Monthly Archives: September 2014

Stage Stores: Zacks’ Bear of the Day Play

Stage Stores, Inc. (SSISnapshot Report) is one of the many retailers that is struggling as consumers get picky on what they’re buying. This Zacks Rank #5 (Strong Sell) recently lowered full year guidance.

Stage Stores has a unique part of the retail market. It operates 849 stores in 40 states in small and mid-sized cities. It offers moderately priced, nationally recognized brand name apparel, accessories, cosmetics and footwear.

The company operates under the names of Bealls, Goody’s, Palais Royal, Peebles and Stage.

Big Miss in the Second Quarter

On Aug 14, Stage Stores reported its fiscal second quarter results and missed the Zacks Consensus by 31%. Earnings were just $0.35 compared to the Zacks Consensus of $0.51.

Like many of its peers, it saw comparable store sales fall 4.2% in the quarter compared to a year ago. For the first six months of the year sales decreased 2.2%.

What’s working?

While the second quarter was “challenging” sales trends improved throughout the quarter. The back-to-school categories performed well as did cosmetics.

But Guidance Still Lowered

Even though it expects improved second half results, it guided comparable store sales in the range of flat to positive 2.0% for the year. Earnings guidance was lowered in the range of $1.05 to $1.15.

Analysts lowered estimates to get in line with the company’s guidance. 4 estimates were lowered for 2014 in the last 60 days to $1.05 from $1.24.

Analysts also lowered estimates for fiscal 2015 to $1.29 from $1.50.

Shares Sink to 2-Year Low

It hasn’t been a good 2 years for Stage Store shareholders. Shares recently hit 2-year lows.

If you thought you could get a steal on this stock, think again. It’s actually not that cheap, considering its struggles. It has a forward P/E of 16.6.

For investors looking for a retailer with better prospects, you might want to consider Foot Locker Inc. (FLSnapshot Report) instead. It is expected to grow earnings by 19% this year. It’s a Zacks Rank #2 (Buy).

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

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Lands’ End: Zacks’ Bull of the Day Play

Lands’ End, Inc. (LE) celebrated its first quarter spun-off from Sears Holdings by beating the Zacks Consensus Estimate by 117%. This Zacks Rank #1 (Strong Buy) is cashing in on its strong catalog brand even as investors are being cautious.

Lands’ End is a Wisconsin-based retailer that was formerly owned by Sears. Founded in 1963 as a catalog for yachtsmen, the company now offers clothing, accessories, and footwear for men, women and children through catalogs, its online web site, and in retail stores primarily located in Sears and some standalone Lands’ End Inlet stores.

It is especially well known for its winter apparel and footwear.

Big Beat in the Second Quarter

On Sep 10, Lands’ End reported its first earnings results since it went IPO in March of this year.

It easily beat the Zacks Consensus Estimate, reporting $0.37 compared to the Consensus of just $0.17.

Sales rose 5.4% to $347.2 million from the second quarter of last year. The Direct segment, which includes catalog and online sales, rose 7.1% to $292.6 million. That’s the company’s largest segment.

Its retail sales declined 2.9% to $54.6 million even though same store sales increased 2.8%. This was the result of fewer Lands’ End retail spaces within Sears and Sears own particular troubles.

Gross margin, a key metric for retailers, rose 310 basis points to 48.5% year over year.

The customer is responding to the product. Being attached to Sears appears to be hurting, not helping, sales.

Estimates Rise

When a company reports earnings for the first time, the analysts never really know what to expect. There is usually a lot of tinkering with estimates afterwards.

That appears to be the case with Lands’ End as well.

1 estimate has moved higher since the report for Fiscal 2014, pushing the Zacks Consensus sup to $2.52 from $2.29.

The analysts are also bullish on Fiscal 2015 with 1 estimate moving higher for that year as well within the last month. The 2015 Zacks Consensus Estimate has risen to $2.60 from $2.48.

Shares Soar on Earnings Beat

Investors loved the big beat in the company’s first quarter out of the gate. They pushed the shares up to a new high.

But despite the quick move higher by the shares, they’re not excessively priced.

Lands’ End has a forward P/E of just 16.6 which is just below the average of the S&P 500 of 17.

Lands’ End is also in a top ranked industry, the retail- catalog industry. It ranks #1 out of 265 Zacks Rank Industries.

For investors looking for a retailer with a strong brand and online presence, Lands End is one to keep on your short list.

Want More of Our Best Recommendations?

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

IXIA: Zacks’ Bear of the Day Play

Earnings estimates have fallen sharply for IXIA (XXIASnapshot Report) after the company reported disappointing second quarter results on September 15. It is a Zacks Rank #5 (Strong Sell) stock.

Although the stock has sold off heavily so far this year, it still doesn’t look like a value at 26x next year’s earnings.

IXIA provides converged Internet Protocol (IP) network test and network visibility solutions for a variety of network equipment manufacturers, service providers, enterprises, and government agencies. According to IXIA, the company “develops amazing products so its customers can connect the world”.

Sales by product type in the second quarter were as follows:

Hardware: 62%
Software: 11%
Warranty: 24%
Other: 3%

Approximately 40% of total revenue came from outside of the United States in Q2.

Second Quarter Results

IXIA delivered disappointing second quarter results on September 15. Adjusted earnings per share (but including stock-based compensation) came in at -$0.02, which was 2 cents below the Zacks Consensus Estimate. It was down from adjusted earnings per share of +$0.12 in the same quarter last year.

Total revenues declined 2% year-over-year to $109.5 million despite $13.3 million in revenue from the Net Optics acquisition in December 2013. It was also well below the consensus of $122.0 million. Sales to its two largest customers – AT&T and Cisco – fell 35% year-over-year to $18.3 million, or 16.7% of total revenues.

Through the first half of 2014, operating cash flow was down 79% year-over-year to $10.8 million.

Estimates Falling

Following weak second quarter results, analysts revised their estimates significantly lower for both 2014 and 2015, as you can see in the following chart:

This sent the stock to a Zacks Rank #5 (Strong Sell).

Premium Valuation

While shares of IXIA have sold off significantly so far this year, the valuation picture just doesn’t look very compelling. The stock trades around 26x the current 2015 consensus, which is a significant premium to the industry median of 13x. And the company’s enterprise value to cash flow ratio of 21 is also a significant premium to the industry median of 8.

IXIA also sports a negative tangible book value.

The Bottom Line

With falling revenues, falling earnings estimates and premium valuation, investors should avoid IXIA for now.

Todd Bunton, CFA is a Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor and Surprise Trader services.

Southwest Airlines: Zacks’ Bull of the Day Play

Since Southwest Airlines (LUVAnalyst Report) was last featured as the Bull of the Day on April 9, 2014, the stock has soared more than 40%.

Despite the huge run up in the stock price, shares still offer attractive upside potential.

The company delivered stellar second quarter results back in late July, prompting a flurry of positive estimate revisions from analysts. This sent to stock to a Zacks Rank #1 (Strong Buy). And based on current consensus estimates, shares trade at a reasonable 17x forward earnings, which is in-line with its historical median.

Southwest Airlines Co. is the nation’s largest carrier in terms of originating domestic passengers boarded. Including AirTran (which it acquired in 2011), it operates the largest fleet of Boeing aircraft in the world, serving 93 destinations across the United States and five near-international countries.

Second Quarter Results

Southwest Airlines delivered stellar second quarter results on July 24. Adjusted EPS came in at 70 cents, crushing the Zacks Consensus Estimate of 61 cents. It was a whopping 84% increase over the same quarter last year and marked the company’s 5th consecutive quarter of record profits.

Revenue rose 8% year-over-year to $5.011 billion, which also beat the consensus of $4.932 billion. Revenue passenger miles (paying passengers x distance traveled) increased 2.4%.

Meanwhile, the adjusted operating margin expanded to 16.3% in the quarter as the load factor (revenue passenger miles / available seat miles) increased 230 basis points to 83.9%.

Over the last 12 months, the company has generated a solid 17.1% pre-tax return on invested capital, which is above its 15% full year target.

Estimates Soaring

Following the big Q2 beat, analysts revised their estimates significantly higher for Southwest. This sent the stock to a Zacks Rank of 1 (Strong Buy).

The current 2014 Zacks Consensus Estimate is $1.80, up from $1.49 ninety days ago. The 2015 consensus has risen from $1.75 to $2.10 over the same period.

You can see the sharp increase in estimates in the company’s “Price & Consensus” chart:

The stock price has also received some lift from the recent drop in oil prices.

Valuation

While shares of Southwest has soared in 2014, the valuation picture still looks reasonable. The stock trades at 17x 12-month forward earnings, which is in-line with its 10-year historical median. The company’s enterprise value-to-cash flow ratio is around 12, which is a premium to its historical median of 10 but certainly not unreasonable given the strong growth projections for the company.

The Bottom Line

With strong earnings momentum, stellar growth projections, a history of profitability and reasonable valuation, shares of Southwest Airlines still offer attractive upside potential.

Todd Bunton, CFA is a Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor and Surprise Trader services.

Nortek: Zacks’ Bear of the Day Play

Make no mistake about it, yesterday was a bloodbath. After a day like that it’s easy to pick on stocks that have been beat down. With today’s Bear of the Day I’m not looking to pick on a stock just because it’s down. I’m looking to help you avoid an industry that’s had weakness in earnings revisions as well as an individual stock that has seen downward revisions as of late.

First I found a stock in the Building Products – Air and Heating industry which ranks in the bottom 7% of our Zacks Industry Rank. Granted the industry only contains four stocks, but none of them is above a Zacks Rank #3 (Hold). But today’s Bear is the only Zacks Rank #5 (Strong Sell) in the bunch.

Nortek (NTK) is a manufacturer of residential commercial building products primarily in the United States, Canada and Europe. It offers range hoods, bath fans, indoor air quality systems, heating and air conditioning systems, and technology offerings, including audio, video, access control, security and digital display mounting and mobility products. The company serves remodeling and replacement, residential and commercial new construction, manufactured housing and personal and enterprise computer markets. Nortek is based in Providence, Rhode Island.

Earnings estimates have been coming down recently. The most glaring revision that stands out is the current quarter estimate. Consensus has come down from $1.02 just 90 days ago all the way to 65 cents per share. This has also had an adverse effect on this year’s consensus, pulling it down from $2.94 to $2.05.

The recent trend of downward revisions just began recently. Our data shown in the price and consensus chart shows positive revisions from September 2013 through June 2014. Since then these numbers have started to come down along with Nortek’s stock price.

The technical picture for the stock hasn’t been much better either. After having a fantastic run up from the mid $60s in August and September of last year to a high near $92 in July of this year, NTK has begun a steady sell-off.

The first down leg took NTK shares down to $77, down nearly every day in July. After consolidating a bit in the high $70s, NTK tried to retrace its downturn. Unfortunately, NTK  couldn’t leapfrog the $85 level. After several failed attempts NTK began to sell-off  again during the second week of September.

Since then the drop took NTK all the way to a low of $73.24 on September 19th. That helped push the stochastics firmly into oversold territory and had Nortek trading well below its 40 day moving average. The 40 day currently sits at $80.77, well above the current stock price at $75.43.

Aramark: Zacks’ Bull of the Day Play

After a miserable day like we just saw yesterday, it’s tough to jump back in and give a positive spin on anything. It seemed like there was no place to hide unless you were holding GoPro (GPROSnapshot Report) or Zoes (ZOESSnapshot Report). The rest of the market got taken out back behind the woodshed. The sell-off was relentless and affected every sector of the broad market.

But I thought given the situation in the market right now it may make sense to find something that’s going to be a bit more defensive. I set out to find a stock we could look at that is an industry that is non-cyclical and could hold up through tough time. I’m not saying the economy is suddenly going to head south. I’m just saying it would be nice to find an old school company with some solid earnings we can sink our teeth into.

Aramark (ARMKSnapshot Report) is a $14 billion global provider of award winning services in food, facilities management, and uniforms. If the fourth quarter goes anything like Q3 2014 was, investors are in for some good news right around the quarter. Q3 saw sales of $3.6 billion with organic growth of 4%. Adjusted operating income was up 10% to $192.4 million while operating income came in at $141.3 million.

This amounted to EPS of 19 cents with year-to-date sales topping $10.9 billion. This caused the company to raise its full year guidance to a range of $1.45 to $1.50. President and CEO Eric J. Floss stated, “I am pleased to report another quarter of strong business results achieved within a challenging consumer and economic environment. Our performance reflects solid execution against a sound strategy and was broad-based across the segments and geographies of our portfolio. Based upon this strength and our overall business momentum, we are increasing our full-year 2014 earnings outlook.”

These bullish comments from the CEO definitely influenced analysts covering the stock. Two analysts revised their current year estimates up from $1.27 to $1.33 and next year up from $1.38 to $1.47. Add this to the three upside earnings surprises in a row and you see why ARMK is currently a Zacks Rank #1 (Strong Buy).

This market has made it pretty hard to find a chart worthy of a buy recommendation. Major support levels have been tested and ruthlessly violated on this sharp downturn we saw yesterday. As for Aramark stock, this hasn’t really been the case. Since going public at the end of December 2013, ARMK has bounced between $22.50 and $30.

The top of this range proved to be a little too rich for investors as that level was hit twice in March only to see the stock reverse and come back down for find a new bottom of the range at $25 in June. Since then the range has tightened even more, with most of the price action happening between that level and $28.

The pullback over the last few days ARMK down from the high $27s to the $26.60 level it closed at Thursday. But there is some good news regarding the pullback, we’re still trading above the 40 day moving average. Even though the average has a neutral to negative slope right now, trading above it gives the stock an overall bullish bias. Investors looking to get long should park their stops on the shy side of August’s $25.62 low.

Tesco: Zacks’ Bear of the Day Play

Generally speaking, we don’t like to focus on foreign stocks for our Bear of the Day segment here at Zacks. However, the bear case for the ADR of Tesco (TSCDY) is pretty compelling and definitely deserves a closer look by investors.

Company in Focus

For those of you who don’t know, TSCDY is a grocery retailer based out of the UK. The company has over 7,000 stores, and in addition to its home market, the firm has operations in continental Europe and a variety of emerging markets in Asia.

Grocery stores are usually pretty stable businesses, though they admittedly face cutthroat competition and razor thin margins. However, TSCDY has run into some serious volatility as of late, largely thanks to a brewing accounting scandal.

Accounting issues come to light

Recently, Tesco slashed its most recent profit outlook as it was found that the company has overstated fiscal 2015 profits by about $409 million. This was largely due to booking revenue too early and delayed recognition of costs, and adding insult to injury, it comes pretty soon after Tesco cut its full year forecast anyway.

This announcement really caught analysts off-guard, while some management executives were suspended for the issue. Some have put their ratings of the company on review, while others are thinking that Tesco may have to sell some assets in order to recover from the impact from this debacle.

Analyst response

Given this issue, it probably shouldn’t be too surprising to note that analysts have universally slashed their full year estimates for Tesco, with three moving lower in just the past week alone. Investors have witnessed a similar trend in the next year numbers too, suggesting this recent double guidance cut could have a longer term impact on the company.

This is particularly true when you consider the magnitude of these estimate revisions lately. The consensus estimate for the current year has fallen from $1.22/share 30 days ago to just $0.92/share today, while next year’s figures have, over the same time period, fallen from $1.25/share to just $0.85/share today.

Thanks to these revisions, TSCDY now has negative growth rates for both the current year and next year, suggesting prospects aren’t very good for this company that is already mired in a very competitive industry. As a result, it should be pretty clear why we have assigned Tesco a Zacks Rank #5 (Strong Sell) and are looking for more underperformance from this company in the months ahead.

Other Picks

If you are looking for another choice in the retail-supermarket industry, you should note that the pickings are pretty slim as the segment is in the bottom 20% overall. However, there is one other foreign company that could be a better choice, CBD.

This Brazilian firm is currently a Zacks Rank #2 (Buy) and has actually just moved up from ‘sell’ territory in the past week alone. So, this company might be a better choice in this corner of the market, and especially when compared to Tesco and its extremely poor outlook.

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Jamba: Zacks’ Bull of the Day Play

While many small caps have been hit hard in the recent slump, this trend hasn’t afflicted all of the companies in this capitalization level. Take for example Jamba (JMBASnapshot Report), a company best known for its subsidiary, Jamba Juice, which offers blended drinks and smoothies across the U.S.

While it has seen a brief dip in recent trading, the company has easily outperformed the Russell 2000 over the past six months. In fact, JMBA has added about 13.6% in the time frame, compared to a loss of 4.9% for the Russell 2000 ETF (IWM) in the same period.

Obviously, this represents a large level of outperformance when compared to peers in the small cap world, and especially so when considering how weak many other stocks have been over the past few months. However, when considering the recent earnings report, it is pretty clear why JMBA is outperforming and how it could continue to move higher in the quarters ahead too.

Recent Earnings

In the August earnings report, JMBA reported earnings of 44 cents a share, a big beat from analyst expectations which called for EPS of 38 cents for the quarter. Additionally, it marked a return to profitability for JMBA as last quarter saw a loss of one cent a share so this represented a very much needed surprise for the company.

Additionally, a highlight from the report was the firm’s new products which are helping to drive sales growth. Many now believe that the company’s turnaround plan is working and that more growth could be ahead for JMBA in the future.

Earnings Estimates

Analysts seem to agree with these bullish prospects as earnings estimates have been moving higher lately for JMBA, signaling bullish prospects for the company’s EPS. In fact, not a single estimate has gone lower in our consensus for either the current year or next year time frames.

Additionally, the magnitude of these revisions have been pretty solid, and for both the current year and next year time frames as well here. For the current year, the consensus has moved from $0.37/share 60 days ago to $0.43/share today, while next year’s figures have seen numbers move from $0.71/share to $0.80/share in the same time period.

With these moves higher, JMBA is now looking to post truly amazing growth rates for the current year time frame, with current projections putting the number at nearly 378%. And, for next year, growth is expected to be at 86% right now, so clearly JMBA has plenty of room to move higher in the months and years ahead from an earnings growth perspective.

Bottom Line

Thanks to these factors, Jamba Juice has earned itself a Zacks Rank #1 (Strong Buy) putting it into rare company. Only 5% of all stocks in our coverage universe are Strong Buy stocks, so clearly JMBA is looking quite impressive right now, and especially when compared to other small caps out there.

Plus, JMBA has a very strong growth rate and with new products and plenty of options for growth still on the table, these triple digit growth rates should definitely be within reach for the company. So if you are looking for a strong company in the almost universally beaten down small cap space, definitely consider JMBA as a standout that could juice your portfolio’s returns in Q4.

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Petrobras: Zacks’ Bear of the Day Play

Petrobras (PBRAnalyst Report) shares were in a steady uptrend this year that looks like a swing traders dream with waves of higher highs and higher lows after the giant integrated Brazilian energy company finally bottomed at a multi-year low of $10.

But early September’s peak just below $21 was met with some fast and furious liquidation bringing shares back nearly 25% in a couple of weeks.

The cause? More earnings estimate revisions (EER) of the downward variety. And this is not a new story for PBR since the shares traded back above $50 in late 2009.

Here is the Zacks proprietary Price & Consensus chart that shows how well stock prices following the direction of EER…

The Brazil Economy and Politics

Some energy analysts probably also cite larger macro forces at work in shares of PBR too. Brazilian stocks had a remarkable bull run this year that PBR was part of.

But more recently, Brazil’s equity market has been riding the election waves. When the polls show voter support for incumbent Dilma Rousseff, markets sell off, while improving prospects for opposition candidate Marina Silva sends the iBovespa index higher.

In this Latin American nation, leftist President Dilma Rousseff has come under heavy criticism for Brazil’s dismal economic performance under her leadership, highlighted by recession and increasing inflation. Therefore, her re-election is perceived as the extension of this ‘stagflation’-like situation.

On the other hand, Brazilian Socialist Party presidential candidate Marina Silva is seen as increasingly pro-industry, thereby preferred by investors. The business community is hopeful that her win would not only attract more capital to the country but more importantly, reduce the state intervention in company affairs.

Watching the coming October 5 election results will be important for PBR investors. But equally vital will be monitoring the Zacks Rank to tell you when the analysts have turned around their view of the company’s earnings outlook.

Kevin Cook is a Senior Stock Strategist for Zacks.com where he runs the Follow The Money Portfolio.

YY Inc: Zacks’ Bull of the Day Play

Chinese Internet stocks certainly took a beating in the weeks leading up to the Alibaba (BABA) IPO. But many became bargains in the process.

One such Zacks #1 Rank is YY Inc. (YYSnapshot Report) a $4 billion interactive social platform where users can engage in one-on-one or group activities including games, music, online dating, broadcasting, and education.

While the stock has run hard since trading below $15 in January 2013, its 120% EPS growth this year and 40% growth projected for next year are still attracting aggressive investor attention.

And the 20% slide in shares to around $77 this month has brought the forward P/E down to a respectable 26X this year’s $3.27 consensus and only 18X next year’s $4.27 estimate.

Is YY the Little Facebook (FBAnalyst Report) of China?

Here is the company described in their own words…

“YY is a revolutionary rich-communication social platform that engages users in real-time online group activities through voice, text and video. With the capacity to support over one million participants concurrently, our platform allows users to create and organize groups of varying sizes to discover and participate in a wide range of online group activities, such as karaoke, online games, game broadcasting, online dating, E-learning covering language, finance, programming, and other subjects, live shows and conference calls.”

Using high-quality voice and video technology, YY has created a large scale community for social interactions and activities. According to iResearch, YY had an 87% market share in the real-time online group voice communications market in China in terms of user time spent in 2013.

Segments and Structures

YY Platform consists of YY Client, the YY.com and Duowan.com web portals, Mobile YY and Web-based YY.

YY Client, launched in China in July 2008, is their PC-based user software that provides real-time access to online activities groups, which they call “channels.”

YY.com is their online portal and guide to channels, events and content available across the platform.

Duowan.com is a dedicated game media website that provides comprehensive information on online games and other resources for users and online game players.

YY User Metrics

773.4 million registered users accounts as of June 30, 2014

Over 100 million Monthly Active Users as of the second quarter 2014

On average, each active user spent 49+ hours on YY Client as of June 30, 2014

521 billion voice minutes spent on YY Client in the first nine months of 2013

A “voice minute” means a minute in which the user is using our voice and video-enabled services, such as listening to or talking on YY channels.

2nd Quarter Growth

In early August, YY reported for Q2 and investors were impressed enough to send the stock to new all-time highs above $90. Here were the headline numbers…

2Q14 Net Revenues Up 105.6% YOY to $135.6 million

2Q14 Net Income Up 139.0% YOY to $35.8 million

2Q14 Non-GAAP Net Income Up 106.6% YOY to $41.6 million

The top-line jump was primarily driven by a 118.3% increase in revenues from Internet value-added services, or IVAS revenues.

Mr. David Xueling Li, YY’s CEO, had these comments in the quarterly report…

“We are excited about our strong performance in the second quarter of 2014, as we continue to grow and strengthen our interactive social platform. Our online music and entertainment business once again exceeded our expectations, as revenues grew by 202.7% year-over-year and paying users grew by 77.6% year-over-year.

In addition, this quarter witnessed the ascension of our online dating business, with revenues surging by 299.2% quarter-over-quarter. By utilizing our unique and powerful online communication capabilities, we continue to build new business lines that will broaden our product offering, elevate our brand and pave the way for further growth.

Having attracted over 100 million average monthly active users through the second quarter of 2014, we are tirelessly working to build new and innovative products, providing a comprehensive services marketplace that caters to our users’ ever-changing demands.”

Analyst Outlook

The Zacks Rank quantitative model is robust because it uses only Wall Street analysts earnings estimate revisions (EER) in a specific formula to compare relative EPS trends and momentum.

The Rank relies heavily on two components of analyst EER, Agreement and Magnitude. What’s good to see in the case of YY is not only the rapidly rising Magnitude of EER but also more Agreement as new analysts begin to cover the company.

Take a look at the EPS summary tables below and you’ll see how analyst coverage double from 2 to 4 between this year and next.

Also note the rapidly rising estimates in the Magnitude section where 2014 consensus projections have gone from $2.36 to $2.97 in the past 60 days — a 26% increase — and 2015 numbers launched from $3.25 to $4.27, a 31.4% jump.

Clearly, Wall Street analysts are catching on to the growth story here in YY. And that’s good news for anyone skeptical about the safety of investing in Chinese companies. The more analyst eyeballs we have on their financial statements and verifiable business metrics, the more confidence we can gain from these growth projections.

One prominent brokerage research firm in particular is especially optimistic about the YY story. JPMorgan Asia analysts put out a note after YY’s last quarterly report in which they gave the shares an Overweight rating and raised their PT to $118 citing that the company’s “new initiatives demonstrate platform scalability.”

I think this 20% pullback to support above the 200-day moving average in the $70-75 area is a great place to start a position. And that’s what I did last week.

Disclosure: I own YY shares for the Zacks FTM Portfolio.

Kevin Cook is a Senior Stock Strategist for Zacks.com where he runs the Follow The Money Portfolio.