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Rocket Companies, Zscaler, BP, Royal Dutch Shell and Eni SpA highlighted as Zacks Bull and Bear of the Day

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·9 min read
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For Immediate Release

Chicago, IL – October 18, 2021 – Zacks Equity Research Shares of Rocket Companies, Inc. RKT as the Bull of the Day, Zscaler, Inc. ZS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on BP plc BP, Royal Dutch Shell plc (RDS.A) and Eni SpA E.

Here is a synopsis of all five stocks:

Bull of the Day:

Rocket Companies is a Zacks #1 (Strong Buy) that consists of personal finance and consumer service brands. Some popular segments include Rocket Mortgage, Rocket Homes, Rocket Auto and Rocket Loans. 

The company debuted last year when it had its IPO in August of 2020. Since then, the stock became a favorite of the meme crowd, which caused a violent spike over $40 back in March. But the last few months have not been kind, with the stock falling to all-time lows last week.

However, there has been some buying interest with the recent market rally. And with estimates ticking higher, is it time for the stock to lift off?

About the Company

Rocket is headquartered in Detroit, Michigan and was founded in 1985. The company has a team of 26,000 employees and its flagship company, Rocket Mortgage has consistently been named one of the “100 Best Companies to Work For” by Fortune magazine.  

Rocket has a market cap of about $32 Billion and has Zacks Style Scores of “B” in Value but “F” in Growth. The Forward PE is 7, which makes it attractive to value investors.

Q4 Earnings

Rocket reported earnings in August, seeing results come in as expected. Revenue was a slight beat, but the company posted $0.46 v $0.46 expected. Adjusted EBITDA was lower year over year, but closed loan originations came in at $83.8B v the $72.3B.

The CEO commented that they are on pace to be the largest retail home purchase lender in the nation by the end of 2023. He added that their newer businesses Rocket Homes, Rocket Auto and solar program represent significant growth opportunities. 

The company has only missed once since becoming a publicly traded stock. Rocket next reports November 11th and estimates have been ticking higher.

Estimates

Over the last 90 days, earnings estimates have jumped higher across most time frames. For the current quarter, we have seen estimates raised by 30%, from $0.37 to $0.48. For the current year, we have seen a 6% move higher in that same time frame.

Value play and short Interest

The low PE makes this stock very attractive to value investors. Obviously, the market thinks that growth won’t be as rosy investors think. However, if the company does beat expectations, the bulls will be quick to jump in.

Additionally, the stock has a rather large short interest, with about 12 million shares short the stock. This is about 10% of the float, so any positive catalyst will force shorts to buy back the stock.

The Technicals

As mentioned above, the stock recently hit its all-time low just under $15. But the reaction from that level has been extremely positive. The stock snapped back to the $17 area, which is the 50-day moving average. Sellers showed up there, but if the bulls get above that level, we could get some short covering to the 200-day MA.

That 200-day is currently at $19.50, or almost 20% higher from current levels. We most likely need a catalyst to get there and perhaps earnings will be just that.

Bottom Line

Rocket continues to gain market share in the mortgage market and believe their goals for next year are achievable. This stock has been forgotten by the retail crowd, but next month's earnings could bring interest back into the name.

Bear of the Day:

Zscaler is a Zacks Rank #5 (Strong Sell) that is one of the world’s leading providers of cloud-based security solutions.

The stock has been very hot this year, up over 50% and hitting all-time highs last week. However, earnings estimates are ticking lower ahead of their report in December. Investors might want to lock in some gains, to avoid a nasty pullback before the year is out.

About the Company

Zscaler is headquartered in San Jose, CA and employs over 3,000 people. The company was founded in 2007 and serves customers in airlines and transportation, conglomerates, consumer goods and retail, financial services, healthcare, manufacturing, media and communications, public sector and education, technology, and telecommunications services industries.

ZS is valued at $40 billion and has a Forward PE of 530. The company holds a Zacks Style Score of “B” in Growth but “F” in Value. That high PE won’t be bringing any value investors and growth is key for this stock.

Q4 Earnings

The company reported a nice quarter back in September, seeing a 55% beat on the bottom line. Revenues came in above expectations and the company guided FY22 revenues above expectations. Nothing wrong with the quarter except a Q1 range guide below expectations.

The stock fell slightly. but has rallied back to highs with the recent market rally. However, estimates for the company are falling, so perhaps investors are getting ahead of themselves.

Estimates

Over the last 60 days, estimates have fallen across all-time frames. For the current quarter, we see a 14% drop, from $0.14 to $0.12. For next current year, estimates are about flat, but still falling 2%.

Since EPS, we have seen a bunch of analysts raise price targets, despite the drop in estimates. So obviously the street is bullish about the upcoming quarter.

But investors should take caution as the valuation will likely cause the stock to be sold, even if the company prints a great quarter.

Technical Take

The stock looks great on the technical front, with all-time highs coming last week. There is a good chance that the stock breaks $300 before EPS, but any move above that level should be seen as profit taking.

If the stock were to break $265, we could see some downside. That level is the 50-day MA, which has held up since May.

In Summary

Long-term Zscaler looks like it will continue to be a leader in the security cloud space. However, looking over the next few quarters, we could see valuation issues pop up that will lead to selling in the stock.

A pullback is warranted and investors would likely be rewarded by targeting the 200-day MA under $220.

Additional content:

These 3 Integrated Majors Are Leading the Energy Transition Race

Economies across the world are gradually transitioning to cleaner energy sources. There has been a steady increase in pressure on energy companies to act on climate change on multiple fronts. Most analysts believe that although renewable energy will meet future energy needs, this will not completely wipe out oil and natural gas demand. Demand for fossils fuels will also grow but at a slower pace.

The U.S. Energy Information Administration (EIA), in its International Energy Outlook 2021, revealed that global demand for renewables through 2050 will be the highest. Over the period, demand for oil and natural gas will also grow, although the pace of growth will not be like renewables, on the back of an expanding population and fast-growing economies, added EIA.  

Thus, there are abundant opportunities for energy companies with a footprint in oil and gas resources and the renewable energy space. Three such companies are BPRoyal Dutch Shell and Eni SpA.

BP plc, a British energy giant, is planning to become a net-zero emissions player by 2050 or earlier. The integrated company intends to invest and boost its renewable energy generation capacity to 20 gigawatts (GW) by 2025. The company also has strong upstream and downstream activities, aided by recovering oil price and fuel demand.

Royal Dutch Shell also has the same ambitious target of becoming a net-zero emissions energy player by 2050 or earlier. The integrated energy company is expanding its presence in solar energy generation capabilities and foreseeing great potential in energy generations from offshore and onshore wind. The company also has sizable exposure to upstream and refining operations.

Eni is also leading the energy transition. The integrated energy player has an ambitious plan of reaching 60 GW of installed renewable energy capacity by 2050. This suggests a massive improvement from 1 GW of installed and sanctioned capacity last year. By 2050, it is planning for net-zero Scope 1, 2 and 3 greenhouse gas emissions.

The massive crude price recovery is aiding Eni’s upstream energy business since the company is targeting a compound annual production growth rate of 4% through 2024 since 2020. Eni’s other impressive plan for the upstream business is targeting new discoveries of 2 billion barrels of oil equivalent through 2024 since 2021.

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BP p.l.c. (BP) : Free Stock Analysis Report
 
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