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Dave & Buster's and Advance Auto Parts have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – June 27, 2023 – Zacks Equity Research shares Dave & Buster’s Entertainment (PLAY - Free Report) as the Bull of the Day and Advance Auto Parts (AAP - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Atmos Energy (ATO - Free Report) , Conagra Brands (CAG - Free Report) and Krispy Kreme (DNUT - Free Report) .
Dave & Buster’s Entertainment is a Zacks Rank #1 (Strong Buy) that owns and operates entertainment and dining venues for adults and families. These venues offer a niche atmosphere, where kids can play games, while adults enjoy live sports or other televised events.
The stock has been trading sideways over the last two years, but positive earnings momentum has grabbed the attention of investors. The stock recently made 2023 highs and has pulled back since. With PLAY trading up just over 10% on the year, there seems to be much more potential for the stock to run higher in the back half of the year.
About the Company
Dave & Busters was founded in 1982 and is headquartered in Coppell, Texas. The company employs over 22,000 people and has a market cap of $1.8 billion.
In addition to the strong Zacks Rank, the stock has a Zacks Style Score of “A” in Value and “B” in Growth. The stock has a Forward PE of 12, making it attractive for value investors.
Q1 Earnings
In early June, D&B reported first-quarter earnings, surprising to the upside by 24%. Q1 came in at $1.45 v $1.17 expected, while revenues were in line with expectations.
Same-store sales were down 4.1% annually. But adjusted EBITDA increased 29.8% Y/Y to $182.1 million, with margins contracting to 30.5% from 31.1% a year ago.
CEO Chris Morris had the following comments about the strong quarter:
“Our extremely talented team of operators and support center employees continue to execute on the breadth of strategic opportunities we've identified to unlock significant revenue growth and cost efficiency opportunities in our business which will continue to bring meaningful upside to all stakeholders and in all macro-economic environments. As a testament to the conviction, we have in the long-term success of our business and the value we see in our shares, we have repurchased $200 million of common stock thus far in fiscal 2023, reducing our shares outstanding by nearly 12%.”
In addition to the stock buyback, management displayed confidence in their significant liquidity profile, strong balance sheet, and substantial cash flow. The company says it will “provide the flexibility to invest in the business and opportunistically return capital to shareholders.”
Estimates Rising
While analysts are mixed on the short-term, the company is seeing earnings estimates turn higher long-term.
For the current year, numbers have gone up 12% over the last month, moving from $3.18 to $3.56. For the next year, estimates have gone higher by 14% over that same time frame, moving from $3.83 to $4.35.
Price targets for the stock are going higher as well, with a handful of analysts looking for the PLAY to move into the $60 area, or 50% higher from current levels.
After earnings, BMO moved their target to $60, from $55 and has an Outperform rating. Truist has the stock rated as a Buy and has a $63 target.
Dave & Buster’s has since held an investor day presentation to give investors a better view of the future. After that presentation, Raymond James reiterated PLAY with Strong Buy and has a price target of $60.
The Technicals
Since the COVID crash and rally, the stock has been stuck in a large sideways trading range since early 2021. The high end of this range is the $50 level and the low range is $30.
Buy-and-hold investors are no doubt frustrated by the lack of movement, but the recent earnings pop to 2023 highs brought more attention to the stock. Since then, PLAY has pulled back over 15% and almost filled the investor day gap.
For those interested in the name, current levels offer a great entry point for longer-term investors. For more active traders, the moving averages will likely offer support for a bounce.
The 200-day MA is at $37.25, while the 50-day MA is at $36.10. For more patient investors, they might wait for the “Golden Cross,” which is when that 50-day gets above the 200-day. If that occurs it would be a positive sign for momentum and bring more buyers into the stock.
Looking at resistance, the $45-50 level has been a big hurdle. If the stock can get some more upside above that $50 area, the bulls should target a continued extension to the $62 area.
Bottom Line
Dave & Buster’s is a great place for family fun, but the stock has been stuck going sideways after almost two years. Earnings momentum appears to have brought excitement to the name and investors should be watching the stock closely.
The most recent move lower offers a great risk-reward opportunity for both short-term traders and buy-and-hold investors.
If the bulls can keep the 50-day MA level intact, the stock should eventually grind back to those post-earnings highs. If the company can continue its earnings momentum, a move to that $60 level in the back half of the year is possible.
Advance Auto Parts is a Zacks Rank #5 (Strong Sell) that provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy-duty trucks. The company is a leading automotive parts provider in North America, serving the “do-it-yourself” or “DIY customers.
After seeing strong earnings during the pandemic, AAP hit all-time highs in early 2022. However, the stock has sold off 73% since those $244 highs and sits at $66 after a 40% drop in June.
While some might be looking to buy after this recent drop, it might take a while to see a bounce. An earnings miss and cascading estimates will likely keep the stock suppressed unless the company can turn the momentum.
About the Company
Advance Auto Parts is headquartered in Raleigh, NC.The company was founded in 1929 and employs 40,000.
The company operates under four store names: Advance Auto Parts, Carquest, Worldpac, and Autopart International.
AAP is valued at $4 billion and has a Forward PE of 11. The stock holds Zacks Style Scores of “B” in Value, but “F” in Growth and Momentum. The stock pays a dividend of 1.5%.
Q1 Earnings
In late May Advance Auto reported Q1 earnings, missing expectations by 72%. The company missed on revenues, cut its outlook, and slashed the dividend 83%. FY23 was cut to $6.00-6.50 v the $10.63 expected.
Operating margins were 2.6%, down from 6% a year ago. Management blamed this drop on “higher than planned investments to narrow competitive price gaps in the professional sales channel as well as unfavorable product mix.”
The combination of weak guidance and the dividend cut brought in the sellers. And since earnings the stock fell even lower as analyst estimates continue to drop.
Estimates
Over the last 30 days, analysts have cut estimates for all time-frames.
For the current quarter, analysts have dropped their numbers from $2.89 to $1.59: -$0.87, or 45%.
For the next quarter, analysts lowered estimates from $2.82 to $2.01, or 29%.
Longer term, numbers are falling as well. Next year’s estimates have gone from $11.53-6.95 or 40%.
Technical Take
The stock has taken out the COVID lows and has fallen to levels not seen since 2012. When a stock takes out decade lows, it typically means investors have given up on the name.
While there might be a bounce at some point, investors that have been stuck long likely look to get out on any bounce. Looking at moving averages, the 21-day is at $76, while the 50-day is at $103.
While it might be tempting to buy at current levels and look for a run into those MA resistance levels, there is still a possibility of more downside.
The 2012 lows are $60, while the $2010 lows and big long-term support are at $40. New buyers can likely be patient and wait for those levels if they are interested in the name.
In Summary
When a stock makes decade lows, investors are running to get out. While it might be tempting to buy the large sell-off, the risk-reward is unknown when a stock is falling like a waterfall.
If investors are interested in AAP, they can be patient and wait for price to come to them, or look for the earnings story to turn around.
Additional content:
3 Recession-Proof Stocks to Buy for the 2nd Half of 2023
The U.S. economy expanded in the first quarter and is expected to grow again in the second quarter. However, a prominent index has been signaling recession for months, while recently, an inverted yield curve confirmed that economic growth might shrink soon.
This calls for investing in recession-proof stocks like Atmos Energy, Conagra Brands and Krispy Kreme for steady returns.
Leading Economic Index Yet Again Declines
The Leading Economic Index (LEI), tracked by the Conference Board, declined by 0.7% to a reading of 106.7 in May, following a drop of 0.6% in April. The LEI has now registered its 14th successive monthly decline, signaling an impending economic slump.
The LEI, incidentally, declined by 4.3% from November 2022 to May 2023, a steeper decline compared to the drop of 3.8% between May 2022 and November 2022, pointing toward weaker economic activity soon.
The Conference Board’s, Senior Manager, Justyna Zabinska-La Monica, said that the economy is expected to contract from the beginning of the third quarter of this year to the first three-month period of 2024. She believes that lower government outlays and tightening monetary policy will likely lead to a recession.
Yield-Curve Inversion Signals Economic Downturn
Last week, the U.S. government’s borrowing costs for the short term surpassed their long-term counterparts, and the gap is quickly approaching the record touched during the banking turmoil in March.
On Jun 21, the 2-year Treasury yield was at 4.74%, while the yield for the 10-year Treasury came in at 3.78%, resulting in an inverted yield curve. Needless to say, inverted yield curve situations have always preceded a recession in the last five decades.
An inverted yield curve leads to a worsening credit condition, leading to an imminent recession. The inversion deepened as the Federal Reserve continues to stay hawkish. The central bank’s tightening monetary policy to curb inflation will eventually raise borrowing costs, and deter economic growth.
Lest we forget, Fed Chair Jerome Powell confirmed that it’s imperative to hike interest rates this year to bring down price pressures. He acknowledged that even if inflation has moderated, it remains above the Fed’s target of 2% (read more: 3 Top Bank Stocks to Gain as Powell Stays Hawkish).
3 Recession-Proof Stocks to Buy Now
With threats of a recession looming, it’s judicious for investors to place bets on stocks that are unfazed by economic downturn-led market gyrations. These recession-proof stocks mostly belong to the utilities and consumer staple sectors since the demand for their products like water, gas, electricity, food, and personal care products remains unaltered in any economic situation.
We have, thus, selected three stocks from the aforesaid areas that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth, and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
Atmos Energy is engaged in the regulated natural gas distribution and storage business. Atmos Energy, currently, has a Zacks Rank #2 and a VGM Score of B.
The Zacks Consensus Estimate for its current-year earnings has moved up 0.5% over the past 60 days. ATO’s expected earnings growth rate for the current year is 7.7%.
Conagra Brands is one of the leading branded food companies in North America. Conagra Brands, currently, has a Zacks Rank #2 and a VGM Score of B.
The Zacks Consensus Estimate for its next-year earnings has moved up 0.7% over the past 60 days. CAG’s expected earnings growth rate for the current year is nearly 17%.
Krispy Kreme operates as a branded retailer and wholesaler of doughnuts, coffee, and other complementary beverages and treats, and packaged sweets. Krispy Kreme, currently, has a Zacks Rank #2 and a VGM Score of B.
The Zacks Consensus Estimate for its next-year earnings has moved up 2.4% over the past 60 days. DNUT’s expected earnings growth rate for the current year is 13.8%.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. 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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Dave & Buster's and Advance Auto Parts have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – June 27, 2023 – Zacks Equity Research shares Dave & Buster’s Entertainment (PLAY - Free Report) as the Bull of the Day and Advance Auto Parts (AAP - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Atmos Energy (ATO - Free Report) , Conagra Brands (CAG - Free Report) and Krispy Kreme (DNUT - Free Report) .
Here is a synopsis of all five stocks.
Bull of the Day:
Dave & Buster’s Entertainment is a Zacks Rank #1 (Strong Buy) that owns and operates entertainment and dining venues for adults and families. These venues offer a niche atmosphere, where kids can play games, while adults enjoy live sports or other televised events.
The stock has been trading sideways over the last two years, but positive earnings momentum has grabbed the attention of investors. The stock recently made 2023 highs and has pulled back since. With PLAY trading up just over 10% on the year, there seems to be much more potential for the stock to run higher in the back half of the year.
About the Company
Dave & Busters was founded in 1982 and is headquartered in Coppell, Texas. The company employs over 22,000 people and has a market cap of $1.8 billion.
In addition to the strong Zacks Rank, the stock has a Zacks Style Score of “A” in Value and “B” in Growth. The stock has a Forward PE of 12, making it attractive for value investors.
Q1 Earnings
In early June, D&B reported first-quarter earnings, surprising to the upside by 24%. Q1 came in at $1.45 v $1.17 expected, while revenues were in line with expectations.
Same-store sales were down 4.1% annually. But adjusted EBITDA increased 29.8% Y/Y to $182.1 million, with margins contracting to 30.5% from 31.1% a year ago.
CEO Chris Morris had the following comments about the strong quarter:
“Our extremely talented team of operators and support center employees continue to execute on the breadth of strategic opportunities we've identified to unlock significant revenue growth and cost efficiency opportunities in our business which will continue to bring meaningful upside to all stakeholders and in all macro-economic environments. As a testament to the conviction, we have in the long-term success of our business and the value we see in our shares, we have repurchased $200 million of common stock thus far in fiscal 2023, reducing our shares outstanding by nearly 12%.”
In addition to the stock buyback, management displayed confidence in their significant liquidity profile, strong balance sheet, and substantial cash flow. The company says it will “provide the flexibility to invest in the business and opportunistically return capital to shareholders.”
Estimates Rising
While analysts are mixed on the short-term, the company is seeing earnings estimates turn higher long-term.
For the current year, numbers have gone up 12% over the last month, moving from $3.18 to $3.56. For the next year, estimates have gone higher by 14% over that same time frame, moving from $3.83 to $4.35.
Price targets for the stock are going higher as well, with a handful of analysts looking for the PLAY to move into the $60 area, or 50% higher from current levels.
After earnings, BMO moved their target to $60, from $55 and has an Outperform rating. Truist has the stock rated as a Buy and has a $63 target.
Dave & Buster’s has since held an investor day presentation to give investors a better view of the future. After that presentation, Raymond James reiterated PLAY with Strong Buy and has a price target of $60.
The Technicals
Since the COVID crash and rally, the stock has been stuck in a large sideways trading range since early 2021. The high end of this range is the $50 level and the low range is $30.
Buy-and-hold investors are no doubt frustrated by the lack of movement, but the recent earnings pop to 2023 highs brought more attention to the stock. Since then, PLAY has pulled back over 15% and almost filled the investor day gap.
For those interested in the name, current levels offer a great entry point for longer-term investors. For more active traders, the moving averages will likely offer support for a bounce.
The 200-day MA is at $37.25, while the 50-day MA is at $36.10. For more patient investors, they might wait for the “Golden Cross,” which is when that 50-day gets above the 200-day. If that occurs it would be a positive sign for momentum and bring more buyers into the stock.
Looking at resistance, the $45-50 level has been a big hurdle. If the stock can get some more upside above that $50 area, the bulls should target a continued extension to the $62 area.
Bottom Line
Dave & Buster’s is a great place for family fun, but the stock has been stuck going sideways after almost two years. Earnings momentum appears to have brought excitement to the name and investors should be watching the stock closely.
The most recent move lower offers a great risk-reward opportunity for both short-term traders and buy-and-hold investors.
If the bulls can keep the 50-day MA level intact, the stock should eventually grind back to those post-earnings highs. If the company can continue its earnings momentum, a move to that $60 level in the back half of the year is possible.
Bear of the Day:
Advance Auto Parts is a Zacks Rank #5 (Strong Sell) that provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy-duty trucks. The company is a leading automotive parts provider in North America, serving the “do-it-yourself” or “DIY customers.
After seeing strong earnings during the pandemic, AAP hit all-time highs in early 2022. However, the stock has sold off 73% since those $244 highs and sits at $66 after a 40% drop in June.
While some might be looking to buy after this recent drop, it might take a while to see a bounce. An earnings miss and cascading estimates will likely keep the stock suppressed unless the company can turn the momentum.
About the Company
Advance Auto Parts is headquartered in Raleigh, NC.The company was founded in 1929 and employs 40,000.
The company operates under four store names: Advance Auto Parts, Carquest, Worldpac, and Autopart International.
AAP is valued at $4 billion and has a Forward PE of 11. The stock holds Zacks Style Scores of “B” in Value, but “F” in Growth and Momentum. The stock pays a dividend of 1.5%.
Q1 Earnings
In late May Advance Auto reported Q1 earnings, missing expectations by 72%. The company missed on revenues, cut its outlook, and slashed the dividend 83%. FY23 was cut to $6.00-6.50 v the $10.63 expected.
Operating margins were 2.6%, down from 6% a year ago. Management blamed this drop on “higher than planned investments to narrow competitive price gaps in the professional sales channel as well as unfavorable product mix.”
The combination of weak guidance and the dividend cut brought in the sellers. And since earnings the stock fell even lower as analyst estimates continue to drop.
Estimates
Over the last 30 days, analysts have cut estimates for all time-frames.
For the current quarter, analysts have dropped their numbers from $2.89 to $1.59: -$0.87, or 45%.
For the next quarter, analysts lowered estimates from $2.82 to $2.01, or 29%.
Longer term, numbers are falling as well. Next year’s estimates have gone from $11.53-6.95 or 40%.
Technical Take
The stock has taken out the COVID lows and has fallen to levels not seen since 2012. When a stock takes out decade lows, it typically means investors have given up on the name.
While there might be a bounce at some point, investors that have been stuck long likely look to get out on any bounce. Looking at moving averages, the 21-day is at $76, while the 50-day is at $103.
While it might be tempting to buy at current levels and look for a run into those MA resistance levels, there is still a possibility of more downside.
The 2012 lows are $60, while the $2010 lows and big long-term support are at $40. New buyers can likely be patient and wait for those levels if they are interested in the name.
In Summary
When a stock makes decade lows, investors are running to get out. While it might be tempting to buy the large sell-off, the risk-reward is unknown when a stock is falling like a waterfall.
If investors are interested in AAP, they can be patient and wait for price to come to them, or look for the earnings story to turn around.
Additional content:
3 Recession-Proof Stocks to Buy for the 2nd Half of 2023
The U.S. economy expanded in the first quarter and is expected to grow again in the second quarter. However, a prominent index has been signaling recession for months, while recently, an inverted yield curve confirmed that economic growth might shrink soon.
This calls for investing in recession-proof stocks like Atmos Energy, Conagra Brands and Krispy Kreme for steady returns.
Leading Economic Index Yet Again Declines
The Leading Economic Index (LEI), tracked by the Conference Board, declined by 0.7% to a reading of 106.7 in May, following a drop of 0.6% in April. The LEI has now registered its 14th successive monthly decline, signaling an impending economic slump.
The LEI, incidentally, declined by 4.3% from November 2022 to May 2023, a steeper decline compared to the drop of 3.8% between May 2022 and November 2022, pointing toward weaker economic activity soon.
The Conference Board’s, Senior Manager, Justyna Zabinska-La Monica, said that the economy is expected to contract from the beginning of the third quarter of this year to the first three-month period of 2024. She believes that lower government outlays and tightening monetary policy will likely lead to a recession.
Yield-Curve Inversion Signals Economic Downturn
Last week, the U.S. government’s borrowing costs for the short term surpassed their long-term counterparts, and the gap is quickly approaching the record touched during the banking turmoil in March.
On Jun 21, the 2-year Treasury yield was at 4.74%, while the yield for the 10-year Treasury came in at 3.78%, resulting in an inverted yield curve. Needless to say, inverted yield curve situations have always preceded a recession in the last five decades.
An inverted yield curve leads to a worsening credit condition, leading to an imminent recession. The inversion deepened as the Federal Reserve continues to stay hawkish. The central bank’s tightening monetary policy to curb inflation will eventually raise borrowing costs, and deter economic growth.
Lest we forget, Fed Chair Jerome Powell confirmed that it’s imperative to hike interest rates this year to bring down price pressures. He acknowledged that even if inflation has moderated, it remains above the Fed’s target of 2% (read more: 3 Top Bank Stocks to Gain as Powell Stays Hawkish).
3 Recession-Proof Stocks to Buy Now
With threats of a recession looming, it’s judicious for investors to place bets on stocks that are unfazed by economic downturn-led market gyrations. These recession-proof stocks mostly belong to the utilities and consumer staple sectors since the demand for their products like water, gas, electricity, food, and personal care products remains unaltered in any economic situation.
We have, thus, selected three stocks from the aforesaid areas that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth, and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
Atmos Energy is engaged in the regulated natural gas distribution and storage business. Atmos Energy, currently, has a Zacks Rank #2 and a VGM Score of B.
The Zacks Consensus Estimate for its current-year earnings has moved up 0.5% over the past 60 days. ATO’s expected earnings growth rate for the current year is 7.7%.
Conagra Brands is one of the leading branded food companies in North America. Conagra Brands, currently, has a Zacks Rank #2 and a VGM Score of B.
The Zacks Consensus Estimate for its next-year earnings has moved up 0.7% over the past 60 days. CAG’s expected earnings growth rate for the current year is nearly 17%.
Krispy Kreme operates as a branded retailer and wholesaler of doughnuts, coffee, and other complementary beverages and treats, and packaged sweets. Krispy Kreme, currently, has a Zacks Rank #2 and a VGM Score of B.
The Zacks Consensus Estimate for its next-year earnings has moved up 2.4% over the past 60 days. DNUT’s expected earnings growth rate for the current year is 13.8%.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
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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.