For Immediate Release
Chicago, IL – August 17, 2020 – Zacks Equity Research Shares of ANGI Homeservices Inc. (ANGI - Free Report) as the Bull of the Day, The Children's Place, Inc. (PLCE - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis onHanesbrands Inc. (HBI - Free Report) , Crocs, Inc. (CROX - Free Report) and Activision Blizzard, Inc. (ATVI - Free Report) .
Here is a synopsis of all five stocks:
The world economy is shifting online with the pandemic accelerating global digitalization by 5 years in just 5 months. Angi Homeservices is well-positioned for the new normal, with its leading online service offerings unmatched in its niche space.
This enterprise "is creating the world's largest digital marketplace for home services, connecting millions of homeowners across the globe with home service professionals." Analysts have been increasingly optimistic about the company's outlook pushing up EPS estimates.
Angi Homeservices was created when Angie's List and HomeAdvisor joined forces through a merger in 2017. Angie's List and HomeAdvisor provide similar functionality with both providing services from a clogged drain to home remodeling. When I went through each site, they actually asked me identical questions before getting an instant (initial) quote on HomeAdvisor and a suggested & reviewed list of contractors to choose from on Angie's List.
Since the merger, this digitally conceived enterprise has broadened its portfolio of online service offerings with Handy in the fall of 2018 and Fixd Repair at the beginning of 2019. Both of these companies are home services-oriented and have extended Angi's synergy fueled customer reach.
This business is built on innovation and is continuously driven by fresh new ideas through acquisitions and organic additions. The company has a bright future in the post-pandemic world as society satisfies its home services needs through online platforms. Angi's leading positioning in this segment makes an attractive investment for the new normal.
Performance & Financials
ANGI has performed admirably throughout the COVID-crisis trade this year, having surged almost 50% year-to-date and roughly 200% since its April lows.
The stock is trading at a reason forward price-to-sales of below 4x, half the valuation of its internet service cohorts. ANGI is over 43% off its 2018 highs, and with accelerating double-digit percentage growth expected for the next couple years, this is an excellent opportunity to jump into this COVID-19 winner.
The enterprise is in the midst of closing a $500 million bond offering for 5-year notes at a rate of 3.875% (sold at face value), which will provide Angi Homeservices with liquidity for general operations and potential acquisition purposes.
The company is slowly but surely buying up their entire niche space. Its recent synergy driving purchases gives me confidence that Angi's savvy management team will discover some lucrative opportunities amid these highly uncertain market conditions.
The enterprise's businesses are snowballing domestically, and its European segment just turned an operational profit for the first time in its Q2 quarterly report, August 10th. Angi demonstrated a 9% year-over-year topline expansion, which was a marginal deceleration from prior quarters, but the company was able to appreciate its operating profits by 55% and profits by 82%, massively expanding its margins.
Angi Homeservice's ability to continue growing its topline and make the proper cost-cutting measures to produce this level of margin widening amid the worst economic recession in over a decade is a signal that this business could explode when normal economic conditions resume.
Technical Look At ANGI
Below is a TradingView chart that I drew from ANGI's late 2018 highs to its current price level. These shares bounced off a 61.8% Fibonacci retracement level in early August, and now it's sitting at a healthy support level, which I anticipate this stock should bounce off (both levels circled in blue).
ANGI is also sitting at oversold levels on the stochastic oscillator and coming towards that level on the RSI, which I circled in red. This, combined with the support level these shares are sitting at, should provide these shares with an excellent springboard from their current price level.
The pandemic has accelerated society's reliance on digital platforms by years in only a few months. The world is becoming conditioned to utilize online services, and Angi Homeservices portfolio of service offerings is well-positioned to take full advantage of this COVID fueled economic shift, which is already filling its sails with a robust tailwind.
11 out of 12 analysts are calling this stock a buy today. Despite some potential short-term volatility, I think that ANGI could provide your digitally shifting portfolio with robust long-term returns.
Children's Place is yet another product of the quickly escalating retail apocalypse. The COVID pandemic has been devastating to retail businesses that rely on brick-and-mortar foot-traffic, and PLCE is no exception. PLCE shares have run up unjustly these last few months, and I would pull my money out while I still had the chance. Analysts have been dropping their expectations for PLCE for some time, and this stock is now sitting at a Zacks Rank #5 (Strong Sell).
The business is getting hammered by the COVID pandemic, with sales down 38% in PLCE's Q1 (ending May 2nd). Earnings flipped to a massive loss of ($28.6) million (on an adjusted basis) and an EPS of ($1.96), which represents the company's worst quarter in over a decade.
Children's Place liquidity is dwindling with a disappearing line of credit that leaves the company with only about $100 million left in liquidity and currently liabilities up to $759 million. I am worried that if the business is unable to open its stores to full capacity in the next 6-months or so, it could be looking at a bankruptcy restructuring or worse.
The Retail Apocalypse & Recent Acquisition
The company has closed over 200 stores since 2013, with 42 store closures in 2018 and another 45 closures in 2019. The company is en route to close about 1/3 of its stores in less than 10 years. Management will not give up despite the obvious systemic issues in its business model.
Children's Place just acquired children's brand Gymboree for $76 million (this acquisition also included Crazy 8 brand) after the company filed for its second bankruptcy in less than two years. Gymboree was forced to close down ¾ fourths of its stores following its January bankruptcy as the brand goes seemingly obsolete. Children's Place is attempting to revitalize the company through rebranding, which I expect will take a substantial amount of capital and may not be successful.
The acquisition brought on an extensive amount of debt to the firm's balance sheet bringing its total debt-to-capital up to 72%. This is a concerning level for me to see, especially when the firm is experiencing a declining top and bottom-line. If consumer discretionary spending dries up, this combined company will find itself in bankruptcy court pretty quickly.
Children's Place is hoping to rejuvenate Gymboree with its 200 remaining stores and the relaunch of Gymboree.com in 2020. This whole venture is a massive risk, and I personally don't see it working out.
Children's Place appears to have systemic issues that this new acquisition of an obsolete brand will not improve. I think that the purchase of Gymboree marks the beginning of the end for this enterprise. I would stay away from PLCE, especially after the unjustified share price run-up these past few months.
3 Factors that Makes Hanesbrands an Attractive Pick
Hanesbrands is gaining from robust growth efforts, which have been boosting investors’ optimism. Notably, shares of the company have surged 87.8% in the past three months compared with the industry’s growth of 39.4%. Also, the stock has comfortably outperformed the Zacks Consumer Discretionary sector’s rise of 20.1% in the same time frame.
Moreover, analysts look optimistic regarding the stock’s performance. Evidently, the Zacks Consensus Estimate for 2020 earnings has improved significantly to $1.47 per share in the past 30 days.
Let’s discuss the factors that are likely to keep driving the company’s growth.
Protective Gear Business: A Key Driver
In an attempt to stay afloat amid the coronavirus pandemic, Hanesbrands developed a product line of personal protective garments. The newly-floated business resonates well with the present environment, commercial and consumer demand. Notably, the company has sold about $752 million of personal-protection garments worldwide during the second quarter of 2020, which is well ahead of expectations. As part of the protective garment sales in the second quarter, it delivered more than 450 million cloth face coverings and above 20 million medical gowns to the U.S. government.
Moreover, the company is selling face masks to customers globally under its brand names, including Hanes, Champion, Bonds and Dim. Going ahead, Hanesbrands expects to sell more than $150 million of protective garments in the second half of 2020, mostly in the third quarter. Clearly, the newly-floated protective garments business signifies an ongoing growth opportunity.
Strength in E-commerce Business
As consumers are increasingly resorting to online shopping, Hanesbrands continues to focus on developing its online sales. In second-quarter 2020, the company registered global online sales growth of more than 70% via the e-commerce websites, retailer websites, large internet pure-plays and business-to-business customers on a rebased year-over-year comparison. Hanesbrands is focused on making incremental investments in its online business to keep pace with consumers’ evolving shopping patterns.
Project Booster Bodes Well
Hanesbrands launched a multi-year program in first-quarter 2017 to drive investment for growth, minimize costs as well as increase cash flow. This program, which is well-positioned for the next five years, aims to boost the company’s Sell More, Spend Less, Generate Cash strategy for additional gains, mainly from the global commercial and supply chain scale through acquisitions. Furthermore, the Project Booster cost savings along with other cash flow drivers like synergies from buyouts and diversified revenues bode well.
We believe that robust cost savings along with the aforementioned upsides are likely to help this Zacks Rank #1 (Strong Buy) stock to stay in investors’ good books.
Top 2 Consumer Discretionary Picks
Crocs which sports a Zacks Rank #1, has a long-term earnings growth rate of 15%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Activision Blizzard, carrying a Zacks Rank #2 (Buy), has long-term earnings growth rate of 17.3%.
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