Yahoo Finance Uber Technologies and RE/MAX have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – April 26, 2024 – Zacks Equity Research shares Uber Technologies, Inc. UBER as the Bull of the Day and RE/MAX Holdings, Inc. RMAX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Chipotle Mexican Grill CMG, Wingstop WING and CAVA Group CAVA.
Here is a synopsis of all five stocks:
Bull of the Day:
Uber Technologies, Inc. posted its first full-year profit as a public company in 2023 by expanding its ride-hailing and delivery businesses while streamlining its operations at every turn.
Wall Street rewarded Uber by sending its stock to new all-time highs in February, soaring 130% over the last 12 months.
Uber shares have cooled off to trade at attractive levels for long-term investors given its impressive outlook in segments of the economy it transformed from a niche app for people in select cities into a $50 billion-a-year behemoth.
A Transformational 2023
Uber posted fourth-quarter profit of $1.43 billion, including a $1 billion benefit from its equity investments. The ride-hailing firm reported $652 million of income from operations vs. a loss of $142 million in the fourth quarter of 2022. Uber's Q4 operating income also surged by $258 million quarter-over-quarter.
On top of that, Uber's Q4 free cash flow hit $768 million vs. a negative cash flow of -$303 million in the final quarter of 2022. This came after Uber posted its first-ever quarterly operating profit in the second quarter of last year.
CEO Dara Khosrowshahi called 2023 an "inflection point" proving Uber can "continue to generate strong, profitable growth at scale."
Uber spent the last several years cutting jobs and streamlining its operations, always pivoting toward profitable expansion amid a wild ride for its business that saw ride-hailing briefly fade during Covid and food delivery soar. The company's strength in its core mobility and delivery segments are offsetting struggles in its much smaller freight unit.
Uber's results over the last several years highlight that people are back to living their pre-pandemic lives in full force. Crucially, the resurgence of its ride-hailing segment hasn't come at the expense of delivery, showcasing the strength of its two core business models that are especially popular with higher-income consumers who are less impacted by lingering inflation and various economic cycles.
Uber grew its monthly active platform consumers by 15% YoY in the fourth quarter to 150 million, fueled by growth across mobility (ride-hailing) and delivery. Total trips soared 24% YoY to 2.6 billion in Q4, while mobility gross bookings jumped 29% YoY to $19.3 billion and delivery surged 19% to $17 billion.
Uber, under Khosrowshahi, has focused heavily on disciplined spending and cost-cutting measures. Uber offers far fewer discounts to consumers and incentives to drivers these days. Uber is reducing delivery errors and becoming more efficient while boosting its market share vs. rival Lyft and others.
On top of that, Uber is rolling out more advertisements across its core Uber app, Uber Eats, and beyond to help monetize its growing customer base for ride-hailing and delivery. Uber also heavily scaled back on its in-house autonomous vehicle dreams in favor of a strategic partnership with Waymo for self-driving ride-hailing.
Uber in December announced a new partnership with autonomous trucking firm and independent subsidiary of Daimler Truck AG, Torc Robotics. Uber is prepared to compete against or possibly with the likes of Tesla (TSLA) and others in the autonomous ride-hailing, delivery, and freight space down the road.
Growth Ahead
Uber grew its revenue by 17% in 2023, even as it came up against an impossible to compete against stretch of 83% sales growth in 2022 and 56% in 2021. The ride-hailing company is projected to post another 16% growth in 2024 and 2025 to hit $50.49 billion next year—vs. $13 billion in pre-Covid 2019.
Its total gross bookings are projected to surge 19% in 2024, based on Zacks data. Meanwhile, its monthly active platform consumers are expected to climb 13% to 169 million.
Uber swung from an adjusted loss of -$4.65 a share in 2022 to +$0.87 per share last year. The company is expected to post 40% adjusted EPS growth in 2024 and another 67% in FY25 to reach $2.04 per share.
Uber crushed our Q4 EPS estimate by 340% ($0.66 vs. $0.15). Its consensus FY24 EPS estimate has climbed by 97% over the last year, with its outlook for FY25 up 20%. The firm's overall upbeat EPS revisions help it grab a Zacks Rank #1 (Strong Buy) right now.
Other Fundamentals
Uber stock has soared around 130% over the last year to break above its 2021 highs to a record of around $82 a share in mid-February. During the same stretch, its rival Lyft climbed 60%, future possible robot taxi rival Tesla moved 7% higher, and tech popped 40%.
Uber is now up 70% over the last five years vs. Lyft's 70% downturn. The stock has pulled back from its highs, trading 14% below its records and 23% below its average Zacks price target.
Uber is currently trying to find support at its 21-week moving average, where the S&P 500 and the Nasdaq found support to start the week. Uber fell from its most overbought RSI levels in February to neutral.
Uber's valuation is improving. The stock trades at a 50% discount to its highs at 3.2X forward sales and 30% below the Zacks tech sector. Plus, its PEG ratio, which factors in its longer-term earnings growth outlook, sits at 0.9 vs. tech's 1.8.
Bottom Line
Some investors might want to wait until after Uber reports its first quarter 2024 financial results on May 8 before they consider buying the stock.
Long-term investors are often well served to forget the market timing game. Plus, Wall Street loves the stock, with 34 of the 40 brokerage recommendations Zacks has at "Strong Buys," alongside no "Sells."
Bear of the Day:
RE/MAX Holdings, Inc. is a global real estate firm and one of the largest franchisors in the real estate industry. RMAX stock has continued to suffer as the company's earnings outlook tumbled over the last several years.
RMAX 101
RE/MAX franchises real estate brokerages globally under the RE/MAX brand and mortgage brokerages in the U.S. under Motto Mortgage. The firm also sells supplementary products and services to our franchise networks, including loan processing services.
RE/MAX boasts that it has more than 140,000 agents in over 9,000 offices across over 110 countries. That said, RE/MAX and Motto Mortgage are 100% franchised. The company's business revolves around providing technology, training, and marketing.
RE/MAX posted strong growth in three out of the past five years, including 33% revenue expansion in the pre-Covid 2019 period and 24% in 2021.
RE/MAX's revenue fell 8% in 2023 and its adjusted earnings tumbled 38%. The firm has been impacted by the slowing housing market, driven by higher mortgage rates and a difficult to compete against stretch of pull-forward expansion during the Covid boom.
RE/MAX's adjusted earnings are projected to fall another 7% in 2024 on 5% lower sales amid rough macro conditions. RE/MAX's earnings outlook has faded fast over the last several years, including recent negativity.
For instance, RE/MAX's Q1 FY24 consensus EPS estimate is down 17% in the last several months, with its most accurate/recent EPS estimate slightly below that beaten-down level.
The company's long-term outlook likely remains strong, driven by larger demographic trends. The firm is also optimistic about the near term future. "Looking ahead to 2024, we believe there are many reasons to be optimistic – encouraging interest rate trends, improving customer sentiment, and ongoing pent-up demand bode well for progressively better housing market performance moving forward," CEO Erik Carlson (who took over in late 2023) said in prepared Q4 remarks.
Bottom Line
RE/MAX's downward earnings revisions help it earn a Zacks Rank #5 (Strong Sell) at the moment. On top of that the company's Real Estate – Operations segment lands in the bottom 13% of over 250 Zacks industries.
Wall Street is skeptical of the stock at the moment, with four of the six brokerage recommendations Zacks has at "Holds," alongside two "Sells." The stock is down over 80% in the last five years, including a 60% downturn in the past 12 months. This fall is part of an even larger decline that began in 2017.
RE/MAX will report its earnings results on Thursday, May 2.
Additional content:
Chipotle's Q1 Beat Heats Up Restaurant Stocks
Chipotle Mexican Grill reported earnings Wednesday after the market close and did not disappoint shareholders.
Chipotle had another stellar quarter of business activity, growing revenues 14.1% YoY, increasing margins, and opening 47 new restaurants with 43 including a Chipotlane, a drive through option.
Chipotle Mexican Grill is an innovator in the restaurant space, commercializing the fast-casual concept and leading the way for the industry. Shareholders have benefitted tremendously from Chipotle's success as the stock has compounded at an annual rate of 19.7%, well above the broad market and industry.
With analyst beating earnings, and a top Zacks Rank Chipotle Mexican Grill makes for a worthy consideration in any investor's portfolio. Additionally, several other up and coming restaurant stocks offer huge opportunities, and the sector as a whole has shown relative strength during the recent market selloff.
Here we will cover Chipotle's earnings and share two other top ranked restaurant stocks to dive into.
Earnings Results
Chipotle reported a strong first quarter with revenue up 14.1% to $2.7 billion. Comparable restaurant sales grew 7%, driven by higher transactions and menu price increases. Profits were also strong, with adjusted earnings per share up 27.3% to $13.37.
Earnings beat analysts' estimates by 14.5% and sales by 1.2%.
The company is optimistic about the future, citing successful marketing initiatives and a focus on throughput. They are expecting full-year comparable restaurant sales growth in the mid to high-single digits and plan to open 285 to 315 new restaurants.
Margins saw notable expansion as well, with operating margin rising from 15.5% to 16.3% from last quarter.
Is Chipotle a Buy?
As of today, Chipotle shows continued growth on both the top and bottom line as it cements its leadership in the space. It boasts a Zacks Rank #2 (Buy) rating, reflecting upward trending earnings revisions and forecasts EPS to grow 22% annually over the next 3-5 years.
Additionally, as noted, CMG stock has been displaying relative strength against the broad market, indicating a preference for the stock from institutional investors.
Other High-Flying Restaurant Stocks
The sector has been performing quite well broadly, and a handful of new restaurant stocks have been putting up huge rallies.
Two stocks which have gone public more recently and are posting impressive growth are Wingstop and CAVA Group.
While Wingstop is a more traditional chicken wing take-out and eat it restaurant, CAVA Group has been following the Chipotle model very closely. Cava restaurants have similar industrial design, restaurant layout and pricing to the incumbent Chipotle and showing that the setup works.
CAVA Group is expecting sales to grow 19% annually this year and next and is also forecasting net positive earnings results for the first time in the coming quarter.
Both Cava and Wingstop have a Zacks Rank #2 (Buy) rating and are up significantly more YTD in terms of stock price.
Wingstop is forming an especially compelling technical trade setup. Over the last two months, the price action on WING stock has been building out a bull flag. If the stock can trade above the $375 level, it would signal a technical breakout.
Bottom Line
General wisdom usually says that restaurants are a poor business, however the stocks shared here would say otherwise. Chipotle has been one of the top performers in the market over the last decade, and both Cava and Wingstop are showing huge potential with near-term bullish catalysts.
It is also worth noting that amid the worst selloff in nearly six months, these restaurant stocks are showing relative strength against the broader market. Stocks that show strength while the market is down are usually the ones that lead during the next bull run.
For investors looking to diversify into restaurant stocks, Chipotle, Wingstop and Cava all make for worthwhile considerations.
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Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
RE/MAX Holdings, Inc. (RMAX) : Free Stock Analysis Report
Wingstop Inc. (WING) : Free Stock Analysis Report
Uber Technologies, Inc. (UBER) : Free Stock Analysis Report
CAVA Group, Inc. (CAVA) : Free Stock Analysis Report
