For Immediate Release
Chicago, IL – August 14, 2020 – Zacks Equity Research Shares of Grocery Outlet Holding Corp. GO as the Bull of the Day, Wix.com Ltd. WIX asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Texas Instruments Incorporated TXN, Etsy, Inc. ETSY and Teradyne, Inc. TER.
Here is a synopsis of all five stocks:
Bull of the Day:
Grocery Outlet is a Zacks Rank #1 (Strong Buy) that owns and operates a chain of grocery stores in the United States. That might not sound exciting, but the company is a high-growth, extreme value retailer of quality, name-brand consumables and fresh products that sells its products through a network of independently owned and operated stores. The company has a niche, offering discounted, overstocked and closeout products from name brand suppliers.
Grocery Outlet has just under 7000 full-time employees and is headquartered in Emeryville, CA. The company is mainly located on the west coast and Pennsylvania. After a big EPS beat and 17 new store openings, there are signs the company's goal to grow is panning out.
A Recent IPO
The company has been around since 1946 and decided to finally IPO in 2019 to grow the business. The stock opened up in the low $30s and is up about 35% since the debut price. While it has failed to print all-time highs in the recent up move, it was close.
Since the IPO, the company has beaten on EPS five out of five times. However, the last report was the biggest beat yet and should propel the stock to new highs before years end.
Surprise Beat on Q2 EPS
Earlier this week the company reported an 82% surprise beat on EPS along with a beat on revenues. Same store sales came in at +17%, while EBITDA was up 38% year over year. The company added 17 new stores in the quarter, bringing GO up to 362 locations in six states.
CEO Eric Lindberg had some comments on the quarter:
"We are very pleased with our strong operational execution in the second quarter. Our financial results reflect incredible teamwork across the organization including our independent operators, distribution center teams, and our corporate staff. While the safety of our communities and the entire Grocery Outlet team is our number one priority, we remain committed to delivering exceptional value to our customers while continuing to extend our reach."
Growth and Rising Estimates
The company is in its early stages of growth and excelling in a tough environment. With long-term plans to open up 4,800 stores, investors see massive potential for growth. Because of the great quarter and growth potential, analysts are hiking estimates and price targets.
Over the last 7 days, estimates for next year have ticked higher by 3%, from $1.01 to $1.04.
The quarter was very positive, but there was a big negative, an analyst cited as a headwind. While the company is doing well in the pandemic environment, COVID-related costs have cut into profitability. However, consumers see value in the company’s products, which is helping them gain market share. If those two factors can cancel each other out, earnings can continue and the long-term growth story is solid.
The Technical Take
The stock has been steadily grinding higher since the IPO. The previous quarter saw an earnings beat sold, only to be met with buying a month later. The current earnings report was impressive, so the stock has stalled after pulling back from all-time highs. The 21-day moving average seems to be support for now.
If the stock falls further, look to buyers to step in at the 50-day at $40. If the current levels hold, that means buyers defended the 61.8% retracement drawn from July lows to August highs. A move back over $45 would signal the bulls are in full control and should target the $48-50 area.
The stock will need to grow into its valuation for longer-term targets to work out. For those looking to hold the stock into its expansion, look for the $60 and $79 Fibonacci levels.
Grocery Outlet Holdings has big potential to grow and reward investors that get in at current levels. 300 plus stores to almost 5,000 is a lofty goal, but if the earnings story continues, the growth aspect can accelerate.
Bear of the Day:
Wix.com is a Zacks Rank #5 (Strong Sell) that develops and markets a cloud-based platform that enables creation of websites and web applications.
The company was founded in 2006 in Israel and currently has 2400 full-time employees. With a market cap of $13.5 billion the valuation should come into question, which is why the stock has a Zacks Style Score in Value of “F.”.
After earnings last week, investors should be suspect of the massive rally the stock has had. Additionally, the earnings reaction gave investors an opportunity to get out, so selling at current levels might be wise.
Massive Rally off March Lows
The stock was trading around $150 before the pandemic. When the panic selling started, the stock fell to $77, but then rallied back to recent highs in April as investors realized the stock would benefit from lockdowns.
The momentum continued, after the stock hit $300 before the recent earnings report, 100% from the pre-Covid highs.
Earnings Miss and Reaction
Investors expected a big beat going into the quarter, but were slammed with a 213% surprise miss. While the headline number was bad, collections were up 35% year over year and their Q3 guide was as expected.
The headline numbers were bad, and the stock traded down over $50 in the premarket. But some investors liked the positives on the report and the stock traded all the way back up to $319, a $70 rally. Surely, the shorts had to be frustrated at that move.
Since the wacky back and forth, the stock has fallen under $300 once again and analysts have been cutting estimates.
For the next quarter, analysts have cut estimates to $0.06 from $0.34, a drop of 82%. For next year, estimates have fallen 44%, from $1.60 to $0.89.
The stock is at overbought levels and the recent high will perhaps be the tops. The post earnings low was defended at the 50-day MA and if that were to break, we could see further pressure on the stock. The 200-day is all the way down at $167, but those looking to buy back shares they sell now could target hallway back level around $200.
Some stocks are clearly overextended and when earnings fail to impress, things can be unwound quickly. So far, WIX has held up, but if those technical levels break down, look for an accelerated move lower.
3 Growth Stocks with the Highest Zacks Rank
The market continues to grow at an amazing pace, so it only makes sense to take a look at growth stocks in this environment. But how do you find them? More importantly, how do you find ones that should continue to grow in the future?
We have a screen that will help you with that and its aptly titled Zacks #1 Rank Growth Stocks. Not only is it looking for strong buys, but it also wants stocks that have at least a 20% historical growth rate and a 20% or more projected growth rate. In other words, we want to see growth yesterday, today and tomorrow.
Below are three names that recently passed the test. But this screen is changing daily, so click here for the full list of names and make sure to come back regularly to take full advantage of this market.
If you’re going to put “Texas” right there in the name of your company, then it better have results as BIG as the state. Fortunately, Texas Instruments passed that test with its second-quarter report last month.
The company is an original equipment manufacturer of analog, mixed signal and digital signal processing integrated circuits. In other words, it’s a semiconductor name, which puts it in the Top 21% of the Zacks Industry Rank. Furthermore, shares have surged approximately 41.7% since the coronavirus low on March 23.
So how big was that quarterly report? Earnings per share of $1.48 beat the Zacks Consensus Estimate by approximately 68.2%. It marked the eighth straight quarter with a positive surprise and an average beat of more than 26% over the past four.
Revenue of $3.24 billion also topped our expectations by 9.3%. However, TXN was not spared a coronavirus impact. The top line did drop 12% from the previous year due mainly to weakness in the automotive market and its analog and embedded processing segments.
However, the company serves diverse end markets, so it can weather setbacks better than most. For example, its personal electronics and industrial markets performed well.
TXN forecasted third-quarter revenue of $3.26 billion to $3.54 billion and EPS between $1.14 and $1.34. Both of those ranges were above Zacks Consensus Estimates, which led to analysts boosting expectations.
However, you don’t become a Zacks Rank #1 (Strong Buy) like TXN with quarterly revisions. You need the annual estimates to go up too. That’s not a problem.
Earnings estimates for this year have climbed 26.6% in the past 30 days to $5.05, which is another example of Texas-sized improvement. Expectations for next year are more Illinois-sized, having gained 11% in that time to $5.33.
That leaves year-over-year growth at 5.5%, but there’s plenty of time for that to improve as we move forward.
If we’re required to wear facemasks to leave our homes, then we might as well wear something with a little panache. Maybe something with a floral pattern or tie-died. Or perhaps a mask with a comic book character or the cast of the Golden Girls.
Whatever you choose, Etsy has got you covered. The company actually called facemasks an “emerging category” and named it one of the “tailwinds” for its strong second-quarter report from earlier this month.
However, facemasks are just one small part of what Etsy is all about. But it goes to show how felicitous this company is for the current time. It’s an e-commerce company that buys and sells all kinds of goods, including art, home products, mobile accessories, jewelry, wedding products and countless others. It has a more crafty offering than the big guys in this field.
So how fitted to the times is ETSY? Shares are up nearly 300% since the coronavirus low on March 23!
For its second quarter, earnings per share of 75 cents demolished the Zacks Consensus Estimate by more than 78%, while revenue surged nearly 137% year over year to $428.74 million.
The company saw 18.7 million new buyers and reactivated buyers in the quarter. (Reactivated buyers are those who haven’t purchased in over a year.) It is also reinvesting in itself to better capitalize on this weird time in our history and the future.
Analysts are on board! Earnings estimates have soared in the short amount of time since the report. ETSY is now expected to report $2.05 for this year, which marks an advance of 80% in just the past week.
Next year’s upward revisions have been a little tamer, but are still up over 26% in that time to $2.09. So for the moment, analysts aren’t expecting much of a year-over-year improvement, when this pandemic will hopefully be a thing of the past.
But does anybody think that people are going to suddenly stop online purchases when we get back to some kind of normal?
Teradyne has been beating the Zacks Consensus Estimate for several years now, which continued last month with its second quarter report.
TER is a leading provider of automated test equipment, which means it’s part of a space in the top 49% of the Zacks Industry Rank. However, since it generates the bulk of its revenue from the semiconductor test market, it’s also worth noting that the semiconductor – general industry is in the top 21%.
The company reported earnings per share of $1.33 last time, which was more than 101% better than the previous year and ahead of our expectations by nearly 28%. In addition to the long string of positive surprises, it has an average beat of approximately 16.4% over the past four quarters.
Revenue jumped 49% from last year to just under $839 million, which also topped our expectations. Approximately 79% of that came from semiconductor test platforms.
TER attributed the quarter’s success to stronger-than-expected system-on-a-chip (SOC) test shipments, along with successful navigation of supply constraints. The Industrial Automation part of its business was most impacted by the economic shutdown and declined from the previous year, though activity improved monthly through the quarter.
Perhaps the best part of the report, though, was its outlook for the third quarter. TER expects revenue between $745 million and $805 million, with earnings at $1.01 to $1.17. Those forecasts were well above expectations at the time, which led to higher revisions from analysts.
Over the past 30 days, earnings estimates for this year have jumped 25.6% to $3.87, while next year has advanced 15.3% to $4.08. This suggests year-over-year improvement of about 5.4%.
Looking forward, a growing memory market exposure, the robust test demand and its strong product lineup should keep this company producing high marks.
Shares of TER are up 95.3% since the coronavirus low on March 23.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now >>
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