For Immediate Release
Chicago, IL – April 12, 2021 – Zacks Equity Research Shares of Camping World Holdings, Inc. (
CWH Quick Quote CWH - Free Report) as the Bull of the Day, Best Buy Co., Inc. ( BBY Quick Quote BBY - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Sturm, Ruger & Company, Inc. ( RGR Quick Quote RGR - Free Report) , Smith & Wesson Brands, Inc. ( SWBI Quick Quote SWBI - Free Report) and Olin Corporation ( OLN Quick Quote OLN - Free Report) . Here is a synopsis of all five stocks:
Summer is nearly upon us; successful vaccination efforts have prompted a wave of business reopenings and it’s RV season.
One of the most remarkable success stories of the past year has been a meteoric rise in the popularity of recreational vehicles. Though you’d certainly be forgiven for not anticipating it in the Spring of 2020 when Americans were suddenly dealing with strict stay-at-home restrictions, the pandemic ushered in a new golden age for traveling the nation’s highways.
As airlines, hotels and cruise ships saw steep drop offs in bookings and revenues, consumers didn’t lose their desire to travel, they simply readjusted their sights to include new methods of getting around. Owning an RV checked a lot of boxes. For many, it took the place of both air travel and hotel stays, combining the “getting there” along with the “where to stay” in a single safe environment.
Owning the means of transportation
and the lodging meant travelers were in control of their environment and could isolate themselves from virus exposure while still getting (far) out of their homes. RVs provided a valuable sense of self-sufficiency during a tumultuous time. Camping World Holdings has been in existence since 1966, but what started as a single mom-and-pop dealership has rapidly grown into the nation’s largest network of RV sales and service centers over the past few years.
CEO Marcus Lemonis – who you’ve probably seen on several CNBC television shows – is a master of consolidation. He’s not reinventing the wheel, he’s simply buying up a huge number of the small, local operations and putting them under the huge CWH umbrella, taking advantage of large (and growing) economies of scale.
What has been created is an “ecosystem” of not just RV
sales, but also service and support and accessory items. Think about how Apple doesn’t just sell hardware. They sell you a phone, tablet or computer that makes you want other stuff like music, video, books, or another piece of hardware like earbuds or a watch that seamlessly melds with your original device.
It’s much the same soy at Camping World. Customers don’t just buy an RV, they also subsequently need service, repairs and extra accessories to make their RV time more enjoyable. Once they’re in the ecosystem, there’s virtually no end to how much more money they can spend on their new hobby if they choose.
Camping World also deals in pre-owned vehicles, so when a customer decides to trade or sell their vehicle, there’s a good chance CWH can get involved in that transaction as well.
After a tough stretch in 2018-2019, CWH shares have dramatically outperformed the broad markets since the beginning of 2020.
While that type of share appreciation can sometimes be a red flag for investors who fear “buying the top” at a stretched earnings valuation, it’s not the case for Camping World because earnings and earnings forecasts have been keeping pace with the stock price.
In fact, with a full-year 2021 Zacks Consensus Earnings Estimate that has risen from $2.87/share all the way to $3.89/share recently, Camping World currently trades at a Forward P/E Ratio of just 9X – less than half the multiple of the S&P 500.
Those rising estimates also help earn CWH a Zacks Rank #1 (Strong Buy).
RV deliveries are expected to expand 24% in 2021 over the (already huge) 430K that were sold in 2020. To take advantage of those trends, investors would be wise to consider the industry leader in sales and service – a company that’s positioned to reap the benefits of consumer spending on service, repairs and accessories that’s likely to occur years into the future.
That leader is Camping World Holdings.
Today’s “Bull of the Day” is in an industry that got an unexpected boost from the Covid-19 pandemic and subsequent changes in consumer behavior.
The “Bear of the Day” was actually in a similar situation - though unfortunately it appears that the party may be over.
Best Buy did a great job adapting to the restrictions on in-person shopping, expanding online offerings and providing fast shipping and curbside pickup options to customers. That allowed the company to capitalize on trends toward increased purchases of consumer electronics.
For a while, it was pure magic. To work from home, customers needed laptops, cameras and microphones, plus modems and routers to make it all work smoothly from their new “offices.” Once the work day was over, they would also need televisions, video games, phones and pretty much everything else Best Buy sells. They even had extra money. Savings from forgoing in-person entertainment and government relief funds increasingly found their way into those purchases.
For four quarters in a row, Best Buy increased net earnings and beat the Zacks Consensus Estimates, even as they were rising.
The share price kept pace, reaching a new all-time high of $124.89/share recently. Investors who bought the shares near the March 2020 lows have more than doubled their investments.
Unfortunately, Best Buy also finds themselves in competition with the two most formidable competitors in the history of retail, so it’s going to be difficult to stay on the same positive trajectory. Walmart has about 12 times the market capitalization of Best Buy and Amazon is fifty times bigger. That gives them pricing power on both sides of a retail sale and also the ability to add new products and services.
That leaves Best Buy earnings estimates moving in the wrong direction. Best Buy earns a Zacks Rank #5 (Strong Sell).
Amazon’s Prime service not only brings in revenue, it creates customer loyalty. It’s so easy to buy what you need on Amazon, have it delivered to your door and even return it if necessary that consumers increasingly don’t bother to leave the house at all – even when they can.
The company recently introduced a similar customer loyalty program called “Best Buy Beta” that costs $199/year, but it remains to be seen whether the program will gain the kind of traction that Prime has
Revenue forecasts for Best Buy show stagnating sales, up or down 2% YoY..
In contrast, Amazon keeps churning out double-digit gains, year after year.
If you’ve been a Best buy shareholder, you’ve seen the company make some remarkable gains during what could have been a terribly difficult situation. Going forward however, conditions look to be getting much more difficult and there are other retail and e-commerce bets that look a lot better.
Additional content: Gun Stocks in Spotlight as White House Announces Regulatory Steps
President Joe Biden unveiled half-a-dozen executive actions on Apr 8, aimed at curbing gun violence that has recently taken a nasty turn in the United States. Referring to the latest mass shootings in Texas and South Carolina and many more before that as “an epidemic and international embarrassment”, Biden announced stringent gun control initiatives compared to what America has witnessed over the past few years.
The U.S. President also nominated gun-control advocate David Chipman to be director of the Bureau of Alcohol, Tobacco, Firearms and Explosives, which is the key agency enforcing America’s gun laws, with the hope to advance common sense gun safety laws. Naturally, the spotlight is on gun stocks right now.
Biden’s Plan of Action
In his address from the White House, the U.S. President has committed to taking actions for reducing all forms of gun violence – community violence, mass shootings, domestic violence, and suicide by firearm. These actions include tighter rules on buyers of home-assembled “ghost guns” since these firearms lack a serial number and thus cannot be traced by law enforcement. The Justice Department has been directed to issue a proposed rule within 30 days that will help in stopping the proliferation of these firearms.
Biden’s announcements also included initiatives like the Justice Department drafting a policy on arm braces that steady pistols; “red flag” legislation for states and an annual report on firearms trafficking. Biden also emphasized on the government prioritizing investments in community-based violence intervention, which also plays a key role in reducing gun violence in urban communities.
The President has also urged the Congress to pass two bills that the House passed last month, focusing on closure of loopholes in firearm background checks, in addition to advocating banning assault weapons and high-capacity magazines.
Gun Stocks in Focus
As expected, most of the gun-maker stocks reacted adversely to the announcement of such gun control measures, with their share prices taking a dip. These include
Sturm, Ruger & Company: This company is engaged in the design, manufacture and sale of firearms. It also manufactures and sells investment castings made from steel alloys and metal injection molding parts for internal use in the firearms segment. Its firearms include single-shot, auto-loading and bolt-action rifles; single and double-action revolvers; as well as rimfire autoloading and centerfire autoloading pistols.
In response to Biden’s gun control measures, the company’s shares slipped 0.8% in the last trading session.
Smith & Wesson Brands: It designs, manufactures and sells firearms. The company is one of the largest manufacturers of handguns, modern sporting rifles, and handcuffs in the United States. Smith & Wesson manufactures a wide array of handguns (including revolvers and pistols), long guns (including modern sporting rifles, bolt action rifles, and muzzleloaders), handcuffs, suppressors, and other firearm-related products.
In response to Biden’s gun control measures, the company’s shares slipped 0.6% in the last trading session.
Olin Corporation: Apart from being a global producer and distributor of chemical products, this company manufactures and sells small caliber military ammunition and components, and industrial cartridges. The United States Army has selected Olin’s Winchester unit to manufacture small caliber military ammunition, including 5.56mm, 7.62mm, and .50 caliber rounds, as well as certain cartridges and casings.
In response to Biden’s gun control measures, the company’s shares slipped 0.8% in the last trading session.
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