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: DTS, Inc. (Nasdaq: DTSI), Dolby Laboratories (NYSE: DLB), GlobalSantaFe (NYSE: GSF) and Diamond Offshore (NYSE: DO).
See the latest posts to the Analyst Blog by visiting: http://at.zacks.com/?id=2673
Here are highlights from Monday’s Analyst Blog:
Upside for DTSI Already Priced In
Increasing demand for DTS, Inc. (Nasdaq: DTSI) technologies in emerging applications, such as cars and PCs, augur well for earnings growth. Moreover, with the approval of its Board to divest the Digital Cinema business, DTS should be able to concentrate on the consumer business and benefit from the anticipated acceleration of the high definition cycle.
However, once the sale of DTS Digital Cinema business is completed in 2007, SG&A [sales, general and administrative] costs would entirely be borne by the consumer business and would affect operating results in the short run. At the current prices, we think the upside is incorporated into the stock.
The company's fortunes depend on the rate at which consumers adopt technology, like DVDs and home theaters, so it is exposed to volatility in consumer spending. The slowing demand growth for DVD players will moderate the revenue growth for DTS DVD components. DTS also faces stiff competition from Dolby Laboratories (NYSE: DLB), which challenges DTS in nearly all markets and product categories. Dolby's long-standing market position and inclusion in various industry standards make it a strong rival.
Valuation High on GlobalSantaFe
We are maintaining our Hold recommendation on the GlobalSantaFe (NYSE: GSF) shares on valuation grounds. Though continued strength in the company's backlog provides for visible revenue and earnings growth, we believe that GSF's premium valuation relative to the peer group already reflects this positive backdrop.
A key area of concern remains the impact of growing new-build supply on the industry's long-term fundamentals. Our preferred deepwater drilling name is Diamond Offshore (NYSE: DO). The current favorable macro environment is characterized by tight supply-demand fundamentals driving dayrate gains. As such, we think that current valuation is fair and see limited upside from current levels.
GlobalSantaFe divides its operations into three businesses: Contract Drilling, Drilling Management Services, and Oil and Gas. The Contract Drilling business (accounted for 76% of the company's revenue and 96% of the company's operating income in 2006) provides crew and mobile offshore drilling rigs to oil and gas operators, the Drilling Management Services business (22% and 1%, respectively) designs specific offshore drilling programs, and the Oil and Gas business (2% and 3%, respectively) participates in exploration and production activities.
See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2645
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