Trefis Top 5 – June 9 Insights (CSCO, CMG, SPWRA, WMT, EMC)
In today’s wrap, we shed some light on value for the unloved Cisco’s (NASDAQ:CSCO), which sold off sharply following earnings. Inflation pressures are catching up with restaurant chains, and we explore how this might impact Chipotle’s (NYSE:CMG) expansion plans. SunPower (NASDAQ:SPWRA) recently lowered guidance following earnings adding to the slew of bad news in the solar sector. Wal-Mart (NYSE:WMT) received approval for Massmart of S. Africa which will be central to its expansion plans in Africa. Finally EMC (NYSE:EMC) is extending its lead in the worldwide storage software market, which we see as a compelling growth opportunity and has implications for several other companies like HP (NYSE:HPQ) and NetApp (NASDAQ:NTAP).
3 Reasons Why Cisco is Oversold
Cisco’s (NASDAQ:CSCO) stock has plummeted after several of the last earnings announcements. From early Feb 2011, the price has dropped from around $22 to just over $15, a fall of over 30%. Following each of the last sells offs, the stock has made attempts to recover its pre-earnings levels sending a signal that some are optimistic that Cisco will recover in the near to medium-term. On that note, we present few reasons as to why Cisco may still be an attractive stock. The company competes with companies like Juniper (NYSE:JNPR), HP (NYSE:HPQ) and Alcatel-Lucent (NYSE:ALU) in the networking equipment business.
- Rising 25% Year To Date, Will Q1 Results Drive Chipotle Stock Higher?
- Up 11% Already This Year, Does Chipotle Stock Have More Room To Run After Q4 Results?
- Up 30% This Year, Will Chipotle Stock Rally Further Following Q3 Results?
- What To Expect From McDonald’s Stock Post Q2 Results?
- Chipotle’s Stock Up 50% Over Six Months. What’s Next?
- Chipotle Stock Looks Attractive at $1552
Rising Food Costs Could Dampen Chipotle’s Expansion Plans
While Chipotle’s (NYSE:CMG) fresh, nutritious Mexican fare has many fans in the US, the company has also been consistently adding new restaurants and is looking at further expanding in Europe. It reported impressive Q1 numbers driven by a 12.4% increase in comparable restaurant sales, a retail metric to measure a company’s profitability and opened 12 new restaurants bringing the total store count to 1,095. However, increasing food and commodity costs could affect Chipotle margins and discourage the food chain from opening new restaurants until the costs pressures settle down – a situation affecting other restaurant chains like McDonald’s (NYSE:MCD), Burger King, Yum Brands! (NYSE:YUM) and Papa John’s (NASDAQ:PZZA) as well.
SunPower Lowers 2011 Outlook, Could See Loss in Q2
SunPower (NASDAQ:SPWRA) recently announced its outlook for the year 2011, and it did not have a lot of good news to offer. While the company does not expect any significant change to the year’s revenue outlook, it expects lower margins due to its need to reallocate some of its products from the power plant business to the less profitable residential & commercial (R&C) component business. [1] SunPower manufactures and distributes silicon-based solar cells and also produces solar power products for installation on residential and commercial units. It has ventured into large-scale utility power projects only recently with the acquisition of PowerLight Corporation. The company’s primary competitors include First Solar (NASDAQ:FSLR), SuntechPower (NYSE:STP), and Yingli Green Energy Holding Com (NYSE:YGE).
Wal-Mart’s Outlook in Africa
Wal-Mart (NYSE:WMT), the world’s largest retailer, gained its first foothold in Africa through the approval of its $2.4 billion bid for Massmart. Under the terms of the deal, Wal-Mart bought a 51% stake in Massmart on condition that it does not lay off any workers for two years. Wal-Mart competes with other big-name retailers like Target (NYSE:TGT), Costco (NASDAQ:COST), Amazon (NASDAQ:AMZN) and Best Buy (NYSE:BBY).
EMC Gains Share in Growing Storage Software Market
EMC (NYSE:EMC), the leader in storage hardware and software, reported strong performance in first quarter of 2011 extending its share in the $3.5 billion worldwide storage software market to 23.8%, up from 22.4% during the same period last year. EMC was well ahead of its competitors that placed 2nd, 3rd and 4th respectively – Symantec (NASDAQ:SYMC) at 16.0% market share, IBM (NYSE:IBM) at 14.4% and NetApp (NASDAQ:NTAP) at 8.4%. [2]
Notes:- SunPower provides Second quarter and full-year 2011 guidance, SunPower Press Releases, Jun 7 2011 [↩]
- Worldwide Storage Software Market – 1Q11, IDC [↩]