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Wayfair is a Zacks Rank #1 (Strong Buy) that is a leading online seller of home good products, consisting of furniture and home décor. The company is well positioned in the current lockdown environment as consumers get tired of their homes and look to remodel. Since most retail stores are closed, Wayfair is seeing more traffic and more customers.
The COVID Effect
When investors panicked in March, Wayfairs stock plunged to $22, down 80% from it January high of $112. However, the stock has seen a massive rally since, seeing a 500% bounce off the lows.
How is this bounce possible?
In March, it was full panic mode and the selling was relentless. But when investors started realizing that some companies might benefit from the stay at home environment, Wayfair shot to the top of the list. With most retail competition closed for the short-term, Wayfair has thrived catering to people that have time to remodel homes.
The company announced in early April that they will meet or exceed their Q1 guidance due to revenue growth. Here is a statement from the company:
Wayfair continues to see strong demand across most home goods categories in both its US and International segments. After entering the month of March with gross revenue growing at slightly below 20% year-over-year, consistent with January and February growth rates, Wayfair saw this rate of growth more than double towards the end of March. This run-rate has continued into early April.
The stock had already bounced to $50 before this positive news. However, the guide for Q1 accelerated the move and the stock shot up to $60 that day and has doubled from there since.
The question going forward is if all the news is priced in and if there is more room higher.
Estimates Rising
Wayfair has seen the momentum and analysts are jumping on board. Over the last 30 days, next quarters estimates have risen by 26%, from -$2.10 to -$1.55. For next year, we see another big jump over that same time period. FY 2021 estimates have gone from -$8.33 to -$6.81, a rise of 18%.
While the stock has largely reflected these numbers, if the momentum continues the stock will too.
The Technical Take
Wayfair was left for dead in early March. However, the bounce back has the bulls fully in control. The extreme move lower and subsequent move higher gives Fibonacci targets near all-time highs at $170. The stock is volatile and has seen its fair share of ups and downs, but investors should be looking for those highs and buy the dips.
Its not fun to chase stocks higher in the midst of a pandemic, so let’s look at potential buy spots where investors can enter. The 200-day moving average to just under $100, so buy-the dippers would likely want to get in there. However, if the market has another pullback a more patient investor should look for $80 (halfway back from lows) and the 50-day moving average under $70.
In Summary
The stay-at-home environment has hurt a lot of the companies we are familiar with. However, there is a new breed that is catering to our needs as we get through the lockdowns. While a lot of these stocks have already made their moves higher, there is room for them to continue. Investors should take the opportunity in broad market weakness and sniff out stocks like Wayfair when they pullback.
Planet Fitnessis a Zacks Rank #5 (Strong Sell) that is one of the leading franchisors and operators of fitness centers. The stock fell over 70% after all the gyms in the country were closed due to COVID-19. However, with the potential for a reopen of gyms and the economy it bounced significantly, moving up over 170%.
Now that the run higher has stalled at technical resistance, it looks like the stock could fall again.
Overview of Company
The Hampton, New Hampshire company has over 14 million members and 2000 stores in 50 states. PLNT is valued over $5 Billion and has a Forward PE of 52. This high valuation gives the stock a Zacks Style Score of “F” in value.
Gyms Closed
The big issue the company faces is that its business is closed due to COVID-19. This obviously is hurting the company as it can’t collect the revenue from members that are typically going to the gym. The company has frozen all memberships in April, which means the quarter will essentially have no member revenue if they don’t open soon.
While there has been momentum for economies to open, gyms are tricky in a COVID environment. Investors should question whether people will feel comfortable going back to a place where sweat droplets are essentially everywhere.
Technical Resistance
The March lows brought PLNT down to $23.77 from $88.77 the month before. Those lows were a great buy, as the stock has rallied all the way to the mid-$60s in the recent weeks. However, the move has stalled at a 61.8% Fibonacci retracement, which happened to be lined up with the 200-day moving average.
The stock could find support around the $50 level, but a break of the recent momentum could bring the April lows of $40 into play.
Estimates
The big issue with the company is they won’t be making any money early in Q2. While some investors are looking past the upcoming quarter, there will be pressure on the stock the longer the shutdowns continue. Looking at the estimates, we see evidence of this already.
Analyst have cut estimates for all time frames. While the current quarter doesn’t look terrible, next quarter looks disastrous. Over the last 30 days, we have seen a 88% drop in estimates, which fell from $0.32 to $0.04. For the current year, estimates have fallen to $1.16 from $1.51, a drop of 23%. While there could be a rebound the following year, this won’t help the stock if gyms stay shutdown much longer.
Earnings on May 5th
Investors are not expecting a good quarter, but the outlook is what really matters. The company will likely not be able to give guidance, but might be able to comment on how many gyms will be able to open over the next few months. This will give analysts and investors and how bad things will get. With the stock up so much off it lows, investors should get cautious.
In Summary
Planet Fitness was a great buy when people panicked in March. However, the stock has almost doubled and its business remains closed. Moreover, people are starting to get comfortable with their Pelotons, which could be an issue for gyms in the future. The move higher in price should be questioned by investors ahead of earnings next week.
Additional content:
What's in the Cards for Fox Corp. (FOXA - Free Report) Earnings?
Fox Corporationis set to report third-quarter fiscal 2020 results on May 6.
The Zacks Consensus Estimate for earnings in the fiscal third quarter has moved a penny south to 72 cents per share over the past 30 days, implying a 5.3% decline from the figure reported in the year-ago quarter.
Moreover, the consensus mark for revenues is currently pegged at $3.36 billion, suggesting 21.9% growth from the figure reported in the year-ago quarter.
Notably, Fox’s stellar surprise history shows estimate beats in all the trailing four quarters, the average being 98.1%.
Let’s see how things have shaped up for the upcoming announcement.
Factors to Consider
Fox’s third-quarter fiscal 2020 results are expected to reflect the negative impact of the coronavirus. Lower ad demand and spending is anticipated to have hurt advertising revenues, which accounts for more than 50% of the company’s topline.
Moreover, cancellation of major sporting events globally is expected to have dented advertising revenues, partially offset by increased political-ad spending in the to-be-reported quarter.
Further, Fox’s investments in expanding its network are driving the ratings, a trend that most likely continued in the to-be-reported quarter. Additionally, portfolio strength across entertainment and news content is expected to have aided viewership.
In fact, the first quarter was solid for FOX News Digital. Average monthly multiplatform unique visitors were 119.8 million, total multiplatform views were 5.7 billion and total multiplatform minutes were 13.2 billion, per Comscore data, cited by Fox.
Moreover, the network saw double-digit increases in March on a year-over-year basis including multiplatform views (up 33%), multiplatform unique visitors (up 29%) and multiplatform minutes (up 26%). The network’s comprehensive coverage of coronavirus propelled traffic and engagement to all-time highs.
Key Q3 Developments
On Mar 2, Fox announced the completion of its previously-announced purchases of Seattle stations KCPQ-TV FOX 13 and KZJO-TV MyNetworkTV 22 as well as Milwaukee station WITI FOX 6 from Nexstar Media Group.
On Feb 14, Fox announced a multi-year agreement with Cox Media Group that renews FOX Network affiliations for four stations operated by CMG including WFXT in Boston, MA; WHBQ in Memphis, TN: WFOX in Jacksonville, FL and KOKI in Tulsa, OK.
What Our Model Says
Per the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the care here.
Fox has an Earnings ESP of +0.83% and a Zacks Rank #4. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Here are some companies worth considering as our model shows that these have the right combination of elements to beat on earnings this reporting cycle:
Shopify has an Earnings ESP of +5.44% and is #2 Ranked.
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 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.
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 http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Wayfair, Planet Fitness, Fox, Etsy and Shopify as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – May 4, 2020 – Zacks Equity Research highlights Wayfair (W - Free Report) as the Bull of the Day and Planet Fitness (PLNT - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Fox Corporation (FOXA - Free Report) , Etsy (ETSY - Free Report) and Shopify (SHOP - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Wayfair is a Zacks Rank #1 (Strong Buy) that is a leading online seller of home good products, consisting of furniture and home décor. The company is well positioned in the current lockdown environment as consumers get tired of their homes and look to remodel. Since most retail stores are closed, Wayfair is seeing more traffic and more customers.
The COVID Effect
When investors panicked in March, Wayfairs stock plunged to $22, down 80% from it January high of $112. However, the stock has seen a massive rally since, seeing a 500% bounce off the lows.
How is this bounce possible?
In March, it was full panic mode and the selling was relentless. But when investors started realizing that some companies might benefit from the stay at home environment, Wayfair shot to the top of the list. With most retail competition closed for the short-term, Wayfair has thrived catering to people that have time to remodel homes.
The company announced in early April that they will meet or exceed their Q1 guidance due to revenue growth. Here is a statement from the company:
Wayfair continues to see strong demand across most home goods categories in both its US and International segments. After entering the month of March with gross revenue growing at slightly below 20% year-over-year, consistent with January and February growth rates, Wayfair saw this rate of growth more than double towards the end of March. This run-rate has continued into early April.
The stock had already bounced to $50 before this positive news. However, the guide for Q1 accelerated the move and the stock shot up to $60 that day and has doubled from there since.
The question going forward is if all the news is priced in and if there is more room higher.
Estimates Rising
Wayfair has seen the momentum and analysts are jumping on board. Over the last 30 days, next quarters estimates have risen by 26%, from -$2.10 to -$1.55. For next year, we see another big jump over that same time period. FY 2021 estimates have gone from -$8.33 to -$6.81, a rise of 18%.
While the stock has largely reflected these numbers, if the momentum continues the stock will too.
The Technical Take
Wayfair was left for dead in early March. However, the bounce back has the bulls fully in control. The extreme move lower and subsequent move higher gives Fibonacci targets near all-time highs at $170. The stock is volatile and has seen its fair share of ups and downs, but investors should be looking for those highs and buy the dips.
Its not fun to chase stocks higher in the midst of a pandemic, so let’s look at potential buy spots where investors can enter. The 200-day moving average to just under $100, so buy-the dippers would likely want to get in there. However, if the market has another pullback a more patient investor should look for $80 (halfway back from lows) and the 50-day moving average under $70.
In Summary
The stay-at-home environment has hurt a lot of the companies we are familiar with. However, there is a new breed that is catering to our needs as we get through the lockdowns. While a lot of these stocks have already made their moves higher, there is room for them to continue. Investors should take the opportunity in broad market weakness and sniff out stocks like Wayfair when they pullback.
Bear of the Day:
Planet Fitnessis a Zacks Rank #5 (Strong Sell) that is one of the leading franchisors and operators of fitness centers. The stock fell over 70% after all the gyms in the country were closed due to COVID-19. However, with the potential for a reopen of gyms and the economy it bounced significantly, moving up over 170%.
Now that the run higher has stalled at technical resistance, it looks like the stock could fall again.
Overview of Company
The Hampton, New Hampshire company has over 14 million members and 2000 stores in 50 states. PLNT is valued over $5 Billion and has a Forward PE of 52. This high valuation gives the stock a Zacks Style Score of “F” in value.
Gyms Closed
The big issue the company faces is that its business is closed due to COVID-19. This obviously is hurting the company as it can’t collect the revenue from members that are typically going to the gym. The company has frozen all memberships in April, which means the quarter will essentially have no member revenue if they don’t open soon.
While there has been momentum for economies to open, gyms are tricky in a COVID environment. Investors should question whether people will feel comfortable going back to a place where sweat droplets are essentially everywhere.
Technical Resistance
The March lows brought PLNT down to $23.77 from $88.77 the month before. Those lows were a great buy, as the stock has rallied all the way to the mid-$60s in the recent weeks. However, the move has stalled at a 61.8% Fibonacci retracement, which happened to be lined up with the 200-day moving average.
The stock could find support around the $50 level, but a break of the recent momentum could bring the April lows of $40 into play.
Estimates
The big issue with the company is they won’t be making any money early in Q2. While some investors are looking past the upcoming quarter, there will be pressure on the stock the longer the shutdowns continue. Looking at the estimates, we see evidence of this already.
Analyst have cut estimates for all time frames. While the current quarter doesn’t look terrible, next quarter looks disastrous. Over the last 30 days, we have seen a 88% drop in estimates, which fell from $0.32 to $0.04. For the current year, estimates have fallen to $1.16 from $1.51, a drop of 23%. While there could be a rebound the following year, this won’t help the stock if gyms stay shutdown much longer.
Earnings on May 5th
Investors are not expecting a good quarter, but the outlook is what really matters. The company will likely not be able to give guidance, but might be able to comment on how many gyms will be able to open over the next few months. This will give analysts and investors and how bad things will get. With the stock up so much off it lows, investors should get cautious.
In Summary
Planet Fitness was a great buy when people panicked in March. However, the stock has almost doubled and its business remains closed. Moreover, people are starting to get comfortable with their Pelotons, which could be an issue for gyms in the future. The move higher in price should be questioned by investors ahead of earnings next week.
Additional content:
What's in the Cards for Fox Corp. (FOXA - Free Report) Earnings?
Fox Corporationis set to report third-quarter fiscal 2020 results on May 6.
The Zacks Consensus Estimate for earnings in the fiscal third quarter has moved a penny south to 72 cents per share over the past 30 days, implying a 5.3% decline from the figure reported in the year-ago quarter.
Moreover, the consensus mark for revenues is currently pegged at $3.36 billion, suggesting 21.9% growth from the figure reported in the year-ago quarter.
Notably, Fox’s stellar surprise history shows estimate beats in all the trailing four quarters, the average being 98.1%.
Let’s see how things have shaped up for the upcoming announcement.
Factors to Consider
Fox’s third-quarter fiscal 2020 results are expected to reflect the negative impact of the coronavirus. Lower ad demand and spending is anticipated to have hurt advertising revenues, which accounts for more than 50% of the company’s topline.
Moreover, cancellation of major sporting events globally is expected to have dented advertising revenues, partially offset by increased political-ad spending in the to-be-reported quarter.
Further, Fox’s investments in expanding its network are driving the ratings, a trend that most likely continued in the to-be-reported quarter. Additionally, portfolio strength across entertainment and news content is expected to have aided viewership.
In fact, the first quarter was solid for FOX News Digital. Average monthly multiplatform unique visitors were 119.8 million, total multiplatform views were 5.7 billion and total multiplatform minutes were 13.2 billion, per Comscore data, cited by Fox.
Moreover, the network saw double-digit increases in March on a year-over-year basis including multiplatform views (up 33%), multiplatform unique visitors (up 29%) and multiplatform minutes (up 26%). The network’s comprehensive coverage of coronavirus propelled traffic and engagement to all-time highs.
Key Q3 Developments
On Mar 2, Fox announced the completion of its previously-announced purchases of Seattle stations KCPQ-TV FOX 13 and KZJO-TV MyNetworkTV 22 as well as Milwaukee station WITI FOX 6 from Nexstar Media Group.
On Feb 14, Fox announced a multi-year agreement with Cox Media Group that renews FOX Network affiliations for four stations operated by CMG including WFXT in Boston, MA; WHBQ in Memphis, TN: WFOX in Jacksonville, FL and KOKI in Tulsa, OK.
What Our Model Says
Per the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the care here.
Fox has an Earnings ESP of +0.83% and a Zacks Rank #4. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Here are some companies worth considering as our model shows that these have the right combination of elements to beat on earnings this reporting cycle:
Etsy has an Earnings ESP of +8.17% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shopify has an Earnings ESP of +5.44% and is #2 Ranked.
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 http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.