The Zacks Analyst Blog Highlights:Life Technologies, Bristol-Myers Squibb, Hot
Topic, Abercrombie & Fitch and Aeropostale
CHICAGO, Oct. 25, 2012
CHICAGO, Oct. 25, 2012 /PRNewswire/ --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 Life Technologies (Nasdaq:LIFE),
Bristol-Myers Squibb (NYSE:BMY), Hot Topic Inc. (Nasdaq:HOTT), Abercrombie &
Fitch Co. (NYSE:ANF) and Aeropostale Inc. (NYSE:ARO).
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Here are highlights from Wednesday's Analyst Blog:
LIFE Working on Diagnostics Biz
Over the recent past, Life Technologies (Nasdaq:LIFE) has been focusing on
developing its diagnostics franchise. Earlier this month, the company entered
into a license and supply agreement with Singapore based VelaDx. The latter
will develop next generation sequencing-based, in vitro diagnostic tests that
will run on Life Technologies' Ion Personal Genome Machine platform.
Semiconductor sequencing, being a transformative technology, can make
diagnostic tests faster, thereby helping doctors globally to take better
Life Technologies has also resorted to the acquisition route targeted toward
building its diagnostics franchise. The company acquired Compendia Bioscience,
a cancer bioinformatics player, which identifies gene targets for drug
discovery and development. These services are widely used by the
pharmaceutical industry. Based on the oncology data provided by Compendia,
Life Technologies should be able to develop its own tests as well as
collaborate with pharmaceutical companies in companion diagnostic development.
However, the financial terms of the deal were not disclosed. The acquisition
of Compendia is expected to be neutral to 2012 earnings and accretive to the
company's overall ROIC by 2015.
In July, the company went for two tuck-in acquisitions – Navigenics and
Pinpoint Genomics. The acquisition of Pinpoint Genomics provided Life
Technologies with a 14-gene panel test, Pervenio Lung RS, a risk
stratification test for early stage lung cancer. This test, launched in
September, will provide immense help to a huge patient base by identifying
lung cancer patients, who are at high risk of mortality following surgery, in
the early stages. In addition, the test will also aid prevention and disease
On the other hand, the Navigenics deal brings in an established,
CLIA-certified laboratory licensed throughout the U.S. This facility will be
employed for design and validation of new diagnostics assays.
Life Technologies also has a Master Development Agreement with Bristol-Myers
Squibb (NYSE:BMY) for companion diagnostic projects. The collaboration with
Bristol-Myers is in line with the company's strategy to build partnerships
with pharmaceutical majors for companion diagnostic development including
participation in early-phase clinical trials.
Life Technologies enjoys a strong position in the life sciences market. We are
optimistic about the company's focus on its diagnostics franchise, which holds
potential. However, economic uncertainties in Europe and unfavorable currency
were major headwinds for the company during the last reported quarter.
We have a Neutral recommendation on Life Technologies.
Hot Topic Downgraded
We have recently downgraded our recommendation on Hot Topic Inc. (Nasdaq:HOTT)
to Neutral based on its declining comparable-store sales transactions.
Moreover, the stock is trading at a premium pertaining to our forward earnings
estimates that limit its further upside.
We observe that comparable-store sales transactions at Hot Topic's namesake
stores have been falling year over year since the last four quarters. In the
second quarter of fiscal 2012, number of transactions dropped by 8%, whereas
in the first quarter it dipped 6%. During the fourth and third quarters of
fiscal 2011, it decreased 7% and 8%, respectively.
Further, Hot Topic's business is seasonal in nature and generates high
proportion of sales during fiscal third and fourth quarters, which are
characterized by the back-to-school, Halloween and holiday seasons. As a
result, the company is exposed to significant risks if the seasons fail to
deliver expected operating performance.
The company faces intense competition from other teenage-focused retailers in
the industry such as Abercrombie & Fitch Co. (NYSE:ANF) and Aeropostale Inc.
(NYSE:ARO) on the basis of brand recognition, fashion, price, service, store
location, and quality. Consequently, this may hamper Hot Topic's top and
On the reverse side of the story, Hot Topic recently posted strong second
quarter of fiscal 2012, which was in line with the Zacks Consensus Estimate.
The company posted a loss of 2 cents that fared better than the prior-year
loss of 8 cents. Moreover, net sales grew 4.6% during the quarter.
Looking ahead, Hot Topic is quite bullish for the remaining period of fiscal
2012. The company now expects earnings in the range of 8–10 cents per share
and 23–27 cents for the third and fourth quarters, respectively.
Another positive point for Hot Topic is that the company regularly monitors
store sales and takes prudent steps to align merchandise mix in accordance
with the rapidly changing preferences of its target customers. Furthermore,
the company periodically evaluates its stores and remodels or relocates them
in compliance with the latest trends. Hot Topic intends to open 18 new stores,
remodel 16 and close 3 stores, during third quarter.
Based on the above analysis, we believe that the investors should seek for
better visibility for Hot Topic's prospective in the long term, before
investing their money on this stock.
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