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Designer Brands and Bed Bath & Beyond have been highlighted as Zacks Bull and Bear of the Day

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·13 min read
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For Immediate Release

Chicago, IL – January 17, 2022 – Zacks Equity Research shares Designer Brands Inc. DBI as the Bull of the Day, and Bed Bath & Beyond BBBY as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tesla TSLA, NIO Inc. NIO and General Motors GM.

Here is a synopsis of all five stocks:

Bull of the Day:

Formerly known as Designer Shoe Warehouse (DSW), Designer Brands Inc. is a retailer that offers brand-name and designer shoes and accessories for men and women; customers can find dress, casual, and athletic footwear, as well as handbags and luggage. DBI is headquartered in Columbus, Ohio.

Q3 Earnings Delight Investors

Back in December, Designer Brands reported third quarter results that came in better-than-expected.

Total sales surged 31% year-over-year to $835.5 million as the shoe retailer continues to bounce back from the pandemic-related disruptions it faced in 2020.

Adjusted earnings grew to $0.86 per share, comparing favorably to the loss of $0.26 recorded in Q3 2020 and profit of $0.67 in Q3 2019. DBI’s bottom line also easily beat the analyst consensus estimate.

Total comparable sales spiked 40.8%, and digital demand at U.S. retail stores rose 12% compared to 2019. Store traffic also improved to down 8% during the period compared to down 10% in Q2 and down almost 30% in Q1.

Notably, Designer Brands’ gross profit margin rebounded over the third quarters of both 2020 and 2019, even with recent supply chain issues and inflation headwinds.

The retailer’s financial health is also on the mend. DBI ended the quarter with total liquidity of $477.8 million vs. $409.5 million for the same period last year.

Can DBI Surge Higher?

Over the past year, shares of Designer Brands have climbed almost 55% compared to the S&P 500’s increase of 22.4%. Estimates have been rising too, and DBI is a Zacks Rank #1 (Strong Buy) right now.

For fiscal 2021, four analysts have revised their bottom-line estimate upwards over the last 60 days, and the Zacks Consensus Estimate has moved up 54 cents to $1.68 per share. Earnings are expected to climb about 143% compared to the prior year, with sales improving by 43.8%.

Looking ahead, management expects the strong momentum to continue in Q4, and as a result, has raised its profit guidance. Q4 adjusted EPS is now expected to be in the range of $0.10 and $0.15 per share.

CEO Roger Rawlins said on the earnings call that Designer Brands will keep on executing on three strategic initiatives focused on the customer, the brand, and efficiency in order to grow its footprint, improve margins, and increase its bottom line.

DBI jumped 16.5% when it released its report last month. Based on these results and the retailer’s bullish outlook, investors were clearly pricing in the good news. There could even be room for the stock to run too, as it still only trades at 8.4X forward earnings.

If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep DBI on your shortlist.

Bear of the Day:

Bed Bath & Beyond is a leading operator of specialty retail stores in the U.S. and Canada, offering a wide assortment of “everyday low price” products, primarily including domestic merchandise (such as bed linens, bath accessories, and kitchen textiles) and home furnishings (such as cookware, dinnerware, glassware and basic house ware).

Q3 Results Disappoint

In what was supposed to be a stronger holiday season than 2020, Bed Bath & Beyond’s third-quarter results missed the mark across the board.

Revenue plunged 28% to $1.88 billion, far lower than the $2.61 billion it recorded last year and below analysts’ consensus estimate of $1.97 billion.

Net losses also widened, and on an adjusted basis, BBBY reported a loss of $0.25 per share; Wall Street was looking for a profit of $0.01 per share,

Comparable sales fell 7% year-over-year and core sales were down 14%.

CEO Mark Tritton attributed BBBY’s weak performance to a tough September and October; global supply chain disruptions and hot inflation caused a lack of inventory in its stores, and cost Bed Bath & Beyond $100 million during Q3. However, the retailer took action and implemented market-driven pricing and a number of other initiatives to soften the blow, which helped produce flat comps for November.

But pain from the supply chain crisis probably isn’t over quite yet, as BBBY expects sales to see a high-single-digit percentage decline for Q4 and a full-year loss of $0 to $0.15 per share.

Bottom Line

BBBY is now a Zacks Rank #5 (Strong Sell).

10 analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 68 cents to a loss of $0.13 per share. However, Bed Bath & Beyond’s earnings are expected to see double-digit growth for fiscal 2021, up 87.1%, but sales are forecasted to slump over 14%.

Despite Q3’s lackluster performance, BBBY actually shot up 10% during the trading session following its earnings report, but many analysts credit the rally to Reddit traders and the company’s popularity as a meme stock.

Wells Fargo analyst Zachary Fadem, quoted by Barron’s, said the combination of BBBY’s high short interest and its planned $265 share buyback program fueled the stock’s rise. And in a note to clients, Fadem wrote that the “fundamentals are deteriorating, [long-term] goals appear aggressive, and cash appears to be dwindling into a period of heightened business investment."

Shares of Bed Bath & Beyond are down 34% over the past one-year period, and the stock may continue to experience even more wild ups and downs as the supply chain crisis lingers. Potential investors should proceed with caution.

Additional content:

China Auto Market: 2021 Review and 2022 Preview: 3 Stocks to Buy

Auto sales in China, the world’s largest car market, snapped a three-year slump in 2021. According to the China Association of Automobile Manufacturers (CAAM), a total of 26.28 million vehicles were sold in the country last year, marking a 3.8% increase from 2020 levels. But there’s a catch. While COVID-19 concerns and chip deficit disrupted production, the overall vehicle sales growth was primarily driven by strong sales of green vehicles.

With the upward trajectory expected to continue, you can ride the robust EV market in China by investing in Tesla, NIO Inc. and General Motors. Before delving into the stocks, here’s a sneak peek at how China’s auto market (particularly EV sales) fared in 2021 and what you can expect down the road.

December Sales Fall for the 8th Straight Month but EV Momentum Sustains

After decades of blistering growth, the wheels came off China’s auto market in 2018 due to tighter emission standards, trade tensions and economic downturn. In the early months of 2020, China’s vehicle demand was severely hit by coronavirus woes.

While sales in the country started to bounce back by mid-2020, the recovery couldn’t sustain for long amid the global chip crunch. In a telling sign that chip shortage was wreaking havoc in the industry, vehicle sales in the country in December 2021 declined for the eighth straight month.

The bright spot for China’s auto market last year was the soaring popularity of EVs. According to data compiled by the China Passenger Car Association (CPCA), full-year deliveries of new energy vehicles (NEVs) skyrocketed 169% to a record 2.99 million units. Sales of NEVs more than doubled both in November and December.

Deliveries jumped 122.3% and 138.9% year over year in November and December to total 378,000 and 505,000 units, respectively. Sales for NEVs in China soared for the 18th consecutive month in December 2021. Per CAAM, sales of NEV surged 157.5% to 3.52 million units in 2021.

EV Market on Fire, Prospects Bright

Demand for NEVs has been rising amid climate change concerns, advancement in EV charging infrastructure and favorable government policies. In April 2020, the government of China announced plans to extend subsidies and tax breaks for NEVs such as electric or plug-in hybrid cars for another two years to spur sales. Buoyed by favorable government policies, China — the world’s largest EV market — has been on the uptrend since July 2020 and is seeing solid sales of zero-emission vehicles.

However, this year, China will reduce cash subsidies on NEVs by 30% and scrap them altogether by 2022-end. Industry watchers do not expect EV sales in the country to be impacted by the slashing of subsidies, given that the demand for green vehicles is strong enough to grow without government aid. Quoting Jing Yang, research director of Fitch Ratings, “The new-energy vehicle market in China has evolved to be driven by demand from one that was driven by policies and subsidies.”

While some market experts anticipate risks emerging from coronavirus woes, economic slowdown and high commodity costs to loom over China’s auto industry, they are largely upbeat about the EV momentum, with sales of green vehicles doubling this year. The general secretary of the vehicle industry guild, Cui Dongshu, says “Sales growth by NEVs largely outpaced internal combustion engine-driven (ICE) cars, suggesting that NEVs will continue to replace oil-guzzlers at a quick pace.”

Dongshu expects NEV sales in the country to top 6 million units this year. Meanwhile, CAAM envisions NEV sales to surge 47% year over year in 2022 to 5 million units.

EVs in China are on track to reach the 20% nationwide penetration goal in 2022 itself, ahead of the government’s 2025 forecast. Per UBS estimates, three out of five new cars in China are likely to be powered by electricity instead of fossil fuels in 2030. Meanwhile, CAAM envisions NEV sales to rise 47% year over year in 2022 to 5 million units.

Given the upbeat scenario, we highlight three stocks that are likely to help you capitalize on the China EV market’s solid prospects.

3 Stocks in Focus

Tesla: Tesla’s ambitious production plans in the country bode well. China is the second biggest market for this EV behemoth, where the company is spending heavily to boost earnings prospects. Tesla’s Shanghai factory is ramping up well and commands a higher market share in the China EV market. Robust production of Model 3 and Y — which are among the top five hot-selling EVs in the country — at the Shanghai Gigafactory bodes well.

Last month, Tesla sold a record 70,847 China-made vehicles, the highest monthly rate since it started manufacturing in Shanghai in 2019, per CPCA data. For the full year 2021, Tesla sold more than 470,000 cars made at its Shanghai factory. TSLA currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2022 earnings and sales implies year-over-year growth of 32.6% and 40.4%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

NIO: NIO seems well-poised to cement its long-term foothold in the EV market of China. The rising demand for its ES6, ES8 and EC6 models is enhancing the firm’s top line. This year, the firm intends to deliver three new products based on the NIO Technology Platform 2.0, including the ET7 model. Deliveries of ET7 are scheduled to commence in first-quarter 2022. NIO’s battery swap technology is a game-changer and lends it an edge over its peers.

NIO delivered a record-breaking 25,034 vehicles in the fourth quarter of 2021, to boast a new quarterly delivery benchmark that reflected a 44.3% yearly increase. Its yearly deliveries climbed 109.1% to 91,429 vehicles in 2021. NIO currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2022 earnings and sales implies year-over-year growth of 90% and 83%, respectively.

General Motors: U.S. auto giant General Motors commands a huge presence in China, which is the biggest EV market in the world. In 2021, GM introduced its revolutionary Ultium platform, to expedite its move toward a zero-emissions future. The company’s next-generation EVs (across all brands) in China will be powered by Ultium Drive. Cadillac will lead the launch with its LYRIQ in the Chinese market, followed by Buick and Chevrolet. The first Ultium Center opened in Shanghai in October to assemble battery packs for locally built EVs.

General Motors had strengthened its line-up in China with Hong Guang Mini EV, which was launched in July 2020 under the Wuling brand. The Hong Guang MINI EV cemented its position as the best-selling EV in China, with sales of 400,000 units. GM currently carries a Zacks Rank #2. The Zacks Consensus Estimate for 2022 earnings and sales implies a year-over-year growth of 1.1% and 4.6%, respectively.

Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

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