For Immediate Release

Chicago, IL – October 23, 2014– Zacks Equity Research highlights Avago Technologies (AVGO-Free Report) as the Bull of the Day and Lithia Motors (LAD-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon.com Inc. (AMZN-Free Report) and Netflix (NFLX-Free Report).

Here is a synopsis of all five stocks:

Bull of the Day:

One of the industries that really helped push the S&P 500 into a correction this month was Semiconductors. On October 9, Microchip Technology warned and their CEO, Steve Sanghi, essentially "called the top" in the Semi cycle. Here's what he said...

"We believe that another industry correction has begun and that this correction will be seen more broadly across the industry in the near future."

This caused the SOX, the Philadelphia Semiconductor Index, to drop 8.8% in two days, especially after a Goldman Sachs chip analyst issued a report agreeing with Sanghi.
But a curious thing happened as the S&P 500 began its own deeper correction last week, falling over 4% in 3 days: the SOX stopped going down and didn't go any lower while the big cap index was dropping.

And this made more confident about my purchase of Avago Technologies (AVGO-Free Report) when it was on sale in the $70s again, especially as other Semi analysts chimed in that Microchip's woes and insight were unique. And it doesn't hurt that Avago is making great, in-demand technology for Apple right now either.

Avago, a Singapore incorporated company with joint headquarters in San Jose, California, is a leading designer, developer, and supplier of a broad range of analog semiconductor devices and digital, mixed signal, and optoelectronics components and subsystems. These innovations are used in wide range of wireless, wireline, and industrial applications.

Bear of the Day:

Lithia Motors (LAD-Free Report) was a shining star of the automotive dealer group industry for the past three years. And just when car sales were breaking recovery records left and right this year, the stock -- and more importantly, its earnings momentum -- reached a peak.

One wonders if all the terrific sales numbers were also juiced in large part by ultra-cheap financing and special incentives.
On Monday October 13, Lithia warned that it is expecting its 2014 third quarter adjusted net income to be in the range of $34 million to $34.8 million, or $1.30 to $1.32 per diluted share, below its previous forecast of $1.36 to $1.38 per share.

This, of course, brought a wave of analyst earnings estimate revisions (:EER). They took this year's consensus down from $5.05 to $4.86 and next year got clipped even more on a percentage basis from $6.40 to $5.90.

Additional content:

Can Amazon Surprise This Earnings Season?

Amazon.com Inc. (AMZN-Free Report) is slated to report third-quarter 2014 results on Oct 23. In the last reported quarter, Amazon recorded a negative earnings surprise of 107.69%. Let’s see how things are shaping up for this announcement.

Factors to Consider

Amazon reported a loss of 27 cents in the second quarter, greater than the Zacks Consensus Estimate of a loss of 13 cents. Amazon reported revenues of $19.34 billion, down 2% sequentially but up 23.2% from the year-ago quarter. This was within the guidance range of $18.1-19.8 billion (down 4% sequentially but up 20.7% year over year at the mid-point) and in line with our expectations.

Amazon continues to invest in growth areas. In its previous earnings call, Amazon’s management disclosed plans for the third quarter- to add six new fulfillment centers and at least 15 new sortation centers. Sortation centers help Amazon to be closer to its customers so as to enable same-day delivery.

Amazons plans to invest about $100 million to acquire more video content in order to challenge Netflix’s (NFLX-Free Report) and YouTube’s dominance in the video streaming market.

Amazon has also promised to invest $2 billion over the next few years in the Indian e-commerce market.

All these investments might affect Amazon’s margins in the short term.

Earnings Whispers

One estimate for the soon-to-be-reported quarter was revised downward in the last 7 days while there were no upward revisions. The Zacks Consensus Estimate for the quarter declined from a loss of 73 cents to a loss of 74 cents over the same time frame. For the current year, one estimate moved south over the last one week, shrinking the Zacks Consensus Estimate to loss of 4 cents.

Furthermore, our proven model does not conclusively show that Amazon is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, currently stands at +5.41%. This is because the Most Accurate estimate of a loss of 70 cents is higher than the Zacks Consensus Estimate of a loss of 74 cents.

Zacks Rank: Amazon currently holds a Zacks Rank #4 (Sell), which lowers the predictive power of ESP. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

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About the Bull and Bear of the Day

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