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FedEx, Chico's, DraftKings and Paya as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – December 29, 2020 – Zacks Equity Research highlights FedEx (FDX - Free Report) as the Bull of the Day and Chico’s as the Bear of the Day. In addition, Zacks Equity Research provides analysis on DraftKings (DKNG - Free Report) and Paya Holdings Inc. .
Global digitalization has accelerated what would have taken years in a matter of months during 2020’s COVID crisis. The perfect storm has been created for online retailers and their respective delivery services as society is conditioned to function entirely remotely. FedEx has considerably benefited from the COVID-crisis, with its growth being pulled forward by years in just the past 2 quarters. Analysts have been increasingly optimistic about this stock, raising short and long-term EPS estimates and propelling FDX into a Zacks Rank #1 (Strong Buy).
FedEx is a global enterprise with massive expansionary opportunities as businesses go online. Small-and-medium-sized companies are looking for a trusted and fast partner for their product distribution. FedEx Ground is faster to more locations than UPS Ground. FedEx also operates the most extensive air fleet in the world and is globally renowned for its speed and efficiency.
FDX has far outperformed its duopoly cohort UPS in this crazy year, driving up over 73% year-to-date compared with UPS’s 47% share price appreciation. Even with this outperformance, FDX is still trading at a relative discount to UPS, with a forward P/E of 15x compared to UPS’s over 20x P/E. Granted, UPS has an over 2% dividend compared to FDX’s 1% yield, but FedEx has a much more exciting growth outlay.
FedEx operates the largest express delivery service globally (aka FedEx Express), and the need for rapid delivery is going to drive demand for FedEx’s best-in-class delivery services.
Recent Developments
FedEx cut ties with e-commerce giant Amazon in 2019, saying that the business wasn’t lucrative and only made up 1% of the company’s total business. I believe that the implications were much more extensive than 1%. Now FedEx CEO Fredrick Smith is framing the e-commerce behemoth as a threat to its business.
Amazon currently makes up 23.1% of total online retail revenue this past quarter, a figure that has dropped amid the pandemic as many retailers of all shapes and sizes race to get their operations online, according to analytics done by Digital Commerce 360.
FedEx has been acquiring synergy-driving enterprises over the past few years to expand its operations, and further engrain its business in the exploding digital commerce space. The most notable acquisition was the purchase of TNT Express in 2016, which significantly expanded the business’s European exposure. This acquisition initially weighed heavy on margins, but it is finally beginning to produce growth with the COVID tailwind and continuous integration.
Its most recent acquisition was made earlier this month for ShopRunner, “the e-commerce platform that directly connects brands and merchants with online shoppers.” According to FedEx’s related press release, “ShopRunner connects more than 100 brands and merchants to millions of consumers and offers a seamless shopping experience from inspiration through delivery.”
Financials
FDX has healthy-looking financials with more than $8.3 billion in cash & equivalents, swelling free-cash-flows, which topped $1 billion in each of the past two quarters, and a debt-to-total capital of 53%. The company has an enormous amount of financial flexibility for organic growth projects and synergy-driving acquisitions.
FDX has pulled back from its $305+ all-time high, which it hit earlier this month, as investors begin taking some profits from this clear COVID winner. Today looks like an excellent time to jump into this growth-oriented delivery service. 16 out of 21 analysts are calling FDX a buy with no sell ratings and an average price target of $307 a share, which would represent an over 15% upside from where it is trading today.
Final Thoughts
FedEx has some strong tailwinds going into 2021, including continued growth opportunities from TNT Express and its synergy-driving integration, the e-commerce explosion, as well as a resurgence in B2B operations as the economy comes back to normality. The world has been conditioned to exist remotely in the new normal, and FedEx’s best-in-class delivery operations position it to boom in the Roaring 20s.
The retail apocalypse is exploding amid this global pandemic, and no brick-and-mortar business is safe. Chico’s is one such business that has not been immune to the COVID driven economic downturn. CHS has lost 85% of its value in the past 5 years, and it continues to disappoint investors with an over 55% breakdown so far this year. Sell-side analysts are becoming more pessimistic about this stock and continue to lower expectations pushing this stock down to a Zacks Rank #5 (Strong Sell).
The Business
Chico’s is a women’s fashion brand that began out of Sanibel, Florida 36 years ago. The company operates three separate retailers, branded Chico’s, White House Black Market, and Soma.
The peak of this retailer’s performance was back in 2014 but has since fallen prey to the changing digital commerce landscape. Amazon and the other large online retailers have left less versatile firms like Chico’s in the dust. Chico’s operated 1,547 stores in 2014 and has since closed 129 stores and expects to close another 250 over the next three years.
This once women’s fashion icon’s inability to adapt to the digitalizing world has led to a sales decline in the past 19 out of 20 quarters and shareholders have suffered. Chico’s revenue decline is expected to continue in the years to come.
Chico’s bottom line has flipped negative, and its losses are accelerating seemingly every quarter. The business is quickly running out money, and this pandemic may be the straw that broke the camel’s back for Chico’s.
The best thing that could happen to Chico’s at this point is an acquisition. Otherwise, I see this archaic enterprise fizzling into bankruptcy, and that is what investors & traders have
CHS is soon to be a penny stock trading at $1.50. This low share price causes accentuated volatility, adding more risk to any investor holding these shares.
Take Away
The retail apocalypse is real, and the COVID-crisis is pushing brick-and-mortar retailers that haven’t adapted to the evolving consumer out of the market. Chico’s is just another teetering retail domino getting ready to fall. There are significant systemic issues with this company, and I would not put any position on this stock at this time.
Additional content:
2020 Has Been the Year of the SPAC IPO: Here Are the 4 Most Prominent
The year 2020 has witnessed several trend reversals due to the pandemic. Along with the change in the field of work culture and lifestyle, a notable shift is palpable in the investment world. For example, a major change noted in the IPO and M&A field is the rise of Black Check or Special Purchase Acquisition Company (SPAC).
What Are SPACs or Blank Check Companies?
Per the U.S. Securities and Exchange Commission, a blank check or Special Purchase Acquisition Company (SPAC) is a “development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, other entity, or person. These companies typically involve speculative investments and often fall within the SEC’s definition of penny stocks or are considered microcap stocks.”
2020: A Breakout Year for SPAC IPOs
In 2020, SPACs make up most of the growth in the U.S. IPO market compared with the year-ago level.So far this year, SPACs have raised $79.87 billion in gross proceeds from 237 counts, surpassing the record $13.6 billion raised in 2019 (raised from 59 IPOs). The average IPO size was $337 million.
The 462% year-over-year jump in proceeds raised by SPACs this year outperformed the traditional IPOs, which have been raised $67 billion year-to-date, as quoted on Business Insider. In 2007, the last peak of SPAC IPO volumes, SPACs made up about 14% of the IPO market versus about 50% of the market share in 2020. This validates the SPACs’ booming prospects.
Defiance ETFs noted that the COVID-19 situation has made the Blank Check route more appealing for going public as virtual road shows are less effective. The route is also less complicated and pricey. The craze for SPAC IPO increased over summer, with more than one new SPAC IPO per day since July, Goldman highlighted, as quoted on Business Insider.
Big shot investors like Bill Ackman and Michael Klein have raised billions through their SPACs this year. About 45% of U.S. corporate executives are interested in pursuing SPACs, alliances and joint ventures, while only 35% still view traditional M&A as worth considering, according to Deloitte, as quoted in an article.
What Awaits in 2021?
Going forward, the outlook for SPAC is rosy. Charlie Ergen, the chief executive at Dish Network, seeks to create a new company that will raise $1 billion through an IPO to fund acquisitions in the technology, media and telecom sectors. The blank check company called CONX looks to close its first deal within 24 months. Space company Momentus intends to go public through a Stable Road’s SPAC with close to $1 billion valuation.
If the economy continues to improve, SPACs in 2021 could be as solid as they were in 2020. Just the volume of SPACs currently seeking acquisitions (210, according to BTIG, all with time limits of 18 to 24 months maximum) points to a winning trend, as quoted on CNBC.
Against this backdrop, below we highlight the top SPAC IPOs of 2020. Here are the gems:
QuantumScape
The solid-state battery developer for electric vehicle use QuantumScape recently completed its announced IPO. The company has agreed to a merge with the SPAC company Kensington Capital Acquisition. Its shares jumped about 50% on the very first day of trading on Nov 27. Shares have gained 388% past month.
DraftKings
The digital sports entertainment and gaming company DraftKings merged with SPAC Diamond Eagle Acquisition Corp. and SBTech and then hit the market on Apr 24. It finished the trading day with a gain of about 11% to close at $19.35. The stock has gained about 197% since Apr 24.
Paya Holdings Inc.
FinTech Acquisition Corp. III acquired Paya turning it to Paya Holdings Inc., which is an integrated payments provider. The fintech company made its market debut on Oct 19.Shares of the company have risen as much as 10% since its debut though it fell somewhat to close the day. The stock has added 18.3% since hitting the market.
Fisker
On Oct 29, 2020, the EV maker Fisker announced that it completed the reverse merger with Spartan Energy Acquisition Corp. As of Oct 30, 2020, Fisker is publicly listed and traded on the New York Stock. Its shares surged 13% on debut. Since hitting the market, Fisker shares have gained about 47%.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?
These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.
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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FedEx, Chico's, DraftKings and Paya as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – December 29, 2020 – Zacks Equity Research highlights FedEx (FDX - Free Report) as the Bull of the Day and Chico’s as the Bear of the Day. In addition, Zacks Equity Research provides analysis on DraftKings (DKNG - Free Report) and Paya Holdings Inc. .
Here is a synopsis of all four stocks:
Bull of the Day:
Global digitalization has accelerated what would have taken years in a matter of months during 2020’s COVID crisis. The perfect storm has been created for online retailers and their respective delivery services as society is conditioned to function entirely remotely. FedEx has considerably benefited from the COVID-crisis, with its growth being pulled forward by years in just the past 2 quarters. Analysts have been increasingly optimistic about this stock, raising short and long-term EPS estimates and propelling FDX into a Zacks Rank #1 (Strong Buy).
FedEx is a global enterprise with massive expansionary opportunities as businesses go online. Small-and-medium-sized companies are looking for a trusted and fast partner for their product distribution. FedEx Ground is faster to more locations than UPS Ground. FedEx also operates the most extensive air fleet in the world and is globally renowned for its speed and efficiency.
FDX has far outperformed its duopoly cohort UPS in this crazy year, driving up over 73% year-to-date compared with UPS’s 47% share price appreciation. Even with this outperformance, FDX is still trading at a relative discount to UPS, with a forward P/E of 15x compared to UPS’s over 20x P/E. Granted, UPS has an over 2% dividend compared to FDX’s 1% yield, but FedEx has a much more exciting growth outlay.
FedEx operates the largest express delivery service globally (aka FedEx Express), and the need for rapid delivery is going to drive demand for FedEx’s best-in-class delivery services.
Recent Developments
FedEx cut ties with e-commerce giant Amazon in 2019, saying that the business wasn’t lucrative and only made up 1% of the company’s total business. I believe that the implications were much more extensive than 1%. Now FedEx CEO Fredrick Smith is framing the e-commerce behemoth as a threat to its business.
Amazon currently makes up 23.1% of total online retail revenue this past quarter, a figure that has dropped amid the pandemic as many retailers of all shapes and sizes race to get their operations online, according to analytics done by Digital Commerce 360.
FedEx has been acquiring synergy-driving enterprises over the past few years to expand its operations, and further engrain its business in the exploding digital commerce space. The most notable acquisition was the purchase of TNT Express in 2016, which significantly expanded the business’s European exposure. This acquisition initially weighed heavy on margins, but it is finally beginning to produce growth with the COVID tailwind and continuous integration.
Its most recent acquisition was made earlier this month for ShopRunner, “the e-commerce platform that directly connects brands and merchants with online shoppers.” According to FedEx’s related press release, “ShopRunner connects more than 100 brands and merchants to millions of consumers and offers a seamless shopping experience from inspiration through delivery.”
Financials
FDX has healthy-looking financials with more than $8.3 billion in cash & equivalents, swelling free-cash-flows, which topped $1 billion in each of the past two quarters, and a debt-to-total capital of 53%. The company has an enormous amount of financial flexibility for organic growth projects and synergy-driving acquisitions.
FDX has pulled back from its $305+ all-time high, which it hit earlier this month, as investors begin taking some profits from this clear COVID winner. Today looks like an excellent time to jump into this growth-oriented delivery service. 16 out of 21 analysts are calling FDX a buy with no sell ratings and an average price target of $307 a share, which would represent an over 15% upside from where it is trading today.
Final Thoughts
FedEx has some strong tailwinds going into 2021, including continued growth opportunities from TNT Express and its synergy-driving integration, the e-commerce explosion, as well as a resurgence in B2B operations as the economy comes back to normality. The world has been conditioned to exist remotely in the new normal, and FedEx’s best-in-class delivery operations position it to boom in the Roaring 20s.
Bear of the Day:
The retail apocalypse is exploding amid this global pandemic, and no brick-and-mortar business is safe. Chico’s is one such business that has not been immune to the COVID driven economic downturn. CHS has lost 85% of its value in the past 5 years, and it continues to disappoint investors with an over 55% breakdown so far this year. Sell-side analysts are becoming more pessimistic about this stock and continue to lower expectations pushing this stock down to a Zacks Rank #5 (Strong Sell).
The Business
Chico’s is a women’s fashion brand that began out of Sanibel, Florida 36 years ago. The company operates three separate retailers, branded Chico’s, White House Black Market, and Soma.
The peak of this retailer’s performance was back in 2014 but has since fallen prey to the changing digital commerce landscape. Amazon and the other large online retailers have left less versatile firms like Chico’s in the dust. Chico’s operated 1,547 stores in 2014 and has since closed 129 stores and expects to close another 250 over the next three years.
This once women’s fashion icon’s inability to adapt to the digitalizing world has led to a sales decline in the past 19 out of 20 quarters and shareholders have suffered. Chico’s revenue decline is expected to continue in the years to come.
Chico’s bottom line has flipped negative, and its losses are accelerating seemingly every quarter. The business is quickly running out money, and this pandemic may be the straw that broke the camel’s back for Chico’s.
The best thing that could happen to Chico’s at this point is an acquisition. Otherwise, I see this archaic enterprise fizzling into bankruptcy, and that is what investors & traders have
CHS is soon to be a penny stock trading at $1.50. This low share price causes accentuated volatility, adding more risk to any investor holding these shares.
Take Away
The retail apocalypse is real, and the COVID-crisis is pushing brick-and-mortar retailers that haven’t adapted to the evolving consumer out of the market. Chico’s is just another teetering retail domino getting ready to fall. There are significant systemic issues with this company, and I would not put any position on this stock at this time.
Additional content:
2020 Has Been the Year of the SPAC IPO: Here Are the 4 Most Prominent
The year 2020 has witnessed several trend reversals due to the pandemic. Along with the change in the field of work culture and lifestyle, a notable shift is palpable in the investment world. For example, a major change noted in the IPO and M&A field is the rise of Black Check or Special Purchase Acquisition Company (SPAC).
What Are SPACs or Blank Check Companies?
Per the U.S. Securities and Exchange Commission, a blank check or Special Purchase Acquisition Company (SPAC) is a “development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, other entity, or person. These companies typically involve speculative investments and often fall within the SEC’s definition of penny stocks or are considered microcap stocks.”
2020: A Breakout Year for SPAC IPOs
In 2020, SPACs make up most of the growth in the U.S. IPO market compared with the year-ago level.So far this year, SPACs have raised $79.87 billion in gross proceeds from 237 counts, surpassing the record $13.6 billion raised in 2019 (raised from 59 IPOs). The average IPO size was $337 million.
The 462% year-over-year jump in proceeds raised by SPACs this year outperformed the traditional IPOs, which have been raised $67 billion year-to-date, as quoted on Business Insider. In 2007, the last peak of SPAC IPO volumes, SPACs made up about 14% of the IPO market versus about 50% of the market share in 2020. This validates the SPACs’ booming prospects.
Defiance ETFs noted that the COVID-19 situation has made the Blank Check route more appealing for going public as virtual road shows are less effective. The route is also less complicated and pricey. The craze for SPAC IPO increased over summer, with more than one new SPAC IPO per day since July, Goldman highlighted, as quoted on Business Insider.
Big shot investors like Bill Ackman and Michael Klein have raised billions through their SPACs this year. About 45% of U.S. corporate executives are interested in pursuing SPACs, alliances and joint ventures, while only 35% still view traditional M&A as worth considering, according to Deloitte, as quoted in an article.
What Awaits in 2021?
Going forward, the outlook for SPAC is rosy. Charlie Ergen, the chief executive at Dish Network, seeks to create a new company that will raise $1 billion through an IPO to fund acquisitions in the technology, media and telecom sectors. The blank check company called CONX looks to close its first deal within 24 months. Space company Momentus intends to go public through a Stable Road’s SPAC with close to $1 billion valuation.
If the economy continues to improve, SPACs in 2021 could be as solid as they were in 2020. Just the volume of SPACs currently seeking acquisitions (210, according to BTIG, all with time limits of 18 to 24 months maximum) points to a winning trend, as quoted on CNBC.
Against this backdrop, below we highlight the top SPAC IPOs of 2020. Here are the gems:
QuantumScape
The solid-state battery developer for electric vehicle use QuantumScape recently completed its announced IPO. The company has agreed to a merge with the SPAC company Kensington Capital Acquisition. Its shares jumped about 50% on the very first day of trading on Nov 27. Shares have gained 388% past month.
DraftKings
The digital sports entertainment and gaming company DraftKings merged with SPAC Diamond Eagle Acquisition Corp. and SBTech and then hit the market on Apr 24. It finished the trading day with a gain of about 11% to close at $19.35. The stock has gained about 197% since Apr 24.
Paya Holdings Inc.
FinTech Acquisition Corp. III acquired Paya turning it to Paya Holdings Inc., which is an integrated payments provider. The fintech company made its market debut on Oct 19.Shares of the company have risen as much as 10% since its debut though it fell somewhat to close the day. The stock has added 18.3% since hitting the market.
Fisker
On Oct 29, 2020, the EV maker Fisker announced that it completed the reverse merger with Spartan Energy Acquisition Corp. As of Oct 30, 2020, Fisker is publicly listed and traded on the New York Stock. Its shares surged 13% on debut. Since hitting the market, Fisker shares have gained about 47%.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?
These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.
Start Your Access to the New Zacks Top 10 Stocks >>
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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.