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Arhaus and Ally Financial have been highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – January 12, 2023 – Zacks Equity Research shares Arhaus Inc. (ARHS - Free Report) as the Bull of the Day and Ally Financial Inc. (ALLY - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Meta Platforms (META - Free Report) , Snap Inc. (SNAP - Free Report) and Pinterest (PINS - Free Report) .
Arhaus Inc. recently guided above its own forecast for 2022 as the consumer continues to invest in their homes. This Zacks Rank #1 Strong Buy is cheap, with a forward P/E of just 13.9.
Arhaus is a retailer of premium home furnishings. It has more than 81 showroom and design centers across the United States as well as ecommerce capabilities. Arhaus also offers complimentary in-home design services.
Arhaus Raises Full Year 2022 Revenue and Comparable Sales Guidance
On Jan 9, 2023, Arhaus announced an update to its outlook for the fourth quarter and full year 2022.
It now expects record net revenue for 2022 of $1.223 to $1.228 billion up from its prior outlook of $1.173 to $1.193 billion.
Comparable growth is also expected to be stronger for the full year at 51% to 51.4%, up from the prior guidance of 43% to 48%.
"Demand comparable growth for the fourth quarter accelerated from the mid-single-digit range through early November to approximately 10% for the quarter overall and was approximately 13.5% for the full year," said John Reed, CEO.
Analysts Raise Full Year Estimates
The analysts got bullish this week after the increase in guidance.
2 estimates were raised for 2022, pushing the Zacks Consensus Estimate to $0.85 from $0.84. That's earnings growth of 23.2% as the company made $0.69 in 2021.
One estimate was also raised in the last week for 2023, pushing that up to $0.86 from $0.85. That's earnings growth of just 1.2% but the economy is supposed to be slowing, including housing, in 2023.
Shares Hit New 52-Week High in 2023
Arhaus went public in the fourth quarter of 2021. Shares plunged in 2022 but they have come storming back in recent weeks.
Over the last month, the stock is up 27.7% and is now hitting a 52-week high.
It's still cheap, with a PEG ratio of just 0.97. A PEG ratio under 1.0 indicates a company has both growth and value, a rare combination.
Will the consumer keep spending on home furnishings?
If you believe the answer is "yes" then Arhaus is a value stock that should be on your short list.
Analysts remain bearish on Ally Financial Inc., as they continue to cut earnings estimates ahead of fourth quarter earnings. This Zacks Rank #5 (Strong Sell) is expected to see earnings plunge 37% this year.
Ally Financial is a digital financial services company with commercial and corporate customers. It operates a digital bank, Ally Bank, which offers mortgage lending, personal lending, deposits and other banking products, as well as auto finance and insurance operations.
Ally also operates a consumer credit card business, a securities brokerage and investment advisory service and a corporate finance business for equity sponsors and middle-market companies.
A Big Miss in the Third Quarter
On Oct 19, 2022, Ally Financial reported its third quarter results and missed big on the Zacks Consensus Estimate. It missed by $0.61, with earnings at $1.12 versus the consensus of $1.73. It was the second earnings miss in a row.
Net income was $272 million compared to $683 million a year ago as higher net financing revenue was offset by higher provision for credit losses, higher noninterest expenses and lower other revenue.
The company's mortgage business was hit by rising mortgage rates which cooled the housing market.
"Financial results were partially depressed this quarter as a result of an impairment on a nonmarketable equity investment related to our mortgage business, impacting $0.33 of EPS, and higher provisions as a result of loan growth in auto finance and a larger coverage build to ensure the company remains protected as recessionary conditions feel more likely to occur in the coming months," said Jeffrey J. Brown, CEO.
Ally's provision for credit losses increased $362 million year-over-year to $438 million, due to credit losses which are normalizing in-line with expectations and CECL reserve build attributable to robust retail auto origination volume.
Most of the build came in autos where the provision for credit losses jumped $275 million year-over-year to $328 million. The retail auto net charge-off rate was 1.05%, up 78 basis points year-over-year.
Analysts Get Even More Bearish
In the three months since the third quarter report, the analysts have only gotten even more bearish. Ally is set to report fourth quarter earnings on Jan 20, 2023, and the analysts are already lowering estimates into that report.
One estimate has been lowered for both 2022 and 2023 in the last 7 days. The 2022 Zacks Consensus Estimate has fallen to $6.00 from $7.20 three months ago. That's an earnings decline of 30.3% as Ally made $8.61 last year.
The cuts have been even more dramatic for 2023. The 2023 Zacks Consensus Estimate has fallen to $3.80 from $4.17 in the last 2 months. That's another 36.7% decline.
Shares Remain Cheap
Shares of Ally Financial have plunged over the last year. They're down 46.8% in that time, but have recently staged a mini-rally and have gained 8.9% over the last month.
Even with earnings being slashed, the forward P/E is still cheap at 7x. But investors need to ask themselves, will the earnings be cut further after fourth quarter earnings next week?
Ally is also shareholder friendly. In the third quarter it had $415 million in share repurchases. It also pays a dividend, currently yielding a juicy 4.9%.
But there's a lot of uncertainty surrounding the economic environment as the Federal Reserve continues to raise interest rates. Investors might want to wait on the sidelines to see what develops with earnings estimates before diving in.
Additional content:
Checking In on Social Media Stocks
Social media has quickly gripped the world, providing the ability to connect to anyone anywhere at any time just from a few taps.
There are positives and negatives surrounding many of these applications, but one thing seems certain – it’s not going anywhere anytime soon.
With its uprising, many stocks have also gained widespread popularity, namely Meta Platforms, Snap Inc. and Pinterest.
Many of these stocks sailed through rough waters in 2022, with a hawkish Federal Reserve and soaring inflation weighing heavily on sentiment.
It’s been a rough stretch over the past year.
However, over the last month, all three stocks have outperformed the S&P 500, finally finding some buyers.
With the stocks finding some support as of late, it raises a valid question: should investors revisit these stocks? Let’s take a closer look.
Meta Platforms
Meta Platforms is the world’s largest social media platform, evolving its product portfolio from its Facebook app to others like Instagram and WhatsApp. Currently, the company carries a Zacks Rank #3 (Hold).
META has witnessed mixed earnings estimate revisions over the last several months.
The company’s valuation multiples have retraced quite significantly; META’s forward earnings multiple of 16.7X is well beneath its 23.5X five-year median, representing an 18% discount relative to the Zacks Computer and Technology sector.
Meta Platforms carries a Style Score of a “B” for Value.
META’s next quarterly release is scheduled for February 1st, 2023. Currently, the Zacks Consensus EPS Estimate of $2.11 suggests a decrease of roughly 40% year-over-year.
Pivoting to the top line, our consensus revenue estimate of $31.2 billion suggests a 7% pullback from year-ago quarterly sales of $33.7 billion.
Snap Inc.
Snap’s flagship product, Snapchat, is a mobile camera application that helps people communicate through short videos and images called Snaps. The company is a Zacks Rank #3 (Hold).
Snap has seen its earnings outlook shift negative across several timeframes over the last several months.
Similar to META, Snap has seen its valuation multiples pull back quite extensively; the company’s shares now trade at a 3.1X forward price-to-sales ratio, a fraction of its 12.5X five-year median and nearly in line with its Zacks sector average.
Snap’s next earnings release takes place on January 31st, 2023. As it stands, the Zacks Consensus EPS Estimate of $0.10 indicates a 54% Y/Y pullback. The company’s top line appears to be in better shape, with our $1.3 billion estimate suggesting a marginal 0.4% year-over-year increase.
Pinterest
Pinterest provides a platform to show users (Pinners) visual recommendations (Pins) based on their tastes and interests. The company sports a Zacks Rank #2 (Buy).
Like the stocks above, the company’s valuation multiples have pulled back by notable margins. Pinterest shares currently trade at a 5.4X forward price-to-sales, nowhere near the 11.5X median since its 2019 IPO but above its Zacks sector average by a fair margin.
Pinterest has posted strong quarterly results, exceeding the Zacks Consensus EPS Estimate in nine of its last ten quarters. In its latest release, PINS crushed bottom line estimates by 120% and reported sales 3% above expectations.
Bottom Line
As social media quickly gathers attention across the globe, so do the companies responsible for these applications.
And in 2022, they had a pretty rough showing amid a challenging macroeconomic group.
All three stocks above – Meta, Snap and Pinterest – provide exposure to social media.
In addition, all three have seen their valuation multiples pull back considerably, perhaps enticing long-term investors.
Still, a more sound strategy would be to wait until many stocks from the realm start witnessing positive earnings estimate revisions.
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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Arhaus and Ally Financial have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 12, 2023 – Zacks Equity Research shares Arhaus Inc. (ARHS - Free Report) as the Bull of the Day and Ally Financial Inc. (ALLY - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Meta Platforms (META - Free Report) , Snap Inc. (SNAP - Free Report) and Pinterest (PINS - Free Report) .
Here is a synopsis of all five stocks.
Bull of the Day:
Arhaus Inc. recently guided above its own forecast for 2022 as the consumer continues to invest in their homes. This Zacks Rank #1 Strong Buy is cheap, with a forward P/E of just 13.9.
Arhaus is a retailer of premium home furnishings. It has more than 81 showroom and design centers across the United States as well as ecommerce capabilities. Arhaus also offers complimentary in-home design services.
Arhaus Raises Full Year 2022 Revenue and Comparable Sales Guidance
On Jan 9, 2023, Arhaus announced an update to its outlook for the fourth quarter and full year 2022.
It now expects record net revenue for 2022 of $1.223 to $1.228 billion up from its prior outlook of $1.173 to $1.193 billion.
Comparable growth is also expected to be stronger for the full year at 51% to 51.4%, up from the prior guidance of 43% to 48%.
"Demand comparable growth for the fourth quarter accelerated from the mid-single-digit range through early November to approximately 10% for the quarter overall and was approximately 13.5% for the full year," said John Reed, CEO.
Analysts Raise Full Year Estimates
The analysts got bullish this week after the increase in guidance.
2 estimates were raised for 2022, pushing the Zacks Consensus Estimate to $0.85 from $0.84. That's earnings growth of 23.2% as the company made $0.69 in 2021.
One estimate was also raised in the last week for 2023, pushing that up to $0.86 from $0.85. That's earnings growth of just 1.2% but the economy is supposed to be slowing, including housing, in 2023.
Shares Hit New 52-Week High in 2023
Arhaus went public in the fourth quarter of 2021. Shares plunged in 2022 but they have come storming back in recent weeks.
Over the last month, the stock is up 27.7% and is now hitting a 52-week high.
It's still cheap, with a PEG ratio of just 0.97. A PEG ratio under 1.0 indicates a company has both growth and value, a rare combination.
Will the consumer keep spending on home furnishings?
If you believe the answer is "yes" then Arhaus is a value stock that should be on your short list.
Bear of the Day:
Analysts remain bearish on Ally Financial Inc., as they continue to cut earnings estimates ahead of fourth quarter earnings. This Zacks Rank #5 (Strong Sell) is expected to see earnings plunge 37% this year.
Ally Financial is a digital financial services company with commercial and corporate customers. It operates a digital bank, Ally Bank, which offers mortgage lending, personal lending, deposits and other banking products, as well as auto finance and insurance operations.
Ally also operates a consumer credit card business, a securities brokerage and investment advisory service and a corporate finance business for equity sponsors and middle-market companies.
A Big Miss in the Third Quarter
On Oct 19, 2022, Ally Financial reported its third quarter results and missed big on the Zacks Consensus Estimate. It missed by $0.61, with earnings at $1.12 versus the consensus of $1.73. It was the second earnings miss in a row.
Net income was $272 million compared to $683 million a year ago as higher net financing revenue was offset by higher provision for credit losses, higher noninterest expenses and lower other revenue.
The company's mortgage business was hit by rising mortgage rates which cooled the housing market.
"Financial results were partially depressed this quarter as a result of an impairment on a nonmarketable equity investment related to our mortgage business, impacting $0.33 of EPS, and higher provisions as a result of loan growth in auto finance and a larger coverage build to ensure the company remains protected as recessionary conditions feel more likely to occur in the coming months," said Jeffrey J. Brown, CEO.
Ally's provision for credit losses increased $362 million year-over-year to $438 million, due to credit losses which are normalizing in-line with expectations and CECL reserve build attributable to robust retail auto origination volume.
Most of the build came in autos where the provision for credit losses jumped $275 million year-over-year to $328 million. The retail auto net charge-off rate was 1.05%, up 78 basis points year-over-year.
Analysts Get Even More Bearish
In the three months since the third quarter report, the analysts have only gotten even more bearish. Ally is set to report fourth quarter earnings on Jan 20, 2023, and the analysts are already lowering estimates into that report.
One estimate has been lowered for both 2022 and 2023 in the last 7 days. The 2022 Zacks Consensus Estimate has fallen to $6.00 from $7.20 three months ago. That's an earnings decline of 30.3% as Ally made $8.61 last year.
The cuts have been even more dramatic for 2023. The 2023 Zacks Consensus Estimate has fallen to $3.80 from $4.17 in the last 2 months. That's another 36.7% decline.
Shares Remain Cheap
Shares of Ally Financial have plunged over the last year. They're down 46.8% in that time, but have recently staged a mini-rally and have gained 8.9% over the last month.
Even with earnings being slashed, the forward P/E is still cheap at 7x. But investors need to ask themselves, will the earnings be cut further after fourth quarter earnings next week?
Ally is also shareholder friendly. In the third quarter it had $415 million in share repurchases. It also pays a dividend, currently yielding a juicy 4.9%.
But there's a lot of uncertainty surrounding the economic environment as the Federal Reserve continues to raise interest rates. Investors might want to wait on the sidelines to see what develops with earnings estimates before diving in.
Additional content:
Checking In on Social Media Stocks
Social media has quickly gripped the world, providing the ability to connect to anyone anywhere at any time just from a few taps.
There are positives and negatives surrounding many of these applications, but one thing seems certain – it’s not going anywhere anytime soon.
With its uprising, many stocks have also gained widespread popularity, namely Meta Platforms, Snap Inc. and Pinterest.
Many of these stocks sailed through rough waters in 2022, with a hawkish Federal Reserve and soaring inflation weighing heavily on sentiment.
It’s been a rough stretch over the past year.
However, over the last month, all three stocks have outperformed the S&P 500, finally finding some buyers.
With the stocks finding some support as of late, it raises a valid question: should investors revisit these stocks? Let’s take a closer look.
Meta Platforms
Meta Platforms is the world’s largest social media platform, evolving its product portfolio from its Facebook app to others like Instagram and WhatsApp. Currently, the company carries a Zacks Rank #3 (Hold).
META has witnessed mixed earnings estimate revisions over the last several months.
The company’s valuation multiples have retraced quite significantly; META’s forward earnings multiple of 16.7X is well beneath its 23.5X five-year median, representing an 18% discount relative to the Zacks Computer and Technology sector.
Meta Platforms carries a Style Score of a “B” for Value.
META’s next quarterly release is scheduled for February 1st, 2023. Currently, the Zacks Consensus EPS Estimate of $2.11 suggests a decrease of roughly 40% year-over-year.
Pivoting to the top line, our consensus revenue estimate of $31.2 billion suggests a 7% pullback from year-ago quarterly sales of $33.7 billion.
Snap Inc.
Snap’s flagship product, Snapchat, is a mobile camera application that helps people communicate through short videos and images called Snaps. The company is a Zacks Rank #3 (Hold).
Snap has seen its earnings outlook shift negative across several timeframes over the last several months.
Similar to META, Snap has seen its valuation multiples pull back quite extensively; the company’s shares now trade at a 3.1X forward price-to-sales ratio, a fraction of its 12.5X five-year median and nearly in line with its Zacks sector average.
Snap’s next earnings release takes place on January 31st, 2023. As it stands, the Zacks Consensus EPS Estimate of $0.10 indicates a 54% Y/Y pullback. The company’s top line appears to be in better shape, with our $1.3 billion estimate suggesting a marginal 0.4% year-over-year increase.
Pinterest
Pinterest provides a platform to show users (Pinners) visual recommendations (Pins) based on their tastes and interests. The company sports a Zacks Rank #2 (Buy).
Like the stocks above, the company’s valuation multiples have pulled back by notable margins. Pinterest shares currently trade at a 5.4X forward price-to-sales, nowhere near the 11.5X median since its 2019 IPO but above its Zacks sector average by a fair margin.
Pinterest has posted strong quarterly results, exceeding the Zacks Consensus EPS Estimate in nine of its last ten quarters. In its latest release, PINS crushed bottom line estimates by 120% and reported sales 3% above expectations.
Bottom Line
As social media quickly gathers attention across the globe, so do the companies responsible for these applications.
And in 2022, they had a pretty rough showing amid a challenging macroeconomic group.
All three stocks above – Meta, Snap and Pinterest – provide exposure to social media.
In addition, all three have seen their valuation multiples pull back considerably, perhaps enticing long-term investors.
Still, a more sound strategy would be to wait until many stocks from the realm start witnessing positive earnings estimate revisions.
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.