For Immediate Release
Chicago, IL – March 9, 2021 – Zacks Equity Research Shares of Micron Technology, Inc. (
MU Quick Quote MU - Free Report) as the Bull of the Day, Harley-Davidson, Inc. ( HOG Quick Quote HOG - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Sony Corporation , TakeTwo Interactive Software, Inc. ( TTWO Quick Quote TTWO - Free Report) and Capcom Co., Ltd. ( CCOEY Quick Quote CCOEY - Free Report) . Here is a synopsis of all five stocks: Micron Technology is the global king of memory chip technology and a driving force in the 4th Industrial Revolution. The company continues to impress analysts and investors alike, with MU shares having more than doubled since the end of August. The stock looks like it still has legs to keep this rally alive.
Micron's savvy management team sizably raised guidance for its fiscal Q2 quarter (February quarter earnings) across the income statement for revenues, margins, and earnings as demand for semiconductors exploded. This has catalyzed analysts to raise their price targets and EPS estimates alike, propelling MU into a Zacks Rank #1 (Strong Buy).
The world digitized by years in a matter of months during this Pandemic as global economies were forced to leverage advanced technology in order to remain competitive amid the stay-at-home initiative. As economies recover, enterprise and consumer spending are poised to surge, and cutting-edge tech will be one of the first things this capital goes to. We are on the verge of hyperscaling super-cycle, and Micron is positioned to benefit heavily.
The 4th Industrial Revolution is taking off, and COVID-19 has catalyzed its acceleration. The digitalization of 2020 has ignited the world's thirst for advanced tech, and this is just the beginning.
The Business Attraction
The companies two largest segments are dynamic random-access memory (DRAM) and NAND (aka NAND flash memory), with end markets that include data centers, mobile tech, PCs, graphics, and automotive. These end markets have proliferated demand for Micron's cutting-edge chips.
DRAM is expected to maintain a long-term compounded annual growth rate (CAGR) of mid-to-high teens. The rapidly expanding NAND market is expected to yield Micron a CAGR of approximately 30% as long-term demand for this technology accelerates. Micron's management team is also anticipating sizable cost reductions in the coming years.
DRAM made up 70% of the company's total topline according to its November quarter earnings, while Micron's growing NAND division made up 27% of revenues. Roughly 40% of its sales are propelled by its compute and networking segment (CNBU), which has been a beneficiary of the hyperscaling resurgence as businesses start to scale their data centers for cloud-computing, AI, data analytics, etc. CNBU saw 29% year-over-year expansion in its November quarter results (fiscal Q1).
The company's second-largest segment is mobile, which is poised to blast off in the nascent 5G super cycle of smartphones and the internet of this (IoT). Micron has a leading position in this space.
Upcoming Earnings Report
Micron is reporting its February quarter results (fiscal Q2) on March 31st, and expectations are elevated. According to Zacks Consensus estimates, analysts are anticipating an EPS of $0.89 on sales of $6.23 billion, representing year-over-year growth of 98% and 30%, respectively.
This business has a lot to prove in this upcoming report, with investors' expectations reaching new highs. The markets have formed a pattern of buying-the-rumor of a strong quarter and selling-the-news when the robust results are unveiled this past earnings season.
Micron's recent guidance increase earlier this month solidified many investors' already optimistic outlook for the business. Management rose its mid-point revenue guidance by over 7% and EPS by more than 27%.
Forward guidance and management sentiment will be the most important things to focus on in this upcoming quarterly report and earnings call that follows.
MU has been a workhorse amid the tech sell-off these past 3 weeks, with every dip in the stock getting bought back up very quickly. You can see this bullish price action in just the last couple of trading days, with each morning dip being bought back up on sizable volume. MU has sizably outperformed the broader semiconductor space since August 21st.
Despite MU's substantial rally since August, the stock is still trading at a relative discount to the broader semiconductor sector, with a 12-month forward P/E of 13.2x compared to the sector's 19.4x. MU's resilience to broader tech sell-off illustrates this stock's bullish positioning in the semiconductor space, which is expected to have exuberant demand in the next 12-months.
Harley-Davidson has been the symbol of the mid-life crisis for decades and has profited off the Baby Boomers, but there is a new group of consumers in town and their set of demands are shifting. The Chopper is going out of style and, unfortunately, leading its progenitor Harley-Davidson out with it. Analysts continue to pessimistically lower its already deflated EPS estimates for this seemingly antiquated stock, pushing HOG down to a Zacks Rank #5 (Strong Sell). The End Of An Era
Harley-Davidson hit its peak sales and profitability in 2014 and has since been experiencing a decline. The massive demographic shift in consumption is catalyzing this demand slump. Millennials recently overtook Boomers as the largest consuming generation, and they are making some profound changes to the retail landscape (e.g., the retail apocalypse). One of the unfortunate victims of this consumption change has been Harley and its iconic motorcycles.
This is not to say the Harley isn't making an effort to shape their brand image around the evolving consumer. The company has come out with a line of fully electric bikes and has a pipeline of sleek new designs and an eBicycle, which are to be released next year.
These brand-changing efforts may be fruitless as millennials and younger generations turn against some of the brands of their parents' and grandparents' generations as they are no longer "fashionable." Unfortunately, I don't believe Harley will be able to shake its chopper brand association quickly.
COVID, Financials & Chart
Harley has experienced 9 straight quarters of topline declines, with its profits tumbling from $254 million in the second quarter of 2018 to a ($68) million decline this past quarter. COVID-19 pummeled Harley's sales and drove the company's bottom line to its lowest level in the company's public history.
This most recent recession was very different from the systemic financial downfall, and I would have thought Harley Davidson would have fared much better in this medically induced recession.
With mortality at the forefront of many consumers' minds, I think there is more demand for "exciting" purchases like Tesla and Malibu Boats, with their respective stocks reaching all-time highs this year.
This stock's drop accentuates the downward trend HOG has been experiencing since mid-2014, and its all-time high remains in 2006. HOG is trading over 50% below that high. The stock has seen a recent boost on the implication of a recovery trade. HOG has marginally recovered to pre-COVID levels, despite its earning estimates not projecting to reach its 2019 levels for years.
Now is the time to pull profits off this mature Baby Boomer brand that is on its way out without significant system changes in its brand recognition. HOG has more than doubled since its 2020 bottom, and it's time to pull those profits.
People are no longer excited about Harley's anymore. The business appears to be hitting a level of obsolescence as it looks at its glory days in the rearview mirror.
There is still a glimmer of hope that this motorcycle giant will be able to rebrand itself into something millennial-friendly. The success of this year's product releases will be telling in whether the company can evolve with the progressing consumer.
Additional content: Consumer Spending on Video Games Jumps: 3 Picks
The videogame industry has been going through a dream run for quite some time, thanks to the pandemic that saw more people buying console games as they stayed at home. And 2021 too seems to have started on a high.
According to a new report from Safe Betting Sites, consumer spending on video games jumped over 40% in January. This includes spending across all categories including hardware, software and accessories.
January Videogame Spending Jumps
According to a report published in
APN News, citing data from Safe Betting Sites Consumer spending on videogames in the United States jumped a solid 42% on a year-over-year-basis in January, reaching $4.7 billion. On a month-over-month basis, spending increased 25% to $7.7 billion. Globally, revenues from digital sales increased 15% in January.
The robust revenues were reported across all segments, with software sales jumping 36% increase from $3.06 million to $4.17 million in January. Hardware sales soared a whopping 144% to $319 million in January 2021 from $319 million a year ago. Sales of accessories surged 73% to $222 million from $128 million a year ago.
Videogame Industry on a High
Nintendo's Switch was the best-selling console in January, while
Sony Corp.’s PS5 was the second-best performer. The videogame industry has been on a high for more than a year. The pandemic saw most people staying indoors that left them with not too many choices for entertainment. This saw more people buying videogames to spend idle time.
The rise in January comes after a solid fourth quarter in 2020 when sales jumped 26% year over year to $18.6 billion to hit a record high.
In fact, the videogame industry was already doing well for some time and the whole of 2020 proved to be a great year. According to a report from NPD Group, U.S. videogame sales hit $56.9 billion in 2020, increasing 27% year over year. This is also the highest sales generated ever.
The videogame industry has started 2021 on a high too. This thus makes it an opportune time to invest in gaming stocks that are sure to gain in the near term.
Sony Corp. designs, manufactures and sells several consumer and industrial electronic equipment. The company’s product roster comprises audio and video equipment, televisions, displays, semiconductors, electronic components, gaming consoles, computers and computer peripherals and telecommunication equipment.
The company’s expected earnings growth rate for the current year is 92.5%. The Zacks Consensus Estimate for current-year earnings has improved 7.9% over the past 30 days. Sony has a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here. TakeTwo Interactive Software is a leading developer and publisher of video games. The company earns revenues from the sale of disk-based video game products, downloadable contents, subscription, micro-transactions and advertising.
The company’s expected earnings growth rate for the current year is 11.4%. The Zacks Consensus Estimate for current-year earnings has improved 8.8% over the past 30 days. TakeTwo carries a Zacks Rank #2.
Capcom Co plans, develops, manufactures, sells and distributes consumer video games. Its operating segment consists of Digital Contents, Arcade Operations, Amusement Equipments and Other Businesses segments.
The company’s expected earnings growth rate for the current year is 43.5%. The Zacks Consensus Estimate for current-year earnings has improved 12.5% over the past 60 days. Capcom has a Zacks Rank #2.
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