For Immediate Release
Chicago, IL – December 10, 2021 – Zacks Equity Research Shares of Denison Mines Corp. (
DNN Quick Quote DNN - Free Report) as the Bull of the Day, Wolverine World Wide, Inc. ( WWW Quick Quote WWW - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Callaway Golf Company ( ELY Quick Quote ELY - Free Report) and Target Corporation ( TGT Quick Quote TGT - Free Report) . Here is a synopsis of all four stocks: Denison Corp is a Zacks Rank #1 (Strong Buy) that operates as a uranium exploration and development company. The company focus is mainly in the Athabasca region of Saskatchewan, but it also holds interests in various uranium project joint ventures in Canada.
Uranium stocks have been hot in 2021, catching some popularity with the meme crowd of Reddit. While there is a fundamental reason for Uranium stocks to go higher, the excitement sent Uranium ETF URA up over 100% on the year.
The ETF is off 20% from recent highs and many uranium plays have pulled back well off their 2021 high marks. Investors should now ask if it’s time to get back into this niche sector.
About the Company
Denison’s Key Assets include the following:
Flagship Wheeler River Project: Wheeler River is the largest undeveloped uranium project in the eastern portion of the Athabasca Basin. With a 95% interest for Denison, the project has two high grade uranium deposits and 109 million pounds of mineral reserves.
McClean Lake Mill: Denison has a 22.5% interest in this high-grade uranium mll. The uranium mill is one of the world’s largest uranium processing facilities and the property site consists of a tailings management facility, administration offices and building, camp facilities, back-up power supply, water treatment plants and a host of other minor facilities.
The company also holds interests in other joint ventures in Canada and sees some cash flow from closed mine operations in Elliot Lake.
The company has a market cap of about $1.25 Billion and has Zacks Style Scores of “B” in Momentum, but “F” in Value. The Forward PE of 78 will scare investors off, with uranium prices consistently staying higher, this will improve.
The company pays a no dividend and has a beta of 2, which is very volatile for a stock under $2.
Denison reported earnings in early November, seeing a 400% EPS beat. The quarter saw their highest revenues and earnings in years, seeing revenues higher by 248% year over year.
Despite the good quarter, investors took profits and the stock pulled back from its recent run. There are valuation questions of course, but also questions as to if the earnings can remain consistent.
Looking at the estimates for the current year, investors can start to have confidence that the company will continue to produce. Over the last 30 days, estimates have gone from negative $0.02 to positive $0.02.
The reasoning behind the excitement of uranium stocks is the higher price of the commodity itself. The higher prices allow the miners to become more profitable, so naturally, the stocks will move along with that commodity.
Currently for the year, uranium prices are up over 50%. While other energy and metal prices have pulled back on the recent market sell off, uranium is actually flat over the last month. The relative strength is a good sign going forward into 2022.
DNN was a $15 stock in 2008. When the financial crisis hit, the stock fell apart and fell under $1. It never fully recovered and was left for dead until this year. When the stock hit $2 last month, it was a nine year high, showing us investors are coming back into this name.
The recent pullback tested the bulls resolve, but the stock bounced right at the 200-day moving average at $1.31. DNN now trades over $1.50 and bulls can look for some resistance in the $1.70 area.
If the stock can get back over $2, the 161.8% Fibonacci extension is $2.68. This target for the bulls is over 75% from current levels.
Uranium as an energy alternative is highly regulated and headlines from governments can affect price. There have been a lot of negative opinions about nuclear energy over the years, but that tone has changed as it has proven to be a reliable and safe energy source.
With demand going higher along with price, the miners are an attractive way to get exposure. Denison allows investors a low-price entry point into a company that offers earnings potential if uranium prices continue to radiate higher.
Wolverine World Wide is a Zacks Rank #5 (Strong Sell) designs, manufactures, sources, markets, licenses, and distributes footwear, apparel, and accessories. The company offers casual footwear and apparel; performance outdoor and athletic footwear and apparel; kids' footwear; industrial work boots and apparel; and uniform shoes and boots.
The stock was having a good year, but pulled back over the summer and is now unchanged for 2021 after a disappointing earnings report.
Despite the dip, investors should shy away from the stock until earnings get back on track and the stock can get above resistance levels.
About the Company
Wolverine is headquartered in Rockford, MI and employs 3,400 people. The company was founded in 1883 and sells its products to department stores, national chains, catalog and specialty retailers, independent retailers, uniform outlets, and mass merchant and government customers through retail stores, as well as through third-party licensees and distributors.
WWW is valued at $2.7 billion and has a Forward PE of 15. The company holds a Zacks Style Score of “D” in Value, but “A” in Growth.
Wolverine reported earnings in mid-November, seeing a 1.6% EPS beat. The company never misses, but this was its worst quarter since the Q1 of 2020. In comparison to the triple digit EPS beats of a year ago, investors were disappointed.
Additionally, the company cut its FY21 outlook to $2.05-2.10 v the $2.29 expected.
The stock fell over 10% on the report and has continued to drift lower as estimates are falling.
For the current quarter, estimates have dropped 33% over the last 30 days, falling from $0.62 to $0.41. For the current year, we see a 9% drop over that same time frame.
The main reason the company is struggling short term is supply chain issues. While demand remains strong, closures in Vietnam hurt the quarter.
Until the supply chain issues improve, investors might just want to sit on the sidelines and wait for the technical aspects to improve.
WWW is down over 25% from its 2021 highs and back near the unchanged mark for 2021. The stock remains in a sideways trading range since the summer months and is below all moving averages.
Investors can sit on their hands until the 200-day is taken back by the bulls. This level currently resides at $35.50, about 10% higher from current price.
Wolverine is a solid company that makes a quality footwear product. It is an historic brand that has recently acquired Sweaty Betty to help it grow. While the company works through the acquisition and the supply chain issues, investors should look elsewhere.
Additional content: 2 Top Stocks to Buy on the Dip for 2022 Growth
The market roared back to start the week and the buying continued Wednesday, driven once again by tech. Optimism that the new Omicron variant will be milder than some initially feared sent the bulls charging back, as cash pours in to buy seemingly every big drop.
The S&P 500 is once again trading within touching distance of its records and the Nasdaq is only about 2% below its November highs. The positivity and the strength of mega-cap tech stocks does cloud the fact that many big covid winners tumbled to new 52-week lows last week.
The falls come amid rate hike and tapering concerns. But even when the Fed starts to raise rates, which could be sooner than expected as Jay Powell moves away from ‘transitory’ inflation phrasing, they will likely stay low enough historically to prolong
there is no alternative investing.
Plus, let’s not forget how high many stocks climbed in such a short period of time last year. Therefore, Wall Street was always going to take profits and recalibrate the names that got way out of whack. And many of these stocks have started to find buyers again.
Even though there could be more selling and volatility in December. The last few weeks showcase how crucial it is to stay exposed. There is clearly a need to take some gains off the table. But the movers and shakers also utilize pullbacks and periods of quick selling as an opportunity to buy strong stocks at lower prices…
Callaway Golf Company
Golf equipment and apparel maker Callaway has expanded through acquisitions in recent years. Its portfolio features multiple brands beyond its namesake, including TravisMathew. Callaway in March made its biggest splash when it closed its merger with fast-growing, high-tech driving range company Topgolf.
Callaway is now in the entertainment business and Topgolf has found success by attracting tons of “non-golfers” by making it more about fun and friends than traditional driving ranges. Topgolf could help slowly convert some customers into more avid golfers, while also providing potential far beyond the relatively niche golfer space.
Callaway did post strong double-digit revenue growth in FY17-FY19 before its Topgolf deal, including 36% revenue expansion prior to the pandemic—FY20 sales slipped 6%. Zacks estimates call for ELY’s FY21 revenue to soar 96% from $1.6 billion to $3.1 billion, driven by Topgolf’s inclusion. ELY is then projected to post another 18% growth in FY22.
Callaway’s adjusted earnings are projected to slip around 6% this year and then easily surge above its FY20 levels in FY22. The company’s EPS estimates have soared since it topped our Q3 estimates in early November, with its FY21 consensus 62% higher and more importantly FY22 up 83% to $0.75 per share—including a recent pop. This positivity helps Callaway land a Zacks Rank #2 (Buy) right now alongside its “A” grade for Growth in our Style Scores system.
Callaway executives are very pleased with the Topgolf deal and noted how much room there is for growth as people crave a return to fun, with the golf-based entertainment center benefiting from strong walk-in traffic and social events. Callaway is also part of a highly-ranked industry and nine of the 11 brokerage recommendations Zacks has are “Strong Buys.”
Callaway is up 23% in the last year to easily outpace its broader Zacks econ sector, but it closed regular trading Wednesday 22% below its summer highs. Better still, ELY’s current Zacks consensus price target represents 45% upside vs. its current levels.
Callaway stock recently climbed above its 50-day moving average (under its 200-day). And its valuation has improved dramatically even though some might still find it a bit rich in terms of forward earnings. That said, the company did fundamentally reshape its business through Topgolf.
Target cemented its place as a retail and Wall Street titan during the pandemic and it’s continued to grow even as it faces very tough to compete against periods. Last year, its comparable digital sales soared 145%, driven by same-day offerings. This helped total 2020 sales jump 20%, adding $15 billion to its top-line, or “greater than its total sales growth over the prior 11 years.” Meanwhile, its adjusted earnings jumped nearly 50%.
Alongside its successful e-commerce offerings, Target stands out through constant innovations inside its in-house brands for fashion, furniture, food, and more. This will help it continue to grow as one-stop-shopping pushes smaller retailers aside. Target, like ELY, topped our Q3 estimates in November, with comparable sales up another 13% YoY as shoppers flocked back to stores.
Target has also been able to keep its margins relatively strong, especially compared to its peers, even in the face of rising labor costs and supply chain setbacks. In fact, TGT said in November that it continues to expect its full-year operating income margin rate will be 8% or higher. And it raised its guidance for the vital holiday shopping quarter.
Zacks estimates call for Target to post 14% higher sales against its banner year and 40% stronger adjusted earnings. It is then projected to post higher sales in FY22 and its upward bottom-line revisions help it grab a Zacks Rank #2 (Buy) right now next to an “A” grade for Momentum.
Target was on a big run before the initial pandemic selloff and it’s now soared 250% in the past three years to blow away its industry and the S&P 500. It has cooled down recently, up only 3% in the trailing six months vs. the benchmark’s 11%. The stock closed regular trading Wednesday around 11% below its records and some recent selling has it trading below neutral RSI levels at 40 even as the S&P 500 sits closer to overbought at 60.
Despite its huge run, Target’s valuation is far from stretched at the moment. The stock trades at a 25% discount to both its own two-year highs and its industry’s average at 18.6X forward 12-month earnings. TGT is even trading at a slight discount to where it was at the end of 2019.
On top of that, Target in early June raised its dividend by 32% to $0.90 a share and its 1.50% yield tops the S&P 500 and matches the 10-year U.S. Treasury. And 14 of the 17 brokerage recommendations Zacks has for TGT are “Strong Buys.”
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