For Immediate Release
Chicago, IL – June 8, 2023 – Zacks Equity Research shares e.l.f. Beauty (
ELF Quick Quote ELF - Free Report) as the Bull of the Day and Macy’s ( M Quick Quote M - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Bluegreen Vacations Holding Corporation ( BVH Quick Quote BVH - Free Report) , Inspired Entertainment, Inc. ( INSE Quick Quote INSE - Free Report) and VirTra, Inc. ( VTSI Quick Quote VTSI - Free Report) .
Here is a synopsis of all five stocks:
e.l.f. Beauty is a Zacks Rank #1 (Strong Buy) that operates as a cosmetic company. The company offers eye, lip, face, face, paw, and skin care products.
The stock has had an amazing run, up over 300% since June of 2022. The move started in the back half of last year, but continued in 2023, helping ELF up over 90% year to date.
The question for investors after this move is if there is any meat left on the bone. And if so, what are some good entry points for investors to get in.
About the Company
ELF was formerly known as J.A. Cosmetics Holdings and changed its name to e.l.f. Beauty in April 2016. The company was started in 2004 and is headquartered in Oakland, California.
The stock has a Zacks Style Score of “A” in Growth and “A” in Momentum. Value investors will shy away from this one as the Forward PE is 60. This gives the stock a Zacks Style Score of “F” in Value.
ELF employs over 300 employees and sells its products through national and international retailers and direct-to-consumer channels, which include e-commerce platforms.
Q1 Earnings Beat
In late May, ELF beat earnings by 110%. This was the ninth straight EPS beat that stretches back to 2021.
Looking at the quarter, the company reported EPS of $6.88 v the $6.76 expected. Revenues came in at $2.63B v the $2.61B and the company affirmed its outlook. Same Store Sales were up 9.3% and management cited the strength of the beauty category, business model, product line, and loyalty program as reasons for the outperformance.
The company affirmed its FY23 EPS, SSS, capex, and store openings.
Merchandise inventories did increase, but management commented this was to support higher demand, product cost increases, 41 net new stores, new brand launches, and brand expansions.
Analysts loved the quarter and took their estimates and price targets higher.
Since earnings, estimates for the current quarter have gone from $0.47 to $0.56 or 19%. However, for the next quarter, we see only a 5% jump over that same time frame.
Looking at the current year, we see estimates heading 10% higher over the last month. Analysts have hiked from $1.62 to $1.78 since earnings were reported.
For next year, numbers have been taken to $2.08 from $1.98 a month ago. This is a move of 5% to the upside.
Since earnings, multiple analysts have taken price targets higher for ELF:
JPMorgan Chase reiterated ELF with Overweight taking their price target to $102 from $87.
TD Cowen reiterated ELF with Market Perform, lifting their price target to $105 from $70.
DA Davidson maintained a Buy and raised the price target from $121 to $124.
The stock has gone up at a 45-degree angle since June of last year.
Recently making highs of $108.43, most of the short sellers have been taken out of the name. In fact, the short interest is only at 4% of the float. While the stock might go higher from here, at some point we will see a sell-off so let’s look at some buyable levels.
The $96 level is where the 21-day resides. If the recent highs hold, this level would align with a halfway-back retracement drawn from the pre-earnings levels to highs. If this spot were to fail, watch the $91 level, which is the 50-day moving average.
For those looking for a larger move, the 200-day is at $63. This is not likely unless we get a broad market move lower.
Cosmetics have been one of the hottest segments of the market over the last year. The momentum is strong and ELF likely continues higher over the near term.
Its hard to chase at current levels, so investors should watch for buyable pullbacks to take advantage of the long-term trend.
Macy’s is a Zacks Rank #5 (Strong Sell) that is an omni-channel retail organization, that operates stores, websites, and mobile applications. The company trades in a wide range of merchandise, including men’s, women’s, and children’s apparel and accessories, cosmetics, home furnishings, and other consumer goods.
The stock is bouncing after a bad earnings announcement late last week. While this is a relief to those stuck in the name, this is likely a great opportunity to exit the stock. Technical resistance and falling earnings estimates will continue to be a hurdle going forward.
About the Company
Macy’s is headquartered in New York, NY, and employs over 94,000 people. The company was founded in 1930 and was formerly known as Federated Department Stores.
Macy’s operates under three brands Macy's, Bloomingdale's, and bluemercury.
The stock values the company at $4.3 billion and has a Forward PE of 5. The low PE gives the stock a Zacks Style Score of “A” in Value. However, the stock scores an “F” in Momentum. The stock pays a dividend of just over 4%.
In early June, Macy’s reported a 22% EPS beat but missed on revenues. The company also guided lower, dropping its FY23 range to $2.70-3.20 v the $3.73 expected. Macy’s sees comparable sales down -7.5 to -6%, lower than the previous -4% to -2% expected.
With that, the company guided Q2 lower. They now see Q2 at $0.10-0.15 v the $0.73 expected.
Management cited weakened demand trends in their discretionary categories. This forced markdowns, which was the reason for the adjusted guide lower.
Analysts were forced to lower their estimates because of the guide.
Since earnings, numbers from the current quarter have fallen 70%, dropping from $0.73 to $0.22.
For the current year, we see a 14% drop, with estimates dropping from $3.79 a month ago to $3.26 today.
Looking to next year, there is little improvement. Analysts have lowered estimates 13% over the last 7 days.
After the numbers were released, Macy’s traded to the lows of the year, hitting $12.80. However, buyers stepped in and the stock got back most of the losses. Since then, the stock continued to squeeze higher, up over 25% from those lows.
Some of the bad news was likely priced in, which created a buy-the-news event. But investors should remain cautious about this rally.
The stock has run into the 50-day moving average and last time this happened back in March, the stock dropped over 20% in just a couple of weeks.
Investors should expect volatility to remain and avoid the stock until the fundamentals improve.
Macy’s is bouncing due to oversold conditions, but investors should take the opportunity to take their lumps into the up move. There is likely more selling to show itself after the squeeze higher is over.
Additional content: What's Common Between BVH, INSE and VTSI?
When stocks appreciate notably in a relatively short period of time, it makes sense to ask ourselves why did it happened. For all you know, this will help you stumble upon opportunity that your normal screening activity didn’t pull up. That’s what had me taking a closer look at Bluegreen Vacations Holding Corporation, Inspired Entertainment, Inc. and VirTra, Inc..
share price jumped 5.8% during the course of the past week, INSE jumped 5.9% while VTSI did the best of the lot, with a markup of 7.0%.
As the next step, I wanted to check out what
brokers think about these companies. Because brokers often have field knowledge/experience and prepare advanced models that help them understand the fundamentals of a company and calculate/project the performance of its stock, consulting broker opinions is always a good idea. And so, I discovered that the average broker rating on all three stocks is 1, which translates into a Strong Buy rating. Hurray. That means brokers are thrilled with these stocks.
If brokers are rooting for these stocks, in all probability, they will be raising their estimates on them. Most of us who have been following the markets for some time have figured out that it is these
estimate revisions that tend to push up share prices. Even if it doesn’t happen immediately – in fact in many cases it doesn’t happen immediately – share prices definitely do ride up higher in response to positive estimate revisions. Here too I wasn’t disappointed. In just a period of 30 days, 2023 estimates for Bluegreen, Inspired Entertainment and Virtra have climbed a respective 2.5%, 14.6% and 95.7%. Virtra estimates for 2024 are only just available now, but Bluegreen and Inspired estimates are showing increases of 3.3% and 11.9%, respectively. Alright, VTSI looks most attractive from this perspective and BVH the least. But they’re all still worth considering.
For additional drivers, I decided to check the
industries to which these companies belong. As most of us already know, there are certain factors within an industry that tend to lift all players, or at the very least, these factors make a difference in the company’s overall operation. They could make life easier or tougher for the players.
Bluegreen for example, belongs to the Leisure and Recreation Services industry. This is the summer and everyone is going on vacation. Need I say more! But here at Zacks, there’s also a system of rating industries. And Zacks says this industry deserves to be in the top 23% of the 250 odd industries that it classifies.
Again, Inspired Entertainment belongs to the Technology Services industry, which Zacks has placed in the top 43%. While still in the upper hemisphere, this position is obviously not as exciting as the first. But we can take heart from the fact that historically, it has been seen that the bottom half underperforms the top half by approximately 1:2.
That brings us to Virtra, which is placed in the Electronics – Military industry, which is the cream of the cream (top 1%).
No prizes for guessing the winner here!
Finally, let’s turn to
valuation. Because no matter how great a stock is, this may not be the best time to buy it. It’s best to always pick stocks that are appreciating although still undervalued (which means that they are trading below their potential). There are a number of ways to check a stock’s valuation, some more complicated than others. But we’ll stick to the simplest method, i.e. price-to-earnings ratio (P/E). So let’s get down to it:
Bluegreen’s 7.79X P/E trades at a 69.0% discount to the industry’s 25.11X P/E and a 59.0% discount to the S&P’s 18.98X. While trading at a 17.5% premium to their median value, the shares should not be considered overvalued because this is well below the annual high, especially given that the company’s prospects continue to improve.
As far as Inspire Entertainment is concerned, its not surprising that its P/E of 12.59X hugely trails the industry’s 46.0X because the industry valuation appears very high. Therefore, it’s encouraging that the shares also trade at a 33.7% discount to the S&P 500. They also happen to be trading somewhere between their median and high points over the past year, indicating that upside potential cannot be ruled out.
Virtra shares trade at 16.18X P/E, a 14.8% discount to the S&P 500 and a 1.3% discount to the industry’s 16.39X. They’re also trading at a discount of 17.5% to their own 12.59X median value over the past year. Therefore, the shares are definitely undervalued.
Finally, all three carry a Zacks Rank #1, which is a Strong Buy rating from Zacks. Therefore, there’s only one way to conclude this piece and that is by recommending you go for these stocks.
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