We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Revolve Group, Angi, Target, Lululemon and Goldman Sachs highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – August 16, 2021 – Zacks Equity Research Shares of Revolve Group, Inc. (RVLV - Free Report) as the Bull of the Day, Angi Inc. (ANGI - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Target Corporation (TGT - Free Report) , Lululemon Athletica Inc. (LULU - Free Report) and The Goldman Sachs Group, Inc. (GS - Free Report) .
Based in California, Revolve Group is a popular online fashion retailer, selling a wide range of men’s and women’s apparel, shoes, accessories, and beauty items; their core customers are Millennial and Gen Z shoppers, and Revolve is known for carrying on-trend brands and styles at all price points. The company went IPO in June 2019.
Revolve Delivers Excellent Growth in Q2
Net sales increased 60% year-over-year to $228 million (and 41% over Q2 2019), while diluted net profit more than doubled compared to the year-ago period to $0.42 per share.
Domestic net sales were up 59% and international net sales increased 63%.
Gross margin increased 517 basis points to 55.6%, benefitting from healthy inventory levels and consumer demand dynamics. Also helping were higher sales at full-price and a decrease in “the depth of markdowns.”
Free cash flow was $32.8 million for the second quarter, helping to further the retailer’s balance sheet. As of June 30, cash and cash equivalents and net of borrowings were $219.6 million.
“Our exceptional second quarter results were driven by record new customer additions and unprecedented numbers of reactivated customers who hadn’t purchased from us in several quarters while social events were on pause,” said co-founder and co-CEO Mike Karanikolas.
Will RVLV Break Out?
Year-to-date, shares of Revolve have climbed 92.8% compared to the S&P 500’s gain of 19%. However, because of the stock’s run so far this year, it’s reached quite a lofty valuation at 63.4X forward earnings multiple.
This may have been one of the reasons, along with a sales deceleration after the end of Q2, why investors sold RVLV despite its impressive second-quarter report. RVLV sunk over 20% the day after its earnings release.
Despite this hiccup, Revolve still remains a top shopping destination for fashion-minded consumers, and is a stock that could still deliver great returns over the long term.
For the current fiscal year, 10 analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from $0.83 per share to $1.04 per share. Earnings are expected see double-digit growth for fiscal 2021, with 2022 and 2023 continuing that growth trend.
RVLV is a Zacks Rank #1 (Strong Buy) right now.
If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep RVLV on your shortlist.
Angi is a technology company headquartered in Denver, Colorado. It connects users with repair, remodeling, cleaning, and landscape professionals that match your service needs and desired price range. Users can also request and compare quotes so that they can get the best price for their home projects.
Q2 Earnings Recap
Revenue grew $12% year-over-year to $421 million but missed the Zacks Consensus Estimate of $424 million.
Net loss came to $30.3 million, or $0.06 per share, compared to net income of $12.7 million, or $0.02 per share, in the year-ago quarter. Our consensus estimate was calling for a $0.03 loss per share.
Adjusted EBITDA fell to $4.4 million during the period.
Net cash from operation fell to $59.3 million for the six months ended June 30, while free cash flow decreased almost $80 million to $23.5 million.
The company also announced that it repurchased 700,000 shares at an average price of $11.71 a piece between May 7 and August 3.
Bottom Line
ANGI is now a Zacks Rank #5 (Strong Sell).
Four analysts have cut their full year earnings outlook over the past 60 days. ANGI’s bottom line is expected to decline 1.36% year-over-year, and the consensus estimate has fallen $0.05 to a loss of $0.15 per share for fiscal 2021. Next year’s earnings consensus has dropped as well, and Wall Street now expects earnings to be in the red.
Shares have been volatile so far in 2021. Year-to-date, ANGI is down 21.4% compared to the S&P 500’s gain of roughly 19%.
Looking ahead, things may continue to be rocky for Angi as it straightens the kinks out of its rebrand initiative; the company wants to focus more on shoring up the Angi brand while deemphasizing and pulling back spending on the HomeAdvisor brand.
But because of the hot housing market as well as the Covid-19 pandemic, Angi continues to benefit from consumers looking to invest in home-improvement projects; however, some professionals and contractors are struggling to find day labor, which has lead to supply pressure for Angi.
Until the outlook for management’s rebrand strategy improves, potential investors may want to wait on the sidelines.
Additional content:
Could Inflation Be a Good Thing for Retail?
Inflation, which is the decrease in the purchasing power of money, has been one of the main stock market headlines this summer, instigating bouts of volatility amidst the economic recovery.
In functioning free market economies, periods of inflation are normal. The cost of day-to-day economic goods and services gradually rise over time, but things get concerning when prices rise too quickly.
Economists use a variety of methods to track inflation, but the Consumer Price Index is the most commonly used in the U.S. The CPI charts fluctuations in the prices paid by consumers for food, housing, education, clothing, and other various services; the most recent reading showed the CPI advancing 5.4% in the 12 months through July.
Retail Impact
Companies across all industries tend to raise prices on their products to help offset any negative inflationary impacts, since a decrease in spending power reverberates all the way down the manufacturing line.
I’m sure you’ve noticed higher prices at the grocery store, at apparel retailers, at your local Target. But unlike past periods of inflation, consumers are flush with more cash than they’ve been in a long time, having saved more money than usual during the pandemic. And they want to spend, spend, spend.
Retailers are in a unique sweet spot right now. The pandemic thinned out the competition, forcing companies into bankruptcy, to reduce their store count, or to permanently close locations all over the country. Those left standing will likely experience greater pricing flexibility as shoppers return to stores (less competition, less options for consumers) in the mood to shop until they drop.
These retailers have also had the luxury of testing price hikes and resistance levels on both a market-by-market and on a consumer-by-consumer basis, seeing what works and what doesn’t, and what will ultimately bring on the most profits.
I’m not saying that inflation is all sunshine and roses for the retail industry—retail can be very finicky, since you have to predict what consumers will want in the future and what they will be comfortable paying for those goods—but companies today are incredibly well-equipped to handle economic and consumer behavior changes.
The rise of e-commerce and online shopping have provided crucial real-time data about what customers are buying, when they’re buying, and what the competition is up to. Inflation may end up being less of a burden for retailers this time around because of these factors.
Top Stock to Buy: LULU
Lululemon has been a favorite retailer of mine for years now. Their products are my number one choice when I need to update my leggings and other activewear; their quality is consistently great; and in-store shopping is a relaxing experience.
Shares gained over 33% in the past three-month period as investors rotated back into growth stocks. Wall Street has also turned its attention back to LULU; Goldman Sachs recently put the retailer on its elite conviction list, rating the stock a Buy with a price target of $447 per share.
What I like most about Lululemon as a company is that it keeps executing on what it does best. Last year, as the world shut down and everyone stayed home, the desire to live comfortably hit an all-time high. We all bought sweatpants, sweatshirts, and loungewear, and many of us turned to LULU for these clothing items.
In response, the retailer improved its digital distribution channel—it already had an easy-to-use app and website—and loyalty and brand awareness, which was very strong pre-pandemic, solidified even more.
2021 is set to be a strong year for Lululemon, even with the threat of inflation lingering on the sidelines. Consumers like myself are already familiar with Lululemon’s mid-luxury prince point, so if the price of my favorite tank top or pair of leggings increases a bit, it won’t deter me from making that purchase.
Management is predicting revenue to be between $5.825 billion and $5.905 billion for the year, which reflects 33% growth at the midpoint, now that stores are back open and customer traffic is thumping. The company could see even more gains as it continues to expand geographically and launches new clothing categories as well.
The stock is still expensive at 52X forward earnings, but shares are at an attractive discount compared to valuation levels recorded in Q1 of this year (nearly 75X).
If you’re looking for a retail stock with many different long-term growth catalysts in its holster, put LULU on your shortlist.
Disclaimer: The author of this article owns TGT and GS in the Income Investor portfolio.
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 https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Revolve Group, Angi, Target, Lululemon and Goldman Sachs highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – August 16, 2021 – Zacks Equity Research Shares of Revolve Group, Inc. (RVLV - Free Report) as the Bull of the Day, Angi Inc. (ANGI - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Target Corporation (TGT - Free Report) , Lululemon Athletica Inc. (LULU - Free Report) and The Goldman Sachs Group, Inc. (GS - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Based in California, Revolve Group is a popular online fashion retailer, selling a wide range of men’s and women’s apparel, shoes, accessories, and beauty items; their core customers are Millennial and Gen Z shoppers, and Revolve is known for carrying on-trend brands and styles at all price points. The company went IPO in June 2019.
Revolve Delivers Excellent Growth in Q2
Net sales increased 60% year-over-year to $228 million (and 41% over Q2 2019), while diluted net profit more than doubled compared to the year-ago period to $0.42 per share.
Domestic net sales were up 59% and international net sales increased 63%.
Gross margin increased 517 basis points to 55.6%, benefitting from healthy inventory levels and consumer demand dynamics. Also helping were higher sales at full-price and a decrease in “the depth of markdowns.”
Free cash flow was $32.8 million for the second quarter, helping to further the retailer’s balance sheet. As of June 30, cash and cash equivalents and net of borrowings were $219.6 million.
“Our exceptional second quarter results were driven by record new customer additions and unprecedented numbers of reactivated customers who hadn’t purchased from us in several quarters while social events were on pause,” said co-founder and co-CEO Mike Karanikolas.
Will RVLV Break Out?
Year-to-date, shares of Revolve have climbed 92.8% compared to the S&P 500’s gain of 19%. However, because of the stock’s run so far this year, it’s reached quite a lofty valuation at 63.4X forward earnings multiple.
This may have been one of the reasons, along with a sales deceleration after the end of Q2, why investors sold RVLV despite its impressive second-quarter report. RVLV sunk over 20% the day after its earnings release.
Despite this hiccup, Revolve still remains a top shopping destination for fashion-minded consumers, and is a stock that could still deliver great returns over the long term.
For the current fiscal year, 10 analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from $0.83 per share to $1.04 per share. Earnings are expected see double-digit growth for fiscal 2021, with 2022 and 2023 continuing that growth trend.
RVLV is a Zacks Rank #1 (Strong Buy) right now.
If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep RVLV on your shortlist.
Bear of the Day:
Angi is a technology company headquartered in Denver, Colorado. It connects users with repair, remodeling, cleaning, and landscape professionals that match your service needs and desired price range. Users can also request and compare quotes so that they can get the best price for their home projects.
Q2 Earnings Recap
Revenue grew $12% year-over-year to $421 million but missed the Zacks Consensus Estimate of $424 million.
Net loss came to $30.3 million, or $0.06 per share, compared to net income of $12.7 million, or $0.02 per share, in the year-ago quarter. Our consensus estimate was calling for a $0.03 loss per share.
Adjusted EBITDA fell to $4.4 million during the period.
Net cash from operation fell to $59.3 million for the six months ended June 30, while free cash flow decreased almost $80 million to $23.5 million.
The company also announced that it repurchased 700,000 shares at an average price of $11.71 a piece between May 7 and August 3.
Bottom Line
ANGI is now a Zacks Rank #5 (Strong Sell).
Four analysts have cut their full year earnings outlook over the past 60 days. ANGI’s bottom line is expected to decline 1.36% year-over-year, and the consensus estimate has fallen $0.05 to a loss of $0.15 per share for fiscal 2021. Next year’s earnings consensus has dropped as well, and Wall Street now expects earnings to be in the red.
Shares have been volatile so far in 2021. Year-to-date, ANGI is down 21.4% compared to the S&P 500’s gain of roughly 19%.
Looking ahead, things may continue to be rocky for Angi as it straightens the kinks out of its rebrand initiative; the company wants to focus more on shoring up the Angi brand while deemphasizing and pulling back spending on the HomeAdvisor brand.
But because of the hot housing market as well as the Covid-19 pandemic, Angi continues to benefit from consumers looking to invest in home-improvement projects; however, some professionals and contractors are struggling to find day labor, which has lead to supply pressure for Angi.
Until the outlook for management’s rebrand strategy improves, potential investors may want to wait on the sidelines.
Additional content:
Could Inflation Be a Good Thing for Retail?
Inflation, which is the decrease in the purchasing power of money, has been one of the main stock market headlines this summer, instigating bouts of volatility amidst the economic recovery.
In functioning free market economies, periods of inflation are normal. The cost of day-to-day economic goods and services gradually rise over time, but things get concerning when prices rise too quickly.
Economists use a variety of methods to track inflation, but the Consumer Price Index is the most commonly used in the U.S. The CPI charts fluctuations in the prices paid by consumers for food, housing, education, clothing, and other various services; the most recent reading showed the CPI advancing 5.4% in the 12 months through July.
Retail Impact
Companies across all industries tend to raise prices on their products to help offset any negative inflationary impacts, since a decrease in spending power reverberates all the way down the manufacturing line.
I’m sure you’ve noticed higher prices at the grocery store, at apparel retailers, at your local Target. But unlike past periods of inflation, consumers are flush with more cash than they’ve been in a long time, having saved more money than usual during the pandemic. And they want to spend, spend, spend.
Retailers are in a unique sweet spot right now. The pandemic thinned out the competition, forcing companies into bankruptcy, to reduce their store count, or to permanently close locations all over the country. Those left standing will likely experience greater pricing flexibility as shoppers return to stores (less competition, less options for consumers) in the mood to shop until they drop.
These retailers have also had the luxury of testing price hikes and resistance levels on both a market-by-market and on a consumer-by-consumer basis, seeing what works and what doesn’t, and what will ultimately bring on the most profits.
I’m not saying that inflation is all sunshine and roses for the retail industry—retail can be very finicky, since you have to predict what consumers will want in the future and what they will be comfortable paying for those goods—but companies today are incredibly well-equipped to handle economic and consumer behavior changes.
The rise of e-commerce and online shopping have provided crucial real-time data about what customers are buying, when they’re buying, and what the competition is up to. Inflation may end up being less of a burden for retailers this time around because of these factors.
Top Stock to Buy: LULU
Lululemon has been a favorite retailer of mine for years now. Their products are my number one choice when I need to update my leggings and other activewear; their quality is consistently great; and in-store shopping is a relaxing experience.
Shares gained over 33% in the past three-month period as investors rotated back into growth stocks. Wall Street has also turned its attention back to LULU; Goldman Sachs recently put the retailer on its elite conviction list, rating the stock a Buy with a price target of $447 per share.
What I like most about Lululemon as a company is that it keeps executing on what it does best. Last year, as the world shut down and everyone stayed home, the desire to live comfortably hit an all-time high. We all bought sweatpants, sweatshirts, and loungewear, and many of us turned to LULU for these clothing items.
In response, the retailer improved its digital distribution channel—it already had an easy-to-use app and website—and loyalty and brand awareness, which was very strong pre-pandemic, solidified even more.
2021 is set to be a strong year for Lululemon, even with the threat of inflation lingering on the sidelines. Consumers like myself are already familiar with Lululemon’s mid-luxury prince point, so if the price of my favorite tank top or pair of leggings increases a bit, it won’t deter me from making that purchase.
Management is predicting revenue to be between $5.825 billion and $5.905 billion for the year, which reflects 33% growth at the midpoint, now that stores are back open and customer traffic is thumping. The company could see even more gains as it continues to expand geographically and launches new clothing categories as well.
The stock is still expensive at 52X forward earnings, but shares are at an attractive discount compared to valuation levels recorded in Q1 of this year (nearly 75X).
If you’re looking for a retail stock with many different long-term growth catalysts in its holster, put LULU on your shortlist.
Disclaimer: The author of this article owns TGT and GS in the Income Investor portfolio.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
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 https://www.zacks.com/performance for information about the performance numbers displayed in this press release.