraging. The company's efforts to hire experienced bankers and expand its presence are impressive.
We believe that with an eventual improvement in the Texan economy, the company would be further poised to experience an increase in earnings. Our six-month target price of $46.00 equates to 16.7x our earnings estimate for 2012. This price target implies an expected total return of 18.8% over that period.
We have downgraded our recommendation on China Life Insurance - ADR (LFC) to Underperform from Neutral due to the lack of any significant growth catalyst amid the prevailing interest rate, market and currency risks. China Life's full-year 2011 earnings declined steeply from the prior year, due to low premium income and increased impairment losses.
Operating cash flow also declined substantially due to increased claim expenses and adverse changes in the fair values of securities. Despite a strong brand name, significant competition on the domestic front limits earnings growth. Though an extensive domestic distribution channel, strong balance sheet and stable ratings augur strength, we expect limited upside in the near term.
Our six-month target price of $36.00 equates to 25.9x our earnings estimate for 2012. Combined with the $0.81 per ADR annual dividend, this target price implies an expected total return of a negative 8.7% over that period.
Apple Inc.’s (AAPL) relentless effort to curb Samsung’s growth in the tablet market gathered steam when The U.S. Court of Appeals for the Federal Circuit ruled in favor of the iPad maker in a case related to patent infringements. This recent ruling may lead to a potential sales ban on the Galaxy Tab in the U.S., reported Bloomberg.
In December last year, Apple had appealed to the District Court in San Jose for banning Samsung’s Galaxy Tab in the U.S. However, the plea was rejected that time. According to the ruling, the court granted Samsung the right to sell its products in the country until the case goes to trial.
Apple and Samsung have been fighting several legal battles spreading across 10 countries. Their legal tussle hinges on certain design-related patent issues, where the former claims that Samsung’s Galaxy Tabs look and feel just like an iPad.
In light of the recent development, Apple can pursue the sales ban on Samsung’s tablets until the case goes on trial. However, both the companies are expected to look for an out-of-court settlement later this month. Alternatively, Samsung has the option to modify its design for the tablet to dodge the ban.
By banning Samsung tablets in different countries, Apple’s main objective is to stall the growth of Google Inc.’s (GOOG) Android OS. Samsung is leveraging on Android to become one of its most significant competitors and the company is already the largest vendor of Android-based products. The fact that Android is expected to continue its very strong growth all over the world is a major headache for Apple.
We believe that Apple’s legal hassles will continue as competition heats up in the smartphone and tablet space. This will increase legal expenses and will hurt Apple’s operating profit going forward.
Despite the threat from Android and lower-than-expected sales in the tablet market, Apple has maintained its leading position in this arena with 68% market share in the first quarter 2012, which rose significantly from 55% in the fourth quarter of 2011, according to IDC. Samsung came in second while Amazon.com Inc. (AMZN) was third. Interestingly, there was a steep drop in Android-based tablets in the first quarter.
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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