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Shopify, Ulta Beauty, Nintendo, SciPlay and DouYu International highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – April 23, 2020 – Zacks Equity Research Shares of Shopify (SHOP - Free Report) as the Bull of the Day, Ulta Beauty (ULTA - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Nintendo Co., Ltd. (NTDOY - Free Report) , SciPlay Corporation and DouYu International Holdings Ltd. (DOYU - Free Report) .
Shopify is the $68 billion disruptor in online marketplaces taking on Amazon and Ebay in the small business "etailer platform" market.
Just seven weeks ago, I was writing about SHOP as the Bear of the Day when shares were trading $500 on March 3. Here's what I wrote then...
And earnings estimates just plunged after the company revealed a big investment year ahead in their Q4 report delivered on February 12.
Since that reveal, the Zacks consensus for full-year 2020 EPS dropped over 75% from $0.89 to $0.21. Next year got clobbered 55% from $1.60 to just $0.72.
Analysts also found themselves having to adjust their ratings as well since the hyper-growth platform trades at 25 times sales.
Shopify was downgraded to Neutral from Outperform at Credit Suisse with analyst Brad Zelnick saying that despite another strong quarter from Shopify -- and his positive fundamental view on the company's long-term opportunity and belief in management's strategy and ability to execute -- he cut the shares on its "lofty valuation and embedded expectations."
Yet, price targets were raised dramatically across the board in February after the company call, and that's why shares soared from $500 to nearly $600 on Feb 12...
SunTrust: Hold $340 to $585
Baird: Outperform $465 to $590
Wedbush: Neutral $325 to $475
Wells Fargo: Overweight $400 to $600
KeyCorp: Overweight $485 to $575
Rosenblatt: Buy $481 to $630
UBS Group: Underperform $450
Credit Suisse: Neutral $450 to $575
Raymond James: Outperform $365 to $600
Canaccord Genuity: Buy $385 to $600
Royal Bank of Canada: Outperform $400 to $650
Investors wanting to get into Shopify (myself included) probably thought we were going to get our chance in the recent correction.
I wanted to get in on the Jan 9 gap fill near $420 but I was too slow on Friday.
Now I'll have to wait until SHOP is out of the Zacks Rank cellar.
(end of my March 3 notes on SHOP as the Bear of the Day)
SHOP shares fell over 35% after that but kept finding buyers under $340 during the market collapse the week of March 16th. A few weeks later on April 7, Raymond James analyst Brian Peterson downgraded SHOP to Market Perform.
Ten days later, the stock had soared over 50% from $390 to $590. So Peterson published a research note on 4/17 titled "Feedback on Our Downgrade Note (and Why It's Been Dead Wrong So Far)." In that note to clients, he explained what he and his team missed, courtesy of TheFly.com...
His rationale for downgrading the shares was the company's exposure to cyclical shifts in consumer spending, higher exposure to apparel, his view that estimate cuts had not been steep enough yet and the stock's premium valuation, but "what we seemingly missed in this dynamic is how quickly COVID-19 may push new merchants to the Shopify Platform," Peterson said. Despite traffic data that supports benefits for Shopify and "suggests that our call was wrong," Peterson concluded that he is "not sure that this is the right time for shares to be at all time highs." He maintains a Market Perform rating on Shopify shares.
Peterson also noted the nature of client feedback discussions...
"Our investor conversations post the downgrade mostly centered on relative exposure to categories like apparel, and how we should be thinking about GMV trends (note that our model is 19% below consensus for 2Q20)."
This week, as you probably know, SHOP has been making new all-time high closes above $600.
Wedbush put out a note this week titled "Traffic Surging During Coronavirus But Revenue Upside Also Priced In" and moved their PT down to $445.
So what's driving the enthusiasm for SHOP shares despite this analyst pessimism? Just a tweet, via a little blue bird. Here's how Wedbush characterized the message...
On Friday, Shopify CTO Jean-Michel Lemieux shared on Twitter that Shopify's platform is handling Black Friday level traffic on a daily basis during coronavirus. He also noted optimism about traffic growth, and that "it won't be long before traffic has doubled or more." This is a clear positive signal for Shopify. We've noted our view that ecommerce platforms and web builders will be net-beneficiaries in the long-term as consumer and business trends will pull forward both during and after the pandemic and this data certainly supports that Shopify is exceptionally well positioned to capitalize on that trend.
The Wedbush analysts went on to note that the traffic spike is not a direct correlation to revenue as it does not necessarily equate to spending and GMV. Plus, Shopify is giving extended free trials to non-Plus merchants and the company noted in its business update that merchants are heavily relying on discounting.
There is also the factor that Shopify's merchants largely represent consumer discretionary spend on items from categories like fashion, cosmetics, health and beauty.
Bottom line: Shopify remains a competitive force in e-commerce that offers a fantastic platform for small business unequaled by Amazon or Ebay. And their business will gain traction longer-term because of the current brick-and-mortar apocalypse in retail. But the valuation has run far ahead with the stock trading over 30X this year's projected sales of $2 billion. Look to be a buyer on the next dip under $500.
Ulta Beauty is the $11 billion darling of high-end suburban strip malls with cosmetics, bodycare, styling and other salon and spa services unparalleled by any other retailer.
Since I chose Shopify as the Bull of the Day, I couldn't resist profiling the earnings decline in ULTA since the two could represent dueling stories in the quarantine-induced recession battleground.
As I noted in the SHOP story, Wedbush analysts pointed out a reason for caution on that stock: "There is also the factor that Shopify's merchants largely represent consumer discretionary spend on items from categories like fashion, cosmetics, health and beauty."
But SHOP's gain in that department may be ULTA's pain as the $68 billion e-commerce disruptor begins to eat some of the brick-n-mortar's lunch money, which is expected to total $7 billion on the top line this year, representing a 5.44% decline.
Of course, it's the downward earnings estimate revisions that have made ULTA a Zacks #5 Rank this month.
In the past 60 days, the current fiscal year 2021 (ends in January) saw consensus EPS projections drop a whopping 31.6% from $13.09 to $8.95, representing a 25% annual decline. Next year only dropped half as much from $14.34 to $12.05.
I made a quick video Wednesday morning highlighting why I think the stock market relief rally is on borrowed time, especially as led by a handful of stocks making up the strength...
I could have included SHOP in the FAAMNG group -- Facebook, Apple, Amazon, Microsoft, Netflix and Alphabet -- that's holding up the market. Though it's not in the same class as those behemoths with giant revenues and cash flows, it will emerge from this crisis even stronger as the go-to e-tailing platform for many small companies and distributors.
And both SHOP and ULTA will tell us a lot overall, through their growth challenges, about this crisis and the road ahead.
As I write this on Wednesday evening, I saw that CNBC's Jim Cramer profiled Victoria's Secret as a microcosm of the terminal pain for shopping malls. Here were his key points...
“It’s not just the department store that’s dying. It’s the whole mall."
“We knew we didn’t need the department stores, but now the pandemic’s making us realize that maybe we may not need anything in the mall at all.”
“Only two kinds of retailers are working here: the ones that have enormous scale and sell essentials or the ones with fabulous digital businesses.”
ULTA may be one mall story that is most likely to adapt and come out stronger than others. And trading at only 1.6 times sales, it remains an incredible bargain vs SHOP at over 30X.
There will be a time soon to pick up shares of ULTA again soon under $175. The Zacks Rank will let you know.
Additional content:
Videogame Sales Hit 12-Year High: 3 Stocks to Buy
Videogame sales in the United States spiked in March, hitting its highest level in more than a decade. The surge was led by Nintendo Co., Ltd., which sold more than 50 million Switch gaming consoles.
Together, sales of gaming consoles Xbox One, PlayStation 4 and Nintendo Switch rose 63% from a year earlier to $461 million in March. This is a sign that the video gaming industry is likely to benefit from the coronavirus crisis.
The pandemic has forced millions of people into lockdown and quarantine. With nothing much to do locked inside their houses, most are either video streaming or playing video games.
Videogame Sales Boom
According to research firm NPD, videogame sales in the United States hit a 12-year high in March. Sales of gaming hardware, software and accessories in the United States surged 35% to $1.6 billion in March from a year earlier.
The growth is the highest since March 2008 , when sales had risen more than 52% to $1.8 billion, according to NDP. Nintendo’s Animal Cross: New Horizons, which was launched in March, topped the list of best-selling games, outselling PlayStation 4 and Xbox One in console sales.
According to Sellics, which offers technology for vendors on Amazon Marketplace, Switch sales on the ecommerce site have increased 2,979% since the start of 2020 in North America. Switch was also sold out at other major retailers.
Coronavirus Helps Videogame Industry
Governments across the world are shutting down countries and implementing stay-at-home orders. This has seen certain businesses, including gaming, online streaming and video conferencing, witnessing a boost in user engagement. According to Sellics, videogame sales have jumped around 500% in the United States on Amazon so far this year.
Our Choices
Videogame sales are expected to witness growth in the near term with stay-at-home orders and lockdown likely to remain in place for some time now. Given this scenario it is prudent to say that these five stocks are likely to rally in the near future.
Nintendo Co. is a worldwide leader in the creation of interactive entertainment. It manufactures and markets hardware and software for its popular home video game systems, including Nintendo 64 and Game Boy.
The company’s expected earnings growth rate for the current year is 11.7%. The Zacks Consensus Estimate for the current year earnings has improved 9.4% over the past 30 days. Nintendo has a Zacks Rank #2.
SciPlay Corporation is a developer and publisher of digital games on mobile and Web platforms. The company offers games, which include social casino games Jackpot Party Casino, Gold Fish Casino, Hot Shot Casino and Quick Hit Slots.
DouYu International Holdings Ltd. provides a game-centric live streaming platform. The company operates its platform on both PC and mobile apps. The company’s expected earnings growth rate for the current year is 88.2%. DouYu has a Zacks Rank #1.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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.
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Shopify, Ulta Beauty, Nintendo, SciPlay and DouYu International highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – April 23, 2020 – Zacks Equity Research Shares of Shopify (SHOP - Free Report) as the Bull of the Day, Ulta Beauty (ULTA - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Nintendo Co., Ltd. (NTDOY - Free Report) , SciPlay Corporation and DouYu International Holdings Ltd. (DOYU - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Shopify is the $68 billion disruptor in online marketplaces taking on Amazon and Ebay in the small business "etailer platform" market.
Just seven weeks ago, I was writing about SHOP as the Bear of the Day when shares were trading $500 on March 3. Here's what I wrote then...
And earnings estimates just plunged after the company revealed a big investment year ahead in their Q4 report delivered on February 12.
Since that reveal, the Zacks consensus for full-year 2020 EPS dropped over 75% from $0.89 to $0.21. Next year got clobbered 55% from $1.60 to just $0.72.
Analysts also found themselves having to adjust their ratings as well since the hyper-growth platform trades at 25 times sales.
Shopify was downgraded to Neutral from Outperform at Credit Suisse with analyst Brad Zelnick saying that despite another strong quarter from Shopify -- and his positive fundamental view on the company's long-term opportunity and belief in management's strategy and ability to execute -- he cut the shares on its "lofty valuation and embedded expectations."
Yet, price targets were raised dramatically across the board in February after the company call, and that's why shares soared from $500 to nearly $600 on Feb 12...
SunTrust: Hold $340 to $585
Baird: Outperform $465 to $590
Wedbush: Neutral $325 to $475
Wells Fargo: Overweight $400 to $600
KeyCorp: Overweight $485 to $575
Rosenblatt: Buy $481 to $630
UBS Group: Underperform $450
Credit Suisse: Neutral $450 to $575
Raymond James: Outperform $365 to $600
Canaccord Genuity: Buy $385 to $600
Royal Bank of Canada: Outperform $400 to $650
Investors wanting to get into Shopify (myself included) probably thought we were going to get our chance in the recent correction.
I wanted to get in on the Jan 9 gap fill near $420 but I was too slow on Friday.
Now I'll have to wait until SHOP is out of the Zacks Rank cellar.
(end of my March 3 notes on SHOP as the Bear of the Day)
SHOP shares fell over 35% after that but kept finding buyers under $340 during the market collapse the week of March 16th. A few weeks later on April 7, Raymond James analyst Brian Peterson downgraded SHOP to Market Perform.
Ten days later, the stock had soared over 50% from $390 to $590. So Peterson published a research note on 4/17 titled "Feedback on Our Downgrade Note (and Why It's Been Dead Wrong So Far)." In that note to clients, he explained what he and his team missed, courtesy of TheFly.com...
His rationale for downgrading the shares was the company's exposure to cyclical shifts in consumer spending, higher exposure to apparel, his view that estimate cuts had not been steep enough yet and the stock's premium valuation, but "what we seemingly missed in this dynamic is how quickly COVID-19 may push new merchants to the Shopify Platform," Peterson said. Despite traffic data that supports benefits for Shopify and "suggests that our call was wrong," Peterson concluded that he is "not sure that this is the right time for shares to be at all time highs." He maintains a Market Perform rating on Shopify shares.
Peterson also noted the nature of client feedback discussions...
"Our investor conversations post the downgrade mostly centered on relative exposure to categories like apparel, and how we should be thinking about GMV trends (note that our model is 19% below consensus for 2Q20)."
This week, as you probably know, SHOP has been making new all-time high closes above $600.
Wedbush put out a note this week titled "Traffic Surging During Coronavirus But Revenue Upside Also Priced In" and moved their PT down to $445.
So what's driving the enthusiasm for SHOP shares despite this analyst pessimism? Just a tweet, via a little blue bird. Here's how Wedbush characterized the message...
On Friday, Shopify CTO Jean-Michel Lemieux shared on Twitter that Shopify's platform is handling Black Friday level traffic on a daily basis during coronavirus. He also noted optimism about traffic growth, and that "it won't be long before traffic has doubled or more." This is a clear positive signal for Shopify. We've noted our view that ecommerce platforms and web builders will be net-beneficiaries in the long-term as consumer and business trends will pull forward both during and after the pandemic and this data certainly supports that Shopify is exceptionally well positioned to capitalize on that trend.
The Wedbush analysts went on to note that the traffic spike is not a direct correlation to revenue as it does not necessarily equate to spending and GMV. Plus, Shopify is giving extended free trials to non-Plus merchants and the company noted in its business update that merchants are heavily relying on discounting.
There is also the factor that Shopify's merchants largely represent consumer discretionary spend on items from categories like fashion, cosmetics, health and beauty.
Bottom line: Shopify remains a competitive force in e-commerce that offers a fantastic platform for small business unequaled by Amazon or Ebay. And their business will gain traction longer-term because of the current brick-and-mortar apocalypse in retail. But the valuation has run far ahead with the stock trading over 30X this year's projected sales of $2 billion. Look to be a buyer on the next dip under $500.
Bear of the Day:
Ulta Beauty is the $11 billion darling of high-end suburban strip malls with cosmetics, bodycare, styling and other salon and spa services unparalleled by any other retailer.
Since I chose Shopify as the Bull of the Day, I couldn't resist profiling the earnings decline in ULTA since the two could represent dueling stories in the quarantine-induced recession battleground.
As I noted in the SHOP story, Wedbush analysts pointed out a reason for caution on that stock: "There is also the factor that Shopify's merchants largely represent consumer discretionary spend on items from categories like fashion, cosmetics, health and beauty."
But SHOP's gain in that department may be ULTA's pain as the $68 billion e-commerce disruptor begins to eat some of the brick-n-mortar's lunch money, which is expected to total $7 billion on the top line this year, representing a 5.44% decline.
Of course, it's the downward earnings estimate revisions that have made ULTA a Zacks #5 Rank this month.
In the past 60 days, the current fiscal year 2021 (ends in January) saw consensus EPS projections drop a whopping 31.6% from $13.09 to $8.95, representing a 25% annual decline. Next year only dropped half as much from $14.34 to $12.05.
I made a quick video Wednesday morning highlighting why I think the stock market relief rally is on borrowed time, especially as led by a handful of stocks making up the strength...
Recession Discounted, or FAAMNG Holding Up the Market?
I could have included SHOP in the FAAMNG group -- Facebook, Apple, Amazon, Microsoft, Netflix and Alphabet -- that's holding up the market. Though it's not in the same class as those behemoths with giant revenues and cash flows, it will emerge from this crisis even stronger as the go-to e-tailing platform for many small companies and distributors.
And both SHOP and ULTA will tell us a lot overall, through their growth challenges, about this crisis and the road ahead.
As I write this on Wednesday evening, I saw that CNBC's Jim Cramer profiled Victoria's Secret as a microcosm of the terminal pain for shopping malls. Here were his key points...
“It’s not just the department store that’s dying. It’s the whole mall."
“We knew we didn’t need the department stores, but now the pandemic’s making us realize that maybe we may not need anything in the mall at all.”
“Only two kinds of retailers are working here: the ones that have enormous scale and sell essentials or the ones with fabulous digital businesses.”
ULTA may be one mall story that is most likely to adapt and come out stronger than others. And trading at only 1.6 times sales, it remains an incredible bargain vs SHOP at over 30X.
There will be a time soon to pick up shares of ULTA again soon under $175. The Zacks Rank will let you know.
Additional content:
Videogame Sales Hit 12-Year High: 3 Stocks to Buy
Videogame sales in the United States spiked in March, hitting its highest level in more than a decade. The surge was led by Nintendo Co., Ltd., which sold more than 50 million Switch gaming consoles.
Together, sales of gaming consoles Xbox One, PlayStation 4 and Nintendo Switch rose 63% from a year earlier to $461 million in March. This is a sign that the video gaming industry is likely to benefit from the coronavirus crisis.
The pandemic has forced millions of people into lockdown and quarantine. With nothing much to do locked inside their houses, most are either video streaming or playing video games.
Videogame Sales Boom
According to research firm NPD, videogame sales in the United States hit a 12-year high in March. Sales of gaming hardware, software and accessories in the United States surged 35% to $1.6 billion in March from a year earlier.
The growth is the highest since March 2008 , when sales had risen more than 52% to $1.8 billion, according to NDP. Nintendo’s Animal Cross: New Horizons, which was launched in March, topped the list of best-selling games, outselling PlayStation 4 and Xbox One in console sales.
According to Sellics, which offers technology for vendors on Amazon Marketplace, Switch sales on the ecommerce site have increased 2,979% since the start of 2020 in North America. Switch was also sold out at other major retailers.
Coronavirus Helps Videogame Industry
Governments across the world are shutting down countries and implementing stay-at-home orders. This has seen certain businesses, including gaming, online streaming and video conferencing, witnessing a boost in user engagement. According to Sellics, videogame sales have jumped around 500% in the United States on Amazon so far this year.
Our Choices
Videogame sales are expected to witness growth in the near term with stay-at-home orders and lockdown likely to remain in place for some time now. Given this scenario it is prudent to say that these five stocks are likely to rally in the near future.
Nintendo Co. is a worldwide leader in the creation of interactive entertainment. It manufactures and markets hardware and software for its popular home video game systems, including Nintendo 64 and Game Boy.
The company’s expected earnings growth rate for the current year is 11.7%. The Zacks Consensus Estimate for the current year earnings has improved 9.4% over the past 30 days. Nintendo has a Zacks Rank #2.
SciPlay Corporation is a developer and publisher of digital games on mobile and Web platforms. The company offers games, which include social casino games Jackpot Party Casino, Gold Fish Casino, Hot Shot Casino and Quick Hit Slots.
The company’s expected earnings growth rate for the current year is 32%. The company’s shares have gained 22.7% in the past 30 days. SciPlay has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DouYu International Holdings Ltd. provides a game-centric live streaming platform. The company operates its platform on both PC and mobile apps. The company’s expected earnings growth rate for the current year is 88.2%. DouYu has a Zacks Rank #1.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
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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.