In his Ticker Tape Digest, technical expert Leo Fasciocco focuses on stocks breaking out of basing patterns; a recent feature is Shanghai-based Shanda Interactive (NASDAQ: SNDA).
The stock is also a featured idea from Zacks Ellite Stock of the Day. Analyst Tracey Ryniec notes, "Shanda has found the right place to ride out the slowing Chinese economy as online gaming continues to grow."
Leo Fasciocco explains, "With annual revenues of $377 million, Shanda is an interactive entertainment company in China, offering diversified content through its EZ Center platform including online games, literature, music, movies, and other services.
"It is a dominant operator of massively multiplayer and casual online games. They include chess and board games, and network PC games in China. It gets 90% of its revenues from massively multiplayer and casual games with in-game item-based revenue models.
"SNDA recently broke out from a six-week flat base. Over the past 12 months the stock has appreciated 18%, which easily outperformed the S&P 500 index which is down 44% over the same period.
"There is key upside resistance at 40. A breakout from its current base and a push over that point at 40 would be very bullish long-term
"The accumulation - distribution line is in a strong up trend and has broken out to the upside. That is good technical confirmation there is good underlying buying taking place in the stock.
"The stock sells with a price-earnings ratio of 11 based on 2009 net. We consider that to be low and attractive for value investors. We rate SNDA a good intermediate-term play because of its steady earnings outlook and low valuation."
Tracey Ryniec adds, "Online gaming is considered inexpensive entertainment in China, even for the unemployed, and its popularity continues to spread.
"Shanda's platform allows users to interact with each other around the country. It offers an easy to use payment system, 24/7 customer service and technical support. As of Jan 31, 2009, Shanda had over 800 million registered accounts.
"Shanda continued to outperform in the fourth quarter of 2008. On Feb 26, the company reported fourth-quarter earnings that beat Wall Street estimates by 5.88%.
"It was the 4th consecutive earnings surprise. Active paying accounts for Massively Multiplayer Online Role-Playing Games, or 'MMORPGs', rose 13.5% quarter-over-quarter to 5.89 million.
"Revenue jumped 42.1% compared to the year ago period and was up 8.4% from the third quarter of 2008. This was higher than the company's previous guidance of growth between 5% and 8% quarter-over-quarter.
"As the company's fundamentals continue to be strong, consensus estimates for the first quarter of 2009 and the full year 2009 have been rising. First quarter estimates are up 5 cents to 71 cents per share in the last 90 days. Analysts expect earnings to grow 15.51% in 2009.
"Full year 2009 consensus estimates rose 4% to $2.92 from $2.80 in the last 3 months. However, analysts appear conflicted, with 2 analysts lowering and 5 raising out of 12 covering analysts in the last 30 days.
"With its solid fundamentals, Shanda Interactive is arare combination of a growth and value stock. Its PEG ratio is only 0.81 and the stock is trading at just 11.3x forward earnings." 
