For Immediate Release
Chicago, IL – December 17, 2021 – Zacks Value Trader is a podcast hosted weekly by Zacks Stock Strategist Tracey Ryniec. Every week, Tracey will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life. To listen to the podcast, click here:
Your Favorite Stock Sold Off: Is It a Deal or a Trap?
Welcome to Episode #262 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks
Value Investor portfolio, shares some of her top value investing tips and stock picks.
A lot of popular stocks have sold off in the last few weeks, with some of them seeing bear pullbacks of 20% or more.
Disney, PayPal, Gap, Nordstrom and Williams-Sonoma are all down double digits.
Are they cheap?
Should value investors be diving in or is this a value trap?
Definition of a Value Trap
Remember, a stock can be cheap and have classic value fundamentals such as a low P/E or PEG ratio but still not be a deal.
A true value stock has another special factor: increasing earnings for next year.
A trap usually has declining earnings so the stock really isn’t as “cheap” as it appears.
5 Stocks That Have Sold Off: Are they cheap or traps?
1. Walt Disney ( DIS Quick Quote DIS - Free Report)
Disney has been a popular stock for years as many parents have bought it for their children’s portfolios over the years.
But despite being a pandemic winner thanks to its streaming service, the shares have now fallen about 18% year-to-date.
Is Disney cheap after this sell off?
Disney is trading with a forward P/E of 34.8. It’s not exactly cheap on a P/E basis.
But Disney’s earnings are expected to be up 86.9% this fiscal year, with the Zacks Consensus calling for $4.28 up from $2.29 last year.
Are Disney’s earnings expected to bounce back further from the pandemic in fiscal 2023?
Is it a deal?
2. PayPal ( PYPL Quick Quote PYPL - Free Report)
PayPal has been on an incredible 5-year run, with shares up 384% during that time compared to the S&P 500 up just 105%.
But in the last few months, PayPal shares have sunk and are now down 18.6% year-to-date.
Earnings are expected to jump 19% to $4.62 this year from $3.88 last year.
But even with the shares retreating, PayPal is still trading with a forward P/E of 40.
Will PayPal grow those earnings next year or is this sell-off a trap?
3. The Gap ( GPS Quick Quote GPS - Free Report)
The Gap owns one of the most popular retail brands in athleisure powerhouse Athleta. But supply chain issues are hitting the retailer this holiday season.
8 estimates have been cut for fiscal 2022 in the last 30 days, pushing this year’s Zacks Consensus Estimate down to $1.35.
That’s still earnings growth of 164% as the Gap lost $2.11 last year.
Shares have tumbled and are now down 30% over the last 3 months.
However, the Gap is a true value stock, with a forward P/E of just 12.
But is it a trap in 2022?
4. Nordstrom ( JWN Quick Quote JWN - Free Report)
Nordstrom recently reported a disappointing quarter and the shares plunged, falling 23.1% over the last 3 months.
7 estimates were cut for this fiscal year in the last 30 days, with one also being raised during that time. But those cuts have pushed the Zacks Consensus down to $1.28 from $1.43 just a month before.
That’s still earnings growth of 129% as Nordstrom lost $4.39 during the prior year, as the pandemic crushed department store retailers.
Nordstrom trades with a forward P/E of 15.9. This is a little high to even be considered a classic value stock.
Is Nordstrom a deal after this big sell off, or is it a trap?
5. Williams-Sonoma ( WSM Quick Quote WSM - Free Report)
Williams-Sonoma is a home products retailer which owns one of the most popular furniture brands among Millennials and GenZ consumers, West Elm.
Tracey owns shares of Williams-Sonoma in her own personal portfolio.
Shares are up big in 2021, gaining 68.5% year-to-date but in the last month, they’ve fallen 18.5% from recent highs.
It is now trading with a forward P/E of just 12, which makes it a value stock by the classical definition with a P/E under 15.
Williams-Sonoma has been reporting record quarters and analysts are bullish on this year, with earnings expected to rise 57.2% year-over-year.
But what about next year?
Will the strong demand for furniture finally cool in 2022?
Is Williams Sonoma on sale or is it a trap?
Tune Into This Week’s Podcast
What else should you know about figuring out if a stock is a deal or a trap?
Tune into this week’s podcast to find out.
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