Express, The Michaels Companies, Alibaba, Amazon and Disney highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 29, 2020 – Zacks Equity Research Shares of Express Inc. EXPR as the Bull of the Day, The Michaels Companies, Inc. MIK as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Alibaba BABA, Amazon AMZN and Disney DIS.
Here is a synopsis of all five stocks:
Bull of the Day:
Headquartered in Columbus, OH, Express Inc. is a specialty men’s and women’s retailer that’s found predominately in malls and shopping centers in the U.S. The company’s core customer is in their 20s and 30s, and offers work, casual, and going-out apparel.
Investors Upbeat After Q3 Earnings
Back in December, Express reported third quarter earnings that were better-than-expected. Both earnings and revenue topped the Zacks Consensus Estimate. While same-store sales dropped 5%, that figure beat analysts’ estimates of a decline of 6.1%.
Third quarter performance in nearly all categories was a sequential improvement over the last two quarters, and the company’s commitment to improving operating margins and near-term profits were all a good sign for investors going forward.
Why is EXPR Surging?
Shares of Express are up nearly 100% in the last six months, helped by increasing optimism about its long-term profitability strategy. Comparatively, the S&P 500 has returned about 8.5%. Earnings estimates have been rising too, and Express is a Zacks Rank #1 (Strong Buy) pick right now.
For the current fiscal year, three analysts have revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 12 cents from -$0.24 to -$0.12. 2020 looks pretty strong too, with earnings expected to see positive double-digit year-over-year growth.
Last week, Express announced a new profitability plan; management pointed to $80 million in annualized cost-reduction opportunities spread out over the next three years, and identified about 100 stores it will close by 2022.
“Today we are unveiling our new corporate strategy, called The EXPRESSway Forward, and we are focused on profitable growth. My expectation is that we will return to a mid-single-digit operating margin through a combination of low-single-digit comp sales growth, margin expansion and cost reductions,” said CEO Tim Baxter.
Management also narrowed its EPS guidance for the fourth quarter, and now expects earnings between $0.17 and $0.19; the retailer is also looking at its third consecutive quarter of sequential comps improvement in Q4.
If you’re an investor searching for a broader retail stock to add to your portfolio, make sure to keep EXPR on your shortlist.
Bear of the Day:
The Michaels Companies, Inc. is a leading arts and crafts specialty retailer in North America. Customers can find a wide range of project materials, and its departments include floral, framing, home décor and seasonal merchandise. Along with its many private brands, Michaels has partnerships with Crayola, Elmer’s, and Cricut.
Q3 Earnings Disappoint Wall Street
Michaels’ third quarter came in weaker-than-expected on nearly all fronts, and shares closed down over 15% after results were released.
Adjusted earnings and revenue lagged behind the Zacks Consensus Estimate, and comparable-store sales fell 2.2% year-over-year. Total sales declined 4% and EPS was down 17% compared to the prior-year period.
Management pointed to challenging macroeconomic and industry trends as a reason for its underperformance, and has promised to place more emphasis on marketing, seasonal sales events, and inventory management strategies.
Analysts have turned bearish on Michaels, with twelve cutting estimates in the last 60 days for fiscal 2020
Earnings are expected to see double-digit negative growth for the year, and the Zacks Consensus Estimate has dropped 27 cents for that same time period from $2.38 to $2.11 per share.This sentiment has stretched into 2021, though sales and earnings growth could return to positive territory.
MIK is now a Zacks Rank #5 (Strong Sell).
Shares of the retailer are down almost 64% in the last one year. The S&P 500 is up 24.4% in comparison.
Additional content:
Stocks to Watch Amid Coronavirus Anxiety
Coronavirus is causing rippling anxiety across the global markets as the full implications of this potential pandemic are yet to be seen. The richly valued equity was looking for a sell catalyst, and the coronavirus anxiety was the perfect opportunity. If the coronavirus doesn’t become a worldwide pandemic, this fall is creating buying opportunities for those stocks that you thought you missed out on.
The S&P 500 has traded up to its highest forward P/E since the dotcom bubble burst. Through 2019 and the beginning of 2020 the US equity markets rallied steadily guided by the Federal Reserve’s “easy money” policies. The stock market traded straight up since the beginning of October on little news other than some optimism in the US-China trade conflict.
A correction remains necessary, and the coronavirus just happened to be the impetus. As I watch these falling equities, I see a growing opportunity for stocks that I missed out on during the rally.
Which Stocks Am I Looking To Buy As the Market Breaks?
This market is entering an anxiety-ridden state, and with high market valuations, there is room for a more considerable downside. I don’t believe we are entering a bear market, but I feel a marginal correction is due, and a buying opportunity is opening. Here are a few falling diamonds that I would consider buying as the market corrects.
Alibaba
Alibaba is down over 10% in the past week due to the coronavirus, and I would expect this Chinese based company to get hit the hardest. This is creating a buying opportunity for one of my favorite Chinese based companies.
The Amazon of The East has been largely overlooked in the past couple of years due to the US-China trade conflict. Now that the conflict has begun to ease, BABA has seen some recent growth. I see a more substantial upside to China’s ecommerce and cloud computing leader, especially now that it has pulled back.
When compared to Amazon, BABA is trading at a substantial discount. The firm not only sports wider margins and a more extensive growth outlook, it’s also more profitable than Amazon.
I would call this stock a buy right now for any long-term investor, but if you are looking at a shorter horizon, I might wait for the full implications and quantitative effect of the coronavirus to be understood before considering a long position.
Alibaba’s China exposure is still a concern, and it could have a more sizable impact than on US equities.
Disney
DIS has been trading all over the board the past 52-weeks as analysts and investors attempt to price in Disney’s streaming bet. Disney+ saw enormous success in the first 24 hours of its release, with 10 million costumers rushing to sign up for the new “must have” streaming service.
Disney was forced to shut down its mega Shanghai theme park in response to the outbreak. This will have an impact on the companies topline depending on how long the park is shut down.
Despite this marginal impact from 1 of 12 parks, I am confident that Disney + still has a sizable global upside, and so does DIS. These shares traded up fast on the positive feedback from its new streaming platform but have traced down since the beginning of 2020, having lost 8% from the first day of trading this year.
Disney’s new streaming platform has pushed its valuation up as investors price in more future growth from this high potential new offering. DIS is trading at the lower end of its new forward P/E trend (since Disney+ was release November 12th) and as the stock falls its attractiveness increases. Disney’s China exposure is light, and this anxiety-driven sell-off creates a growing opportunity for this investment.
Look for an update on Disney +’s performance in the company’s earnings report next week on February 4th.
Take Away
Whether this global equity break-down will continue is a coin flip, but in my view, US stocks have more room to fall off their rich valuations, and this seller’s momentum may not stop until the full implications of the coronavirus are understood and quantifiable.
Look for good comfortable entry points in the robust investments I discussed above.
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Click to get this free report The Walt Disney Company (DIS) : Free Stock Analysis Report Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Express, Inc. (EXPR) : Free Stock Analysis Report The Michaels Companies, Inc. (MIK) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research
