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Baidu and G-III Apparel have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – January 5, 2023 – Zacks Equity Research shares Baidu (BIDU - Free Report) as the Bull of the Day and G-III Apparel Group (GIII - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Salesforce (CRM - Free Report) .
Baidu, a Zacks Rank #1 (Strong Buy), has enjoyed a recent surge higher following a softening of China’s restrictive COVID policies. Chinese equities have responded well to China’s reopening, which should help to boost the economy and corporate profits. BIDU stock appears to have bottomed out in late October, staging a new uptrend and making a series of higher highs. This presents a notable shift in sentiment from the past two years and points to continued strength.
Baidu is part of the Zacks Internet – Services industry group, which ranks in the top 38% out of more than 250 Zacks Ranked Industries. Because this group is ranked in the top half of all industries, we expect it to outperform the market over the next 3 to 6 months.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
BIDU is a Chinese-language internet search provider based in Beijing. The company offers a host of services such as Baidu App which allows users to access feed services on mobile devices; Baidu Search to access its search capabilities; and Baidu Feed which provides users with a personalized timeline based on their demographics and interests. BIDU also offers various cloud services and solutions, in addition to online marketing services that include pay for performance, auction-based services that allow customers to bid for priority placement of paid sponsored links.
Just yesterday, a host of Chinese companies (including BIDU) surged following foreign regulatory approval for a fundraising plan in relation to billionaire Jack Ma’s Ant Group. The decision points to a softening between Chinese authorities and the country’s tech giants, a favorable move that could further bolster BIDU shares.
Earnings Trends and Future Estimates
BIDU has built up an impressive earnings history, surpassing earnings estimates in each of the past four quarters. Back in November, the company reported Q3 EPS of $2.37/share, a 0.85% surprise over the $2.35 consensus estimate. BIDU has delivered a +50.17% average earnings surprise over the last four quarters.
The outlook remains favorable for Baidu, as analysts covering the company have increased their Q1 ‘23 EPS estimates by +5.56% in the past 60 days. The Q1 Zacks Consensus EPS Estimate now stands at $2.28/share, reflecting potential growth of 28.81% relative to last year.
Zooming out a bit and looking at the 2023 year as a whole, earnings are projected to rise 25.95% versus this past year to $10.92/share. Sales are anticipated to climb 11.2% to $19.39 billion.
Let’s Get Technical
BIDU shares are surging to kick off the new year. Only stocks that are in extremely powerful uptrends deviate from the general market, which continues to hover in a deep correction. This is the kind of stock we want to include in our portfolio – one that is starting to trend well and receiving positive earnings estimate revisions.
Notice how the 50-day moving average (blue line) is now sloping up. BIDU has also now crossed back above its 200-day moving average – another bullish signal. With both strong fundamentals and technicals, BIDU is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, BIDU has recently witnessed positive revisions. As long as this trend remains intact (and BIDU continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Bottom Line
As the Chinese economy bounces back from weaker growth due to overly restrictive pandemic policies, Chinese stocks are moving higher. Backed by a leading industry group and robust history of earnings beats, this top-rated stock is poised to continue its recent run. Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix.
Recent institutional buying should continue to provide a tailwind for the stock price. It’s not too difficult to see why this company is a compelling investment. Investors would be wise to consider BIDU as a portfolio candidate if they haven’t already done so.
G-III Apparel Group designs, sources, and markets women’s and men’s apparel globally. Its products include outerwear, dresses, sportswear, swimwear, handbags, footwear, and luggage. GIII markets its products under proprietary brand names such as DKNY, Eliza J, Marc New York, as well as licensed brands such as Calvin Klein, Tommy Hilfiger, and Cole Haan. The company offers its products to department, specialty, and mass merchant stores.
The Zacks Rundown
GIII has been severely underperforming the market as of late. A Zacks Rank #5 (Strong Sell) stock, GIII has been steadily trending downward for the better part of the last two years. The stock is hitting a series of 52-week lows and represents a compelling short opportunity as the market continues to hover in a deep correction.
GIII is part of the Zacks Textile – Apparel industry group, which currently ranks in the bottom 23% out of approximately 250 industries. Because this industry is ranked in the bottom half of all Zacks Ranked Industries, we expect it to underperform the market over the next 3 to 6 months. Candidates in the bottom half of industry groups can often represent solid potential short candidates. While individual stocks have the ability to outperform even when included in poor-performing industries, their industry association serves as a headwind for any potential rallies.
Weak Foundation: Falling Short on Earnings and Deteriorating Forecasts
Earnings misses have been a sore spot for G-III Apparel over the past year. The company has fallen short of estimates in two of the past four quarters. GIII most recently reported Q3 EPS back in November of $1.35/share, missing the $1.85 consensus estimate by -27.03%. This is the type of negative trend that the bears like to see.
Analysts have been revising earnings estimates downward as of late. For the current quarter, estimates have been slashed -32.39% over the past 60 days. The Q4 Zacks Consensus EPS Estimate now stands at $0.48/share, translating to negative growth of -51.02% relative to the same quarter last year – and this estimate may be high considering the string of misses lately.
Technical Outlook
GIII stock has been steadily falling since 2021 and has now established a well-defined downtrend. The stock continues to trade below both averages, while the 200-day moving average has acted as resistance several times throughout the down move.
While not the most accurate indicator, GIII has also experienced what is known as a ‘death cross,, wherein the stock’s 50-day moving average crosses below its 200-day moving average. GIII would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock.
Final Thoughts
The recent earnings misses in addition to deteriorating estimates are both huge red flags and need to be respected. These will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
GIII’s characteristics have resulted in worst-possible scores in each of our Zacks Growth and Momentum Style Score categories, paving the way for an overall ‘F’ VGM score. The fact that GIII is included in a bottom-performing industry group simply adds to the growing list of concerns. Investors will want to steer clear of GIII until the situation shows major signs of improvement, or possibly include it as part of a hedge or short strategy.
Additional content:
Salesforce Cuts Jobs, Shares Rise
When a publicly traded company announces layoffs, it can often boost the underlying stock price. Though this seems illogical, there are a couple of reasons this could occur.
First, layoffs can indicate that the company is trying to cut costs to improve its financial health in a tough economy. Second, job cuts can signal that the management team is focused on agility, financial efficiency, and increasing the bottom line.
Lastly, it is essential to consider that layoffs can have various impacts on a stock depending on the situation. For instance, if the layoffs are seen as desperate and a product of financial troubles, it will often impact shares negatively. Conversely, if the cuts are viewed as a long-term strategy to cut costs in an otherwise strong company, the stock will often react positively.
Early Wednesday, shares of software giant Salesforce rose after management announced that the company would be cutting 10% of its workforce. Salesforce, the worldwide leader in Customer Relationship Management (CRM - Free Report) software, was an unusual beneficiary of the pandemic. As more and more employees moved to work from home, demand for its product grew years ahead of schedule, and the stock outperformed.
However, recently, the stock has come back to Earth and underperformed as a bloated valuation, tech wreck, and the pandemic euphoria finally wearing off took its toll. So where does CRM stand now?
From a valuation perspective, the stock is getting more attractive, although shares are still expensive relative to the S&P 500 Index. For the trailing twelve-month period, CRM’s P/E of 30.56X is still bloated compared to the Zack’s Computer – Software industry’s P/E of 24.56X.
Earnings growth slowed to just +10% last quarter, though it improved over the previous two quarters. One thing the bull camp can point to is the company’s consistency in beating earnings estimates. Salesforce has surprised on earnings for 20 straight quarters.
From a technical perspective, CRM is stuck in a downtrend and approaching the 50-day moving average from below – an area of resistance.
Takeaway
It may be too early for investors to jump aboard shares of Salesforce, although the stock is getting more attractive. Investor sentiment is shifting in the short-term after the layoff announcement. Valuation is moving closer to sustainable levels, nearly matching its industry peers. With that said, technical hurdles are still in the way, and the company will need to show healthier growth when it reports earnings in its March quarter if it wants to sustain an upside move.
Why Haven’t You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
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.
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Baidu and G-III Apparel have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 5, 2023 – Zacks Equity Research shares Baidu (BIDU - Free Report) as the Bull of the Day and G-III Apparel Group (GIII - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Salesforce (CRM - Free Report) .
Here is a synopsis of all three stocks.
Bull of the Day:
Baidu, a Zacks Rank #1 (Strong Buy), has enjoyed a recent surge higher following a softening of China’s restrictive COVID policies. Chinese equities have responded well to China’s reopening, which should help to boost the economy and corporate profits. BIDU stock appears to have bottomed out in late October, staging a new uptrend and making a series of higher highs. This presents a notable shift in sentiment from the past two years and points to continued strength.
Baidu is part of the Zacks Internet – Services industry group, which ranks in the top 38% out of more than 250 Zacks Ranked Industries. Because this group is ranked in the top half of all industries, we expect it to outperform the market over the next 3 to 6 months.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
BIDU is a Chinese-language internet search provider based in Beijing. The company offers a host of services such as Baidu App which allows users to access feed services on mobile devices; Baidu Search to access its search capabilities; and Baidu Feed which provides users with a personalized timeline based on their demographics and interests. BIDU also offers various cloud services and solutions, in addition to online marketing services that include pay for performance, auction-based services that allow customers to bid for priority placement of paid sponsored links.
Just yesterday, a host of Chinese companies (including BIDU) surged following foreign regulatory approval for a fundraising plan in relation to billionaire Jack Ma’s Ant Group. The decision points to a softening between Chinese authorities and the country’s tech giants, a favorable move that could further bolster BIDU shares.
Earnings Trends and Future Estimates
BIDU has built up an impressive earnings history, surpassing earnings estimates in each of the past four quarters. Back in November, the company reported Q3 EPS of $2.37/share, a 0.85% surprise over the $2.35 consensus estimate. BIDU has delivered a +50.17% average earnings surprise over the last four quarters.
The outlook remains favorable for Baidu, as analysts covering the company have increased their Q1 ‘23 EPS estimates by +5.56% in the past 60 days. The Q1 Zacks Consensus EPS Estimate now stands at $2.28/share, reflecting potential growth of 28.81% relative to last year.
Zooming out a bit and looking at the 2023 year as a whole, earnings are projected to rise 25.95% versus this past year to $10.92/share. Sales are anticipated to climb 11.2% to $19.39 billion.
Let’s Get Technical
BIDU shares are surging to kick off the new year. Only stocks that are in extremely powerful uptrends deviate from the general market, which continues to hover in a deep correction. This is the kind of stock we want to include in our portfolio – one that is starting to trend well and receiving positive earnings estimate revisions.
Notice how the 50-day moving average (blue line) is now sloping up. BIDU has also now crossed back above its 200-day moving average – another bullish signal. With both strong fundamentals and technicals, BIDU is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, BIDU has recently witnessed positive revisions. As long as this trend remains intact (and BIDU continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Bottom Line
As the Chinese economy bounces back from weaker growth due to overly restrictive pandemic policies, Chinese stocks are moving higher. Backed by a leading industry group and robust history of earnings beats, this top-rated stock is poised to continue its recent run. Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix.
Recent institutional buying should continue to provide a tailwind for the stock price. It’s not too difficult to see why this company is a compelling investment. Investors would be wise to consider BIDU as a portfolio candidate if they haven’t already done so.
Bear of the Day:
G-III Apparel Group designs, sources, and markets women’s and men’s apparel globally. Its products include outerwear, dresses, sportswear, swimwear, handbags, footwear, and luggage. GIII markets its products under proprietary brand names such as DKNY, Eliza J, Marc New York, as well as licensed brands such as Calvin Klein, Tommy Hilfiger, and Cole Haan. The company offers its products to department, specialty, and mass merchant stores.
The Zacks Rundown
GIII has been severely underperforming the market as of late. A Zacks Rank #5 (Strong Sell) stock, GIII has been steadily trending downward for the better part of the last two years. The stock is hitting a series of 52-week lows and represents a compelling short opportunity as the market continues to hover in a deep correction.
GIII is part of the Zacks Textile – Apparel industry group, which currently ranks in the bottom 23% out of approximately 250 industries. Because this industry is ranked in the bottom half of all Zacks Ranked Industries, we expect it to underperform the market over the next 3 to 6 months. Candidates in the bottom half of industry groups can often represent solid potential short candidates. While individual stocks have the ability to outperform even when included in poor-performing industries, their industry association serves as a headwind for any potential rallies.
Weak Foundation: Falling Short on Earnings and Deteriorating Forecasts
Earnings misses have been a sore spot for G-III Apparel over the past year. The company has fallen short of estimates in two of the past four quarters. GIII most recently reported Q3 EPS back in November of $1.35/share, missing the $1.85 consensus estimate by -27.03%. This is the type of negative trend that the bears like to see.
Analysts have been revising earnings estimates downward as of late. For the current quarter, estimates have been slashed -32.39% over the past 60 days. The Q4 Zacks Consensus EPS Estimate now stands at $0.48/share, translating to negative growth of -51.02% relative to the same quarter last year – and this estimate may be high considering the string of misses lately.
Technical Outlook
GIII stock has been steadily falling since 2021 and has now established a well-defined downtrend. The stock continues to trade below both averages, while the 200-day moving average has acted as resistance several times throughout the down move.
While not the most accurate indicator, GIII has also experienced what is known as a ‘death cross,, wherein the stock’s 50-day moving average crosses below its 200-day moving average. GIII would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock.
Final Thoughts
The recent earnings misses in addition to deteriorating estimates are both huge red flags and need to be respected. These will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
GIII’s characteristics have resulted in worst-possible scores in each of our Zacks Growth and Momentum Style Score categories, paving the way for an overall ‘F’ VGM score. The fact that GIII is included in a bottom-performing industry group simply adds to the growing list of concerns. Investors will want to steer clear of GIII until the situation shows major signs of improvement, or possibly include it as part of a hedge or short strategy.
Additional content:
Salesforce Cuts Jobs, Shares Rise
When a publicly traded company announces layoffs, it can often boost the underlying stock price. Though this seems illogical, there are a couple of reasons this could occur.
First, layoffs can indicate that the company is trying to cut costs to improve its financial health in a tough economy. Second, job cuts can signal that the management team is focused on agility, financial efficiency, and increasing the bottom line.
Lastly, it is essential to consider that layoffs can have various impacts on a stock depending on the situation. For instance, if the layoffs are seen as desperate and a product of financial troubles, it will often impact shares negatively. Conversely, if the cuts are viewed as a long-term strategy to cut costs in an otherwise strong company, the stock will often react positively.
Early Wednesday, shares of software giant Salesforce rose after management announced that the company would be cutting 10% of its workforce. Salesforce, the worldwide leader in Customer Relationship Management (CRM - Free Report) software, was an unusual beneficiary of the pandemic. As more and more employees moved to work from home, demand for its product grew years ahead of schedule, and the stock outperformed.
However, recently, the stock has come back to Earth and underperformed as a bloated valuation, tech wreck, and the pandemic euphoria finally wearing off took its toll. So where does CRM stand now?
From a valuation perspective, the stock is getting more attractive, although shares are still expensive relative to the S&P 500 Index. For the trailing twelve-month period, CRM’s P/E of 30.56X is still bloated compared to the Zack’s Computer – Software industry’s P/E of 24.56X.
Earnings growth slowed to just +10% last quarter, though it improved over the previous two quarters. One thing the bull camp can point to is the company’s consistency in beating earnings estimates. Salesforce has surprised on earnings for 20 straight quarters.
From a technical perspective, CRM is stuck in a downtrend and approaching the 50-day moving average from below – an area of resistance.
Takeaway
It may be too early for investors to jump aboard shares of Salesforce, although the stock is getting more attractive. Investor sentiment is shifting in the short-term after the layoff announcement. Valuation is moving closer to sustainable levels, nearly matching its industry peers. With that said, technical hurdles are still in the way, and the company will need to show healthier growth when it reports earnings in its March quarter if it wants to sustain an upside move.
Why Haven’t You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Zacks Investment Research
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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.