Not much is going right in the retail world these days. The sector is facing intense threats from online competition, while consumers appear to be shifting at least some of their spending to other areas.
Right now, the sector is ranked dead last in terms of the Zacks Sector Rank, and only five of the sector’s nearly 20 industries have a rank that is even in the top half. This suggests that there are numerous companies that investors should avoid in this sector right now, and one great example of this trend as of late is Cabela’s (CAB).
CAB in Focus
Cabela’s was a market darling years ago, but the company has been struggling for quite some time now and is having difficulty in recreating the magic of the past. Shares are actually down about 20% in the year-to-date time frame, which is especially poor when you consider that the S&P 500 has added nearly seven percent in the same period.
Part of the reason for this sluggishness is Cabela’s recent weakness in earnings season. The company is riding a streak of three straight misses, including two double-digit misses in a row, and the outlook isn’t great either.
That is probably why analysts have been racing to slash their estimates for CAB stock. We haven’t seen any estimates in our consensus go higher for either the current quarter or the current year in the past two months, while the most accurate estimates are below the consensus too.
For the current year, the consensus estimate has fallen by about 10.6% in just the past two months, while we are seeing similar declines for the next year time frame too. With numbers like this and a weak overall sector, it shouldn’t be a surprise that Cabela’s is also poorly ranked, with a Zacks Rank #5 (Strong Sell) for this company.
Hope on the Horizon?
And while investors were clearly hoping for Bass Pro Shops to ride to the rescue and purchase Cabela’s for $4.5 billion (initially $5.5 billion), that definitely seems in doubt thanks to an FTC review since the combined company would control about 20% of the U.S. sporting goods market .
But even more than that, CAB is trading at a valuation below $3.3 billion these days. Why would Bass pay a $1 billion premium—roughly 40% over the current price-- for a company growing at a slower pace than the industry and with negative cash flow growth too? It doesn’t make much sense, and it suggests that the one saving grace for CAB investors may not be that great of an opportunity after all.
Better Choice in Retail
If investors are dead-set on the retail sector, then it might be a good idea to look to a more specialized name in the tech sector. In particular, PC Connection (CNXN) stands out thanks to its impressive VGM score of ‘A’, as well as its Zacks Rank #2 (Buy).
These factor, along with rising earnings estimates and a top 20% industry rank, make CNXN a potentially better pick for investors in the retail world, and particularly when comparing it to Cabela’s right now.Long-Term Buys You Won't See in the News
To end on a positive note, you're invited to see the best long-term trades Zacks Research is uncovering today. These moves have double and triple-digit profit potential and are rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Click here >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Not much is going right in the retail world these days. The sector is facing intense threats from online competition, while consumers appear to be shifting at least some of their spending to other areas.
Right now, the sector is ranked dead last in terms of the Zacks Sector Rank, and only five of the sector’s nearly 20 industries have a rank that is even in the top half. This suggests that there are numerous companies that investors should avoid in this sector right now, and one great example of this trend as of late is Cabela’s (CAB).
CAB in Focus
Cabela’s was a market darling years ago, but the company has been struggling for quite some time now and is having difficulty in recreating the magic of the past. Shares are actually down about 20% in the year-to-date time frame, which is especially poor when you consider that the S&P 500 has added nearly seven percent in the same period.
Part of the reason for this sluggishness is Cabela’s recent weakness in earnings season. The company is riding a streak of three straight misses, including two double-digit misses in a row, and the outlook isn’t great either.
That is probably why analysts have been racing to slash their estimates for CAB stock. We haven’t seen any estimates in our consensus go higher for either the current quarter or the current year in the past two months, while the most accurate estimates are below the consensus too.
For the current year, the consensus estimate has fallen by about 10.6% in just the past two months, while we are seeing similar declines for the next year time frame too. With numbers like this and a weak overall sector, it shouldn’t be a surprise that Cabela’s is also poorly ranked, with a Zacks Rank #5 (Strong Sell) for this company.
Hope on the Horizon?
And while investors were clearly hoping for Bass Pro Shops to ride to the rescue and purchase Cabela’s for $4.5 billion (initially $5.5 billion), that definitely seems in doubt thanks to an FTC review since the combined company would control about 20% of the U.S. sporting goods market .
But even more than that, CAB is trading at a valuation below $3.3 billion these days. Why would Bass pay a $1 billion premium—roughly 40% over the current price-- for a company growing at a slower pace than the industry and with negative cash flow growth too? It doesn’t make much sense, and it suggests that the one saving grace for CAB investors may not be that great of an opportunity after all.
Better Choice in Retail
If investors are dead-set on the retail sector, then it might be a good idea to look to a more specialized name in the tech sector. In particular, PC Connection (CNXN) stands out thanks to its impressive VGM score of ‘A’, as well as its Zacks Rank #2 (Buy).
These factor, along with rising earnings estimates and a top 20% industry rank, make CNXN a potentially better pick for investors in the retail world, and particularly when comparing it to Cabela’s right now.
Long-Term Buys You Won't See in the News
To end on a positive note, you're invited to see the best long-term trades Zacks Research is uncovering today. These moves have double and triple-digit profit potential and are rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Click here >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Get the latest research report on CNXN - FREE