For Immediate Release
Chicago, IL – January 22, 2021 – Zacks Equity Research Shares of The Goldman Sachs Group, Inc. (
GS Quick Quote GS - Free Report) as the Bull of the Day, Dave & Buster's Entertainment, Inc. ( PLAY Quick Quote PLAY - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Marriott Vacations Worldwide Corporation ( VAC Quick Quote VAC - Free Report) , Choice Hotels International, Inc. ( CHH Quick Quote CHH - Free Report) and Hilton Grand Vacations Inc. ( HGV Quick Quote HGV - Free Report) . Here is a synopsis of all five stocks:
Goldman Sachs is a captain of high finance and the banking sector's knight in shining armor. The firm is known for its quick trading action and best-in-class deal-making investment bank. GS has soared over 50% to all-time highs since Biden was elected President on November 3rd, and I believe this stock has legs to continue running.
The economic downturn and proceeding recovery have been an unexpected tailwind for Goldman, driving the business to record profitability the past 2 quarters, with a robust double-digit topline expansion. Due to Goldman's trading and deal-making profit drivers, the bank didn't see the same margin-pinches from the ultra-low interest rates that commercial banks did.
GS is expected to continue pushing growth and profitability as a slew of big deals and market action extends into 2021. Analysts have been increasingly optimistic about GS following its record earnings on Tuesday, pushing its EPS estimates on every time horizon and propelling the stock into a Zacks Rank #1 (Strong Buy).
The firm illustrated unbelievable results in the wake of economic uncertainty, taking advantage of new market opportunities. GS reported record-breaking earnings of $12.08 per share, demonstrating 158% year-over-year growth, and blew Zacks Consensus estimates out of the water by over 72%. Its sales were quite strong as well, showing $11.74 billion, up 18% from the same quarter last year, beating estimates by 22%.
Equity trading and its deal-making investment banking (IB) segment were the two largest growth drivers for this best-in-class investment bank. Goldman's investment banking sector was up 24% in 2020 compared to 2019, and this segment looks like it's just heating up with Q4 IB earnings up 33% from Q3 and 27% year-over-year. Its equities-underwriting portion of IB was booming in 2020 as a record number of businesses hit the public exchanges.
454 companies IPO'd in 2020, raising over $167 billion, far surpassing the previous record made in 1999 amid the dot-com mania. Goldman was an enormous beneficiary of this push to the public markets. The firm drove over $3.4 billion last year from equity underwriting alone, up 130% from 2019. It looks like this subsegment is only beginning to simmer, with this past quarter generating $1.12 billion, up 195% year-over-year and 30% quarter-over-quarter.
GS's global markets division was its biggest topline driver as the business strategically navigated the choppy market waters and drove this segment's revenue up 43% to a record $21.16 billion, 47% of its total topline in 2020. Equities sales & trading at Goldman appear to be still riding a tailwind as the stock market surges to seemingly no end. This group is up 16% quarter-over-quarter.
What's Next For GS?
David Solomon is proving himself at the helm of this remarkable firm. Since Solomon was named CEO and Chairman of Goldman Sachs on October 1st, 2018, GS shares are up over 28%. This may not sound like a lot, but GS has navigated the 2018 year-end sell-off and the most significant economic contraction in over a decade. GS is sizably outperforming its cohorts JPM and BAC, who have only returned 18% and 8%, respectively. Below is a 1-year price chart of GS (blue) compared to JPM (red) and BAC (green).
Investors & traders pulled profits from all the major banks following earnings over the past week. GS was no expectation as its share price dipped from an all-time high of $309.41 down to the $290 we are trading at today. This has created a tremendous buying opportunity, with 9 out 13 analysts calling GS a strong buy today. The most optimistic price targets are north of $400 a share, representing a 69% upside.
I remain a GS buyer despite the run it has already had. This company is adaptable and resourceful, and no matter what the economy throws at it, GS comes out on top.
Dave & Buster's and its arcade driven fun may be a thing of the past as society's
new normal pushes away from crowded entertainment centers. In the post-COVID world, I believe consumers will still avoid places where you are playing (and touching) a game seconds before stuffing your face with curly fries (as incredible as that sounds). Analysts have been getting increasingly pessimistic about PLAY's EPS estimates in the coming years, pushing the stock into a Zacks Rank #5 (Strong Sell).
Dave & Buster's was one of the hardest-hit enterprises during the pandemic, with sales declines of nearly 70% in the past 3 quarters and a bottom-line that flipped into deep negative territory. PLAY went from $47+ per share on February 21st to $4.61 on March 18th, losing over 90% of its value in less than a month's time.
PLAY has actually had a pretty remarkable recovery since it bottomed, driving up as high as $35.99 a share on Tuesday. The stock is up 95% in the past 3 months, and 680% from its low. I think this stock has surged past its intrinsic value in this recovery mania, and it may be time to pull profits.
A Post-Pandemic World
It is probably hard to imagine a thriving economy where all the restaurants and bars are open to cram as many customers as they can fit into their space. Where concert halls and stadiums are filled to the brim with people, and the fear of a microscopic terror is no longer at the forefront of everyone's mind.
This pandemic will forever scar our society. Demand for hand sanitizer and face masks will go well past a "herd immunity" to COVID-19. The post-pandemic world will be a much more germophobic one than the one we left behind in 2019.
It's been 1 year since the first confirmed COVID case in the US, and this viral invasion has completely changed the way the world operates, with global economies digitizing and social distancing becoming the standard.
The New Normal is not just some buzz word that media outlets are trying to sell, but it is a real shift in consumer habits that businesses will have to adapt to. Dave & Busters In the New Normal
As of now, I do not believe that D&B's arcade/restaurant structure will drive the needed demand for growth. The business had already been facing major margin contractions for a couple of years now as the business works to stay relevant in a space that appears to be mature to declining already.
D&B's latest press release on January 11th announced it has $289 million in liquidity with $12 million in cash in the books and $277 million available revolving debt. The company said its current cash burn rate was $3.7 million per week, which means that PLAY has 18-months of runway to get its operations on track.
The business will likely not go belly up for some time, but I wouldn't be surprised if the company were to downsize some of its underperforming locations this year. I believe that the systemic changes in social needs and demands will veer consumers away from crowded arcade/restaurants where you touch everything then put your hand in a basket of wings.
Unless D&B can make some significant systemic changes in its structure that would better cater to the
New Normal, I don't see much growth in this enterprise's future. I am not recommending that you short-sell this stock, but I would consider pulling profits at this point in time if you are holding shares. Additional content: Marriott Vacations ( VAC Quick Quote VAC - Free Report) Q4 Preliminary Contract Sales Improve Marriott Vacations Worldwide announced preliminary results for fourth-quarter 2020. Following the results, the company's shares increased 1.1% yesterday. Notably, in the past six months, the company's shares have gained 55.7%, compared with the industry's rally of 36.9%.
Preliminary contract sales for fourth-quarter 2020 were $178 million, up more than 25% sequentially. While VPG in the fourth quarter jumped 9% year over year, tours declined 59%. Moreover, Interval international exchange transactions rose nearly 17%. However, average revenue per member declined nearly 4% year over year.
The company ended 2020 with liquidity of nearly $1.3 billion. The company expects to report fourth-quarter 2020 results on or around Feb 24, 2021.
Occupancy Increasing Gradually
In late May 2020, the company started reopening some of its resorts for renters and guests. Although the resorts were reopened, the company witnessed very low occupancy. However, with lockdowns being lifted, occupancy rates surged back to the 70% range, highlighting people's willingness to go on vacations.
During the third quarter, the company witnessed strong occupancy rates at short-haul fly-to locations. Notably, occupancy rates at Florida Beach resorts, South Carolina resorts and Mountain Resorts grew from mid-60%, 70% and 75% in July to 70%, 75% and 80% in September, respectively.
Also, occupancy rates at Newport Coast Resort (in Southern California) averaged 80% throughout the third quarter. With occupancies beginning to improve, the company reopened 36 sales centers in July and added four between August and September. It also reopened seven Hawaii sales centers in mid-October.
Marriott Vacations, which shares space with
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