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Tesla, Becton, Dickinson and Co, Computer Programs and Systems, AutoNation and Paycom Software highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – October 5, 2021 – Zacks Equity Research Shares of Tesla, Inc. (TSLA - Free Report) as the Bull of the Day, Becton, Dickinson and Company (BDX - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Computer Programs and Systems, Inc. (CPSI - Free Report) , AutoNation, Inc. (AN - Free Report) and Paycom Software, Inc. (PAYC - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Tesla is a Zacks Rank #1 (Strong Buy) and the company just reported production and delivery numbers for the most recent quarter.  Let’s take a deeper look at this stock in this Bull of the Day article.

Description

Tesla, Inc. makes electric vehicles and energy generation and storage systems in the United States, China, and internationally. The company operates in two segments, Automotive and Energy Generation and Storage. The Automotive segment offers electric vehicles, as well as sells automotive regulatory credits. The Energy Generation and Storage segment engages in the design, manufacture, installation, sale, and leasing of solar energy generation and energy storage products, and related services to residential, commercial, and industrial customers and utilities through its website, stores, and galleries, as well as through a network of channel partners. Tesla, Inc. was founded in 2003 and is headquartered in Palo Alto, California.

Solar Roofs

I have been trying to get a hold of someone at Tesla to speak with me about the solar roof end of the business.  My emails have not been responded to, so I hope this article will get a better reaction.

My understanding of the solar roofs is that they are priced based on the current amount of electric usage for a home.  There is a breakeven price at about 20 years, and a warranty of 25 years.

Solar panels also carry significant tax credits for users, but for now, the credits are being absorbed by Tesla. 

In Southwest Florida, there is an issue with lightning strikes that knock the grid off for just a few seconds, but the reboot cycle for the internet and shock to appliances makes the idea of having a solar roof that much more valuable.

All that being said, there are still issues with the roof and I hope that someone at Tesla sees this article and reaches out to me (BBolan@Zacks.com).

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

For TSLA, I see a good history of beating the Zacks Consensus Estimate.  There are three beats over the last four quarters.

The average positive earnings surprise over the last fours quarters works out to be 26%, which means the company is consistently posting good-sized beats of the Zacks Consensus Estimate. 

Earnings Estimates Revisions

The Zacks Rank tells us which stocks are seeing earnings estimates move higher.  For TSLA, I see estimates moving higher.

Over the last 60 days, I see a few increases.

This quarter has moved from $1.23 to $1.129.

Next quarter has moved from $1.46 to $1.53.

The full-year number has increased from $4.95 to $5.18 over the last 60 days.

Next year is at $6.92 and that is up from $6.76 over the same time horizon.

Positive movement in earnings estimates like that is why this stock is a Zacks Rank #1 (Strong Buy).

Valuation

The valuation for TSLA is on the high end, but with growth like this you would expect investors to pay up.  I see an 150x forward earnings multiple and sales growth in the most recent quarter coming in just over 98%.  The price to book multiple of 30x is well above the industry average.  Price to sales comes in at 18x and again this is well below the industry average of. 

Cybertruck Delayed

I should mention that I hold this stock in the Tech Innovators portfolio that I manage here at Zacks as well as in my personal account.  Tech Innovators added the stock amid the COVID Crash.

One of the biggest tailwinds for the stock is the 1M+ order for the Cybertruck and the story about the demand for power walls well outpacing the supply. 

The gain Tech Innovators is showing on the stock is in excess of 750%, but one of the main reasons to hold the stock is not pushed out until late 2022.  While TSLA has handled the chip shortage better than most, the worry around the solar roof and delays for Cybertruck have me thinking about when it would be best to protect profits.

Bear of the Day:

Becton, Dickinson and Co. is a Zacks Rank #5 (Strong Sell) despite beating the Zacks Consensus Estimate in the most recent quarter.  Stocks that miss the number don’t always fall to a Zacks Rank #5 (Strong Sell) so let’s take a look at why that is the case in this Bear of the Day article.

Description

Based in Franklin Lakes, NJ, Becton, Dickinson and Company, commonly known as BD, is a medical technology company engaged principally in the development, manufacture and sale of medical devices, instrument systems and reagents.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

In the case of BDX, I see four straight beats of the Zacks Consensus Estimate over the last year.  This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower.  For BDX I see estimates fluctuating.

This quarter has dipped from  $2.60 to $2.42.

Next quarter has moved from $3.23 to $2.90 over the last 60 days.

The Zacks Rank is more heavily influenced by the move in the annual numbers, and the movement is mixed for those numbers.

The 2021 consensus number has increased from $12.81 to $12.90.

The 2022 number has moved from $13.06 to $12.34 over the last 60 days.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a majority of stocks in the Zacks universe are seeing positive earnings estimate revisions.  That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).

Additional content:

3 Sectors Looking Up Despite Continuing Covid-19 Woes

Analyzing the job market data for the third-quarter months is undoubtedly one of the best ways for investors looking to play the upcoming earnings season. Despite a strong rise in COVID-19 cases, thanks to the more lethal Delta strain, the unemployment rate declined through the quarter.

However, the actual picture is not as bright as it seems.

Q3 Job Market Trend

In July and August, the job market gained consistently, reflecting a stable economy. In July, nonfarm payrolls increased by 943,000 (the highest since August 2020). In August, unemployment rates were lower in 15 states and the District of Columbia and stable in 35 states. Nonfarm payroll employment increased in 11 states, decreased in three states, and was unchanged in 36 states and the District — per the data by the U.S. Bureau of Labour Statistics.

The official job market data for the month of September has not been released yet. However, going by a Wall Street Journal report of Oct 3, The Wall Street Journal economists estimate that the department’s September employment report, to be released on Friday (Oct 8), will show the jobless rate dropping to 5.1% from 5.2% in August, 5.4% in July and from nearly 15% in the spring of last year.

This seems to be a better picture compared to the past COVID-hit quarters. However, a declining unemployment rate can only show an improving labor market health if it reflects an increase in job growth. Unfortunately, the above trend reflects a lack of job seekers in the market, indicating a slow-moving labor-force participation rate. The Wall Street Journal report estimates the labor-force participation rate to be at or below 61.7% since April, significantly down from 63.4% in January 2020 (the pre-pandemic days).

Fed's Unchanged Outlook Concerns

Many market watchers had expected that amid the declining unemployment rate through the months of the third quarter, the COVID-induced monetary stimulus might get significantly tapered. During the economic crisis, several stimulus measures were launched mainly in the form of rate cuts and bond purchases.

However, the federal reserve kept its monetary policy intact and also raised its inflation rate projection, strongly indicating a dented economic recovery in the third quarter.

As published in the U.S. News, Joe LaVorgna, chief economist of the Americas for Natixis CIB stated that the economy has boomed over the past 12 months but is poised to slow down in the second half of this year. This has forced many of the investment firms to taper the Q3 growth forecasts of the stocks.

The entire scenario is dragging market sentiments down.

Hit Sectors Before Q3 Releases

Apart from the different arms of healthcare providing support amid the pandemic like therapeutic and vaccine makers, diagnostic testing companies as well as critical care support providers, automotive, hospitality, retail, social assistance, and professional and business services witnessed notable job gains through the third quarter. Technology companies also boosted investor confidence with a consistent rally through the third quarter.

3 Sectors to Bet on Now

Already a lot has been said about the growing prosperity of the digital health sector over the past few months. Digital health has sustained its strong growth momentum in the second half of 2021, thanks to the growing demand for contactless services surrounding the more infectious new virus variants. Market watchers claim that, even beyond the pandemic, digital health is expected to maintain this strength as healthcare professionals and patients leverage its benefits.

In fact, per a report by Research and Markets, the U.S. digital health market is expected to be worth $191.64 billion in 2025, witnessing a CAGR of 28.4% during the forecast period (2021-2025). Therefore, the digital health boom is here to stay and investors eyeing this space can capitalize on it backed by certain trends that can drive this market’s performance in 2021.

With respect to this, among the medical infotech players, adding Computer Programs and Systems to one’s portfolio seems prudent as it is a Zacks Rank #2 (Buy) company expected to report solid third-quarter earnings growth of 21.7%.

Our next focus area is the U.S. auto industry. This industry is currently on a growth track, banking on the growing demand for vehicles and favorable credit conditions. While low inventory levels amid the global chip crunch might act as a temporary headwind, the industry’s overall outlook appears promising. The soaring popularity of electric vehicles is spiking sales volumes. Also, rapid digitization has been paying off well and is set to further boost the prospects of the industry participants.

At present, we ask investors to resort to stocks like AutoNation, which has a third-quarter expected earnings growth rate of 123.6%. It sports a Zacks Rank #1 (Strong Buy) at this moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

The onslaught of COVID-19 seems to have permanently limited consumers’ outdoor exposure. In such a situation, the Internet software space is benefiting from accelerated demand for digital transformation and the ongoing shift to cloud. High demand for SaaS due to the increasing need for remote working, learning and diagnosis software as well as cybersecurity applications has been a major driving factor amid the disruptions caused by the coronavirus outbreak.

Here, we suggest investors to snap up Zacks Rank #1 stocks like Paycom Software, with a stellar earnings growth estimate of 26.4% for the third quarter of 2021.

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