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.
Sonos, Wrap Technologies, RH, Tempur Sealy International and Williams-Sonoma highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – August 18, 2021 – Zacks Equity Research Shares of Sonos, Inc. (SONO - Free Report) as the Bull of the Day, Wrap Technologies, Inc. (WRAP - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on RH (RH - Free Report) , Tempur Sealy International, Inc. (TPX - Free Report) and Williams-Sonoma, Inc. (WSM - Free Report) .
Sonos is a Zacks Rank #1 (Strong Buy) that designs, develops, manufactures, and sells multi-room audio products. It offers charging cradles, music players, alternating current adapters, controllers, wireless speakers and loudspeakers.
About the Company
Sonos offers its products through approximately 10,000 third-party retail stores, including custom installers of home audio systems; and e-commerce retailers, as well as through its website.
The company has over 1,400 full time employees and is headquartered in Santa Barbara, California. Sonos used to be known as Rincon Audio, which was founded in 2002.
Sonos has a market cap of $5 Billion and has Zacks Style Scores of “A” in Growth, but “F” in Value. The stock has a Forward PE is 36 and value is a concern for some investors.
Q2 Earnings
Last week Sonos reported a monster 258% beat and raised guidance. The company was expected to see a loss of 17 cents, but instead saw a 27-cent gain. They raised FY21 guidance and now see revenues at $1.70-1.71B v the 1.66B expected. EBITDA was lifted to $270-280M from the prior $225-250M. Margins also are seen higher, going to 15.9-16.4% from the prior 13.8-14.9%.
Management was positive on the call, with the CEO saying:
“Long-term, we remain focused on our key three strategic initiatives - the expansion of our brand, the expansion of our offerings, and driving operational excellence. The powerful momentum we are experiencing in our business, exceeding even our own expectations from six months ago, puts us ahead of schedule on reaching our fiscal 2024 financial targets.”
The beat was the company’s fifth straight and since that streak has begun, the stock is up over 150%.
Estimates
Over the last 7 days, estimates have turned higher. For next quarter, we have seen estimates raised by 5%, from $0.0.86 to $90. For the current year, we have seen a surge of 30% move higher in that same time frame.
In addition to estimates, some analysts have taken their price targets higher since earnings. Both Jefferies and Morgan Stanley raised their ratings and targets to $50 or greater. Those targets are over 25% higher from current levels.
Patent Win vs Google
A few days after earnings, Sonos bulls scored another win after an ITC judge ruled Google infringed on five Sonos patents. This ruling is subject to appeal, but this is great news for investors if it is upheld.
If the appeal and countersuit from Google fails, we could see a ban on imports such as Nest and other streaming speakers. This would hit Google’s hardware and open up some market share to Sonos. It would also make then company a potential acquisition target it a settlement wasn’t reached.
This story has just started, so investors should watch out for future headlines on the issue.
The Technicals
The stock struggled for the first couple years after its IPO. However, things turned around late last year as the stock broke $20 and then made all-time highs. Since the beginning of the year, the stock is up about 60%.
SONO failed to eclipse the all-time highs set in April after the earnings and patent news. The stock has since pulled back and investors should watch some key support levels.
The mid-$36 area is the 61.8% retracement from July lows to recent highs. The 21 and 50-day moving averages both line up at $34.50, while the 200-day is just above $32. Watch these levels for support, before blindly jumping in.
Bottom Line
Earnings momentum looks great, but investors are worried about the valuation side of this trade. If the company continues to perform over the last year, they should be able to grow into that valuation.
When you add in the patent win, it could create an extra tailwind for the stock if any appeal doesn’t stick for Google.
Wrap Technologies is a Zacks Rank #5 (Strong Sell) that is a public safety and technology company. Wrap develops policing solutions for law enforcement and security personnel.
Its main product is BolaWrap, which is a hand-held remote resistant device that discharges an eight-foot bola style Kevlar tether to entangle a subject at a range of 10-25 feet.
Wrap has a nice niche as law enforcement looks for alternatives to firearms. The company describes its product as “A pre-escalation apprehension tool that safely and humanely restrains resisting subjects from a distance”. The goal is to achieve a positive outcome, rather than the negative that we have all seen in the news over the years.
While the objective is great, investors might be a bit too early as the idea has not caught on. This has been reflected in earnings over the years and late last month when the company reported EPS.
More About Wrap
Wrap was founded in 2016, is headquartered in Tempe, Arizona and employs 52 people. The company is valued just over $300 million and has negative earnings. WRAP has Zacks Style Scores of “A” in both Momentum, but an “F” in both Value and Growth.
Earnings History
The stock had a big run higher after the BLM protests in 2020 brought attention to the issue of police and firearms. However, after the company reported a big earnings miss in July of that year, investors realized the earnings just aren’t there yet. There are questions if the BoloWrap is effective enough and while some departments have adopted it, the product isn’t close to being mainstream.
Q4 Earnings and Estimates
The company reported earnings in late July seeing a 54% miss on the bottom line. Revenue came in at $1.9 million vs the $0.8 million last year, so there is some momentum in sales.
However, estimates are still grinding lower. Analysts just don’t see a positive turn anytime soon, which is why the stock likely is well off this year’s highs.
Over the last 30 days, estimates have dropped for the upcoming quarters. For the current year, estimates have dropped from -$0.46 to -$0.56, or a drop of 22%. For next year, estimates have dropped by 50%.
The Technicals
The stock is actually holding up pretty well. After seeing support at the 200-day MA in June and July, the WRAP moved higher after its earnings report. Since then, the 50-day moving average was taken back by the bears and is holding some short-term support. Look for $6.30 and the 200-day to hold the line for the bulls and the 50-day under the $8 level to be sold.
The stock likely trades sideways until there is more adoption of its products.
In Summary
Wrap has an ambitious and noble goal, but it might take a while to catch on and be the norm. Investors know they might be early, but also have to accept that the BoloWrap might never be the standard in law enforcement.
Additional content:
RH Stock Rallies Almost 60% YTD: More Room to Run?
RH has been riding high on focus on improving profit margins, and creating a new and differentiating shopping experience with the addition of hospitality (restaurants as well as cafes) in new galleries.
Shares of this leading luxury retailer in the home furnishing space have advanced 59.7% year to date, faring much better than the Zacks Retail - Home Furnishings industry’s 50.1% rally. Although rising raw material and freight prices are concerns, RH has been showing strong execution, given strength in the multi-channel platform and membership model. The price performance was also backed by the company’s robust earnings surprise history, having surpassed the Zacks Consensus Estimate in all the trailing 14 quarters.
Focus on Margin Expansion: RH expects persistent improvement in operating margins as a result of its focus on a number of strategic initiatives going forward that include: (i) occupancy leverage that it expects to gain from real estate transformation (ii) product margin expansion as it continues to drive full price selling in core business and (iii) cost savings from improvements of operating platform and organizational structure.
For first-quarter fiscal 2021, adjusted gross margin expanded 550 basis points (bps) to 47.3%. Adjusted operating margin also expanded a notable 1,260 bps year over year to 22.6%. Adjusted EBITDA margin expanded 1,050 bps year over year to 26.5%.
Improving Industry Backdrop: Booming real estate activity in second home markets, an accelerated shift of families to larger suburban homes and an uptick in homebuilding should drive increased spending in the markets served by RH. The company has been benefiting from a favorable housing backdrop, solid repair & remodeling activities as well as growth initiatives. Net revenues of $860.8 million for the last reported quarter improved a notable 78% year over year.
Solid Prospects: The company has solid prospects, as is evident from the Zacks Consensus Estimate for fiscal 2021 earnings of $22.88 per share, which indicates 28.3% year-over-year growth. RH is a great pick in terms of value investment, supported by a Growth Score of A.
Also, it has a solid VGM Score of B. Our VGM Score identifies stocks that have the most attractive value, growth and momentum characteristics.
Upbeat 2021 View: Solid housing and renovation market momentum, a record stock market, low interest rates, reopening of several large parts of the economy combined with the recent acceleration in RH demand trends are expected to contribute to the company’s full-year results.
Backed by solid business trends, RH expects fiscal 2021 revenues to grow 25-30%. Adjusted operating margin is anticipated within 23.5-24.3%, indicating growth of 170-250 bps from the year-ago figure of 21.8%. ROIC is expected in excess of 60% for fiscal 2021.
For the fiscal second quarter, it expects revenue growth in the range of 35-37% and adjusted operating margin within 25.9-26.1%.
Superior ROE: RH has a very strong return on equity (ROE) that is indicative of its growth potential. The company’s ROE currently stands at 156.9%. This compares favorably with ROE of 36.4% for the industry it belongs to. This indicates efficiency in using shareholders’ funds and its ability to generate profit with minimum capital usage.
Concerns
Rising raw materials costs and freight expenses are growing concerns for RH as well as other companies like Tempur Sealy International and Williams-Sonoma in the same industry. Delay in manufacturing, low inventory and supply chain disruptions are near-term headwinds.
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
Sonos, Wrap Technologies, RH, Tempur Sealy International and Williams-Sonoma highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – August 18, 2021 – Zacks Equity Research Shares of Sonos, Inc. (SONO - Free Report) as the Bull of the Day, Wrap Technologies, Inc. (WRAP - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on RH (RH - Free Report) , Tempur Sealy International, Inc. (TPX - Free Report) and Williams-Sonoma, Inc. (WSM - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Sonos is a Zacks Rank #1 (Strong Buy) that designs, develops, manufactures, and sells multi-room audio products. It offers charging cradles, music players, alternating current adapters, controllers, wireless speakers and loudspeakers.
About the Company
Sonos offers its products through approximately 10,000 third-party retail stores, including custom installers of home audio systems; and e-commerce retailers, as well as through its website.
The company has over 1,400 full time employees and is headquartered in Santa Barbara, California. Sonos used to be known as Rincon Audio, which was founded in 2002.
Sonos has a market cap of $5 Billion and has Zacks Style Scores of “A” in Growth, but “F” in Value. The stock has a Forward PE is 36 and value is a concern for some investors.
Q2 Earnings
Last week Sonos reported a monster 258% beat and raised guidance. The company was expected to see a loss of 17 cents, but instead saw a 27-cent gain. They raised FY21 guidance and now see revenues at $1.70-1.71B v the 1.66B expected. EBITDA was lifted to $270-280M from the prior $225-250M. Margins also are seen higher, going to 15.9-16.4% from the prior 13.8-14.9%.
Management was positive on the call, with the CEO saying:
“Long-term, we remain focused on our key three strategic initiatives - the expansion of our brand, the expansion of our offerings, and driving operational excellence. The powerful momentum we are experiencing in our business, exceeding even our own expectations from six months ago, puts us ahead of schedule on reaching our fiscal 2024 financial targets.”
The beat was the company’s fifth straight and since that streak has begun, the stock is up over 150%.
Estimates
Over the last 7 days, estimates have turned higher. For next quarter, we have seen estimates raised by 5%, from $0.0.86 to $90. For the current year, we have seen a surge of 30% move higher in that same time frame.
In addition to estimates, some analysts have taken their price targets higher since earnings. Both Jefferies and Morgan Stanley raised their ratings and targets to $50 or greater. Those targets are over 25% higher from current levels.
Patent Win vs Google
A few days after earnings, Sonos bulls scored another win after an ITC judge ruled Google infringed on five Sonos patents. This ruling is subject to appeal, but this is great news for investors if it is upheld.
If the appeal and countersuit from Google fails, we could see a ban on imports such as Nest and other streaming speakers. This would hit Google’s hardware and open up some market share to Sonos. It would also make then company a potential acquisition target it a settlement wasn’t reached.
This story has just started, so investors should watch out for future headlines on the issue.
The Technicals
The stock struggled for the first couple years after its IPO. However, things turned around late last year as the stock broke $20 and then made all-time highs. Since the beginning of the year, the stock is up about 60%.
SONO failed to eclipse the all-time highs set in April after the earnings and patent news. The stock has since pulled back and investors should watch some key support levels.
The mid-$36 area is the 61.8% retracement from July lows to recent highs. The 21 and 50-day moving averages both line up at $34.50, while the 200-day is just above $32. Watch these levels for support, before blindly jumping in.
Bottom Line
Earnings momentum looks great, but investors are worried about the valuation side of this trade. If the company continues to perform over the last year, they should be able to grow into that valuation.
When you add in the patent win, it could create an extra tailwind for the stock if any appeal doesn’t stick for Google.
Bear of the Day:
Wrap Technologies is a Zacks Rank #5 (Strong Sell) that is a public safety and technology company. Wrap develops policing solutions for law enforcement and security personnel.
Its main product is BolaWrap, which is a hand-held remote resistant device that discharges an eight-foot bola style Kevlar tether to entangle a subject at a range of 10-25 feet.
Wrap has a nice niche as law enforcement looks for alternatives to firearms. The company describes its product as “A pre-escalation apprehension tool that safely and humanely restrains resisting subjects from a distance”. The goal is to achieve a positive outcome, rather than the negative that we have all seen in the news over the years.
While the objective is great, investors might be a bit too early as the idea has not caught on. This has been reflected in earnings over the years and late last month when the company reported EPS.
More About Wrap
Wrap was founded in 2016, is headquartered in Tempe, Arizona and employs 52 people. The company is valued just over $300 million and has negative earnings. WRAP has Zacks Style Scores of “A” in both Momentum, but an “F” in both Value and Growth.
Earnings History
The stock had a big run higher after the BLM protests in 2020 brought attention to the issue of police and firearms. However, after the company reported a big earnings miss in July of that year, investors realized the earnings just aren’t there yet. There are questions if the BoloWrap is effective enough and while some departments have adopted it, the product isn’t close to being mainstream.
Q4 Earnings and Estimates
The company reported earnings in late July seeing a 54% miss on the bottom line. Revenue came in at $1.9 million vs the $0.8 million last year, so there is some momentum in sales.
However, estimates are still grinding lower. Analysts just don’t see a positive turn anytime soon, which is why the stock likely is well off this year’s highs.
Over the last 30 days, estimates have dropped for the upcoming quarters. For the current year, estimates have dropped from -$0.46 to -$0.56, or a drop of 22%. For next year, estimates have dropped by 50%.
The Technicals
The stock is actually holding up pretty well. After seeing support at the 200-day MA in June and July, the WRAP moved higher after its earnings report. Since then, the 50-day moving average was taken back by the bears and is holding some short-term support. Look for $6.30 and the 200-day to hold the line for the bulls and the 50-day under the $8 level to be sold.
The stock likely trades sideways until there is more adoption of its products.
In Summary
Wrap has an ambitious and noble goal, but it might take a while to catch on and be the norm. Investors know they might be early, but also have to accept that the BoloWrap might never be the standard in law enforcement.
Additional content:
RH Stock Rallies Almost 60% YTD: More Room to Run?
RH has been riding high on focus on improving profit margins, and creating a new and differentiating shopping experience with the addition of hospitality (restaurants as well as cafes) in new galleries.
Shares of this leading luxury retailer in the home furnishing space have advanced 59.7% year to date, faring much better than the Zacks Retail - Home Furnishings industry’s 50.1% rally. Although rising raw material and freight prices are concerns, RH has been showing strong execution, given strength in the multi-channel platform and membership model. The price performance was also backed by the company’s robust earnings surprise history, having surpassed the Zacks Consensus Estimate in all the trailing 14 quarters.
Let’s take a look at the factors supporting growth of this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Major Growth Drivers
Focus on Margin Expansion: RH expects persistent improvement in operating margins as a result of its focus on a number of strategic initiatives going forward that include: (i) occupancy leverage that it expects to gain from real estate transformation (ii) product margin expansion as it continues to drive full price selling in core business and (iii) cost savings from improvements of operating platform and organizational structure.
For first-quarter fiscal 2021, adjusted gross margin expanded 550 basis points (bps) to 47.3%. Adjusted operating margin also expanded a notable 1,260 bps year over year to 22.6%. Adjusted EBITDA margin expanded 1,050 bps year over year to 26.5%.
Improving Industry Backdrop: Booming real estate activity in second home markets, an accelerated shift of families to larger suburban homes and an uptick in homebuilding should drive increased spending in the markets served by RH. The company has been benefiting from a favorable housing backdrop, solid repair & remodeling activities as well as growth initiatives. Net revenues of $860.8 million for the last reported quarter improved a notable 78% year over year.
Solid Prospects: The company has solid prospects, as is evident from the Zacks Consensus Estimate for fiscal 2021 earnings of $22.88 per share, which indicates 28.3% year-over-year growth. RH is a great pick in terms of value investment, supported by a Growth Score of A.
Also, it has a solid VGM Score of B. Our VGM Score identifies stocks that have the most attractive value, growth and momentum characteristics.
Upbeat 2021 View: Solid housing and renovation market momentum, a record stock market, low interest rates, reopening of several large parts of the economy combined with the recent acceleration in RH demand trends are expected to contribute to the company’s full-year results.
Backed by solid business trends, RH expects fiscal 2021 revenues to grow 25-30%. Adjusted operating margin is anticipated within 23.5-24.3%, indicating growth of 170-250 bps from the year-ago figure of 21.8%. ROIC is expected in excess of 60% for fiscal 2021.
For the fiscal second quarter, it expects revenue growth in the range of 35-37% and adjusted operating margin within 25.9-26.1%.
Superior ROE: RH has a very strong return on equity (ROE) that is indicative of its growth potential. The company’s ROE currently stands at 156.9%. This compares favorably with ROE of 36.4% for the industry it belongs to. This indicates efficiency in using shareholders’ funds and its ability to generate profit with minimum capital usage.
Concerns
Rising raw materials costs and freight expenses are growing concerns for RH as well as other companies like Tempur Sealy International and Williams-Sonoma in the same industry. Delay in manufacturing, low inventory and supply chain disruptions are near-term headwinds.
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.