Back to top

Image: Bigstock

Texas Instruments, Hasbro, Spotify and Netflix highlighted as Zacks Bull and Bear of the Day

Read MoreHide Full Article

For Immediate Release

Chicago, IL – May 2, 2018 – Zacks Equity Research highlights Texas Instruments (TXN - Free Report) as the Bull of the Day, Hasbro (HAS - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Spotify (SPOT - Free Report) and Netflix (NFLX - Free Report) .

Here is a synopsis of all four stocks:

Bull of the Day:

Headquartered in Dallas, Texas, Texas Instruments is an original equipment manufacturer of analog, mixed signal and digital signal processing (DSP) integrated circuits.

It operates through the following business segments: Analog (67% of revenue in 2017), Embedded Processing (24%) and Other (9%).

Excellent Results and Rising Estimates

The company reported excellent results for the first quarter, beating on both the top and bottom lines. Both earnings and revenues posted double-digit growth.

Earnings of $1.11 per share exceeded the Zacks Consensus Estimate of $1.21. Earnings were up 36% year over year and 11% sequentially.

Revenues of $3.79 billion beat the Zacks Consensus Estimate of $3.65 billion and were up 11.4% year-over-year basis and 1% sequentially.

Growth was driven by strong demand for Analog and Embedded Processing products in the auto and industrial markets.

Analysts have been raising their estimates for the company after stronger than expected results.

Zacks Consensus Estimates for the current and next year have surged to $5.43 and $6.01 from $4.97 and $5.67 respectively, 30 days back.

Bear of the Day:

Founded in 1923 and headquartered in Pawtucket, RI, Hasbro engages in design, manufacture and marketing of games and toys. The company offers traditional, high-tech and digital toys, games and licensed products under various well-known brands.

Their brands include NERF, MY LITTLE PONY, TRANSFORMERS, PLAY-DOH, MONOPOLY, BABY ALIVE and MAGIC: THE GATHERING, as well as premier partner brands.

Weak Results Lead to Falling Estimates

The company reported weak results for Q1, missing on both the top and bottom lines.

Adjusted EPS of 10 cents was way short of the Zacks Consensus Estimate of 31 cents and also down sharply from 54 cents reported in the prior-year quarter.

Net revenues of $716.3 million also missed the consensus of $825 million and was down 16% from the prior-year quarter. Decline in revenues was mainly due to liquidation of Toys “R” Us in the US and the UK. Retail inventory overhang, primarily in Europe also contributed to the decline.

Analysts have slashed their estimates after weak results.

Toys ‘R’ Us Liquidation

Toys ‘R’ Us filed for liquidation of its US operation earlier this year. It also plans to sell its businesses in some other countries. This is a major blow to toy makers like Hasbro and Mattel.

With its 700 stores, Toys “R” Us accounted for about one-fifth of toy sales in the US. According to WSJ, Toys “R” Us’ “50,000 square-foot stores were cathedrals to play, places where children explored and discovered new toys.”

Mass retailers like Walmart and Target do not have enough space for that and choose to focus on top-selling toys.

The Bottom Line

Toys ‘R’ Us’ bankruptcy and planned liquidation has created a lot of headaches for this company. It is better to avoid the stock for the time being.

Additional content:

What Our Stock Experts Think of Spotify Prior to Q1 Earnings

Shares of Spotify were up more than 1% through early afternoon trading Tuesday, just one day before the music streaming giant is set to release its first quarter fiscal 2018 results—its first earnings report as a publicly-traded company.

Spotify made waves went it began trading on the New York Stock Exchange through a unique direct listing about a month ago. The rare IPO did not feature underwriters and likely saved the Swedish company plenty of upfront costs, meaning that Wednesday’s report should be a relatively true indicator of its current balance sheet.

Of course, predicting exactly what will happen when such a new stock reports is extremely challenging. According to our current Zacks Consensus Estimates, analysts are calling for Spotify to report an adjusted loss of 34 cents per share and total quarterly revenues of $1.40 billion. But even these figures can be misleading.

Since Spotify is a fresh stock, not many analysts have initiated direct coverage and provided earnings estimates for it. In fact, our Zacks Consensus Estimates are based on just two estimates, and the two analysts that have published these estimates do not seem to agree very well; our high estimate is calling for a per share loss of 19 cents, while our low estimate is calling for a 49 cent loss.

The discrepancy between these two projections might make some investors hesitant to react strongly to Spotify’s actual earnings results. What’s more, plenty of folks are focused on completely different things when recently-public companies file their first few reports. Zacks Stock Strategist Brian Bolan, for example, thinks the top-line result is more valuable.

“The bottom line isn’t as important because there tends to be a lot of ‘noise’ in the first report by almost any company,” Bolan said. “User growth and what kind of real pricing power the company has will be key. Down the road profitability will come, but for now, it is all about MAUs or whatever number they will publish.”

The latest figures from January had Spotify at well over 100 million total active users worldwide, with an impressive 70 million of those paying about $9.99 per month to access its premium features. The firm generated about 4.1 billion euros in 2017, and the vast majority of that came from premium subscribers.

Spotify’s subscription-based business model has drawn comparisons to Netflix. Investors who scooped up SPOT shares at their debut price will obviously hope the stock can replicate Netflix’s remarkable returns over the years, and to do that, many think the company will need to report consistent user growth.

“Spotify said it had 70 million paying subscribers in January. How much has that grown? Like Netflix, subscribers are key. It has been increasing it by 5 or 6 million a quarter. If it keeps or adds to that pace, that could be a boost for the stock,” said Zacks Stock Strategist Tracey Ryniec.

But the comparisons to Netflix do not stop at the two companies’ shared subscription model. Some investors have already started looking much further down the line in an effort to predict how Spotify can break itself from the grips of its astronomical royalty payments.

Spotify will always owe a massive chunk of its top line to record labels and artists in the form of royalties. It has developed relationships with basically all of the music industry’s top publishers, and its payments to these powerhouses account for a sizeable portion of the entire industry’s global revenue.

This obviously underscores the scope of the music streaming revolution, but it also poses challenges for Spotify as it looks to move toward profitability. For Zacks Content Writer Ben Rains, this is the biggest question facing Spotify ahead of its Q1 report

“For all the talk about Spotify becoming the next Netflix, it won’t be able to experience those same gains or profitability unless it can negotiate far better deals with the companies Spotify pays for practically all of its music,” he said.

Rains also argues that it is important to remember that Spotify does not actually own any of the content its users love. Sure, Spotify has been able to negotiate lower fees a few times, but that is not exactly the Netflix model.

Rains elaborated, “Spotify’s growth has in fact forced the big record labels to lower their rights fees, but in the long-run Netflix knew it couldn’t continue to rely on other content providers as the world moved more and more toward a completely streaming future. Therefore, Netflix committed to spend billions to produce its own movies and television shows.”

Spotify shares are up about 8% since the company’s debut last month, but with estimates looking sparse, user growth unpredictable, and few accurate comparisons to be made, there is no telling exactly what the stock will do tomorrow.

Regardless, the world leader in music streaming will not simply fade into irrelevance—even with a bad first report—so this stock will continue to be one to watch in the coming weeks and months.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

Get today’s Zacks #1 Stock of the Day with your free subscription to Profit from the Pros newsletter:

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Strong Stocks that Should Be in the News

Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.

Follow us on Twitter:  https://twitter.com/zacksresearch

Join us on Facebook:  https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.