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Shopify and The Allstate Corporation have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – July 14, 2023 – Zacks Equity Research shares Shopify (SHOP - Free Report) as the Bull of the Day and The Allstate Corporation (ALL - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Paychex (PAYX - Free Report) , CME Group (CME - Free Report) and Adobe (ADBE - Free Report) .
In a 2011 Wall Street Journal Article, famous founder, technologist, and venture capital legend Marc Andreessen once wrote that "Software is eating the world." The quote was in response to the fact that, at the time, many Wall Street analysts were arguing that tech companies had valuations that were too high.
However, in a brilliant act of foresight, Andreessen correctly predicted the wave of software into the economy by saying, "My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy." While the article dates back to 2011, the meteoric shift that Andreesen predicted is still taking place today, and Zacks Rank #1 (Strong Buy) stock Shopify is at the forefront.
Company Overview
Shopify provides a cloud-based commerce platform for small and medium-sized businesses. In simple terms, people use the Shopify platform to help create and manage their online businesses. Shopify empowers online businesses with website setup, product showcases, payment processing, and shipping.
With Shopify, users can choose from various templates to design and customize their store to fit their brand and brand goals. From its IPO in 2014, the stock was a market leader from a fundamental and technical perspective. Shares rose from single digits to more than $140 per share.
Strong Earnings Growth Anticipated
Though the stock finally corrected at the end of 2020, it remains the dominant player in its space. While the stock fell during and in the aftermath of COVID-19, the fall was likely not company-specific but rather due to profit-taking and the macro environment. Ironically, the COVID-19 pandemic became a massive catalyst because it sped up e-commerce adoption and, thus, SHOP.
Analysts agree. Analysts who cover Shopify foresee robust earnings over the coming quarters.
A Positive Earnings ESP Score
The company also beat earnings by 125% last quarter and sports a positive Earnings ESP score which suggests that it is likely to beat earnings when it reports in early August.
Technical Breakout
Finally, the price chart is shaping up. Earlier this year, the 50-day moving average crossed above the 200-day moving average to form a bullish golden cross. Yesterday, SHOP broke out of a multi-week base structure on massive volume turnover.
Valuation
Though Shopify has grown its earnings dramatically since its IPO in 2015, its price-to-sales ratio is hovering near all-time lows. Furthermore, analysts predict record earnings within the next two years. Meanwhile, the stock is well off its all-time high of over $160.
Industry Strength
The old saying that "birds of a feather tend to flock together" applies in the stock market. That's good news for Shopify investors. Other software names, such Unity Software and Salesforce broke out this week – lending more credibility to the move in Shopify.
Conclusion
Shopify stands out from all angles. The software leader has top-tier fundamentals, a historically low valuation, strong analyst estimates, and an attractive chart pattern. Expect Shopify shares to be much higher into 2024.
Founded in 1931 and headquartered in Northbrook, IL, The Allstate Corporation is the third-largest property-casualty (P&C) insurer and the largest publicly-held personal lines carrier in the U.S. Beyond property insurance, the company also provides a range of life insurance and investment products to its diverse customer base.
Headwinds
Catastrophic Loss Risk
The risk of losses due to catastrophic losses is unavoidable for companies like Allstate that are in the property insurance business. Though Allstate's management can do its best to reduce such losses through its catastrophe management strategy and reinsurance programs, it cannot control the weather. Weather-related losses over the years have put a strain on the company and have increased dramatically since 2019.
For example, in 2022, the company incurred roughly $3.1 billion in catastrophic losses. Meanwhile, in 2023, losses from weather-related damages are expected to more than double year-over-year.
Ballooning Debt
The catastrophic losses incurred by the company have led to exploding levels of debt. Since 2020, Allstate's debt-to-equity ratio has more than doubled. Remember, the more debt a company incurs, the more interest it will pay.
Lack of Growth and High Valuation
The two main investor baskets that exist are growth and value – or a combination of the two (Growth at a Reasonable Price, or GARP). Unfortunately for Allstate's stock, the company is unattractive from both perspectives. Last quarter, the company posted a loss of $1.30 per share in EPS. Meanwhile, abysmal single-digit sales growth is expected until the end of 2024.
Conversely, despite the lack of growth and expected growth moving forward, Allstate remains overvalued. ALL's price-to-book ratio of 1.84 is much higher than its peer groups price to book of 1.62.
Relative Weakness
Allstate is a relatively stable, slow-growth, old economy type company. In the current risk-on market environment, stocks like Allstate are lagging, while growthy, tech-oriented stocks outperform.
Takeaway
Unpredictability, a high valuation, and rising debt are reasons to avoid Allstate shares. Furthermore, the stock is in a poor environment, and the chart indicates relative weakness.
Additional content:
3 Incredible Stocks Trading at Historical Discounts
When great stocks go on sale investors must act decisively.
Rarely do the best companies trade down to deep discounts, but when they do finally get below their historic averages, it can be a powerful signal for strong forward returns.
Today I will share three extremely high-quality businesses, with long histories of successful execution, winning business models, and high Zacks Ranks. For investors looking to add long-term holdings to their portfolios these may be great picks for the next few years.
Paychex, CME Group and Adobe all boast exceptional business staying power ensuring their future returns and have outperformed the market index over the last 10 years.
Paychex
Paychex is a prominent provider of payroll, human resources, and benefits outsourcing solutions for businesses of all sizes. With a strong market presence, Paychex offers comprehensive services, including payroll processing, tax administration, employee benefits, and regulatory compliance assistance.
The company's reliable and user-friendly platforms empower organizations to streamline their HR operations effectively. PAYX serves over 740,000 customers in the US and Europe and delivers one out of every 12 American workers' paycheck.
Paychex has grown with incredible consistency on both the top and bottom line over the last 25 years. Sales have grown from $1 billion to $5 billion over that time, with just two years that didn't experience growth. EPS have grown from $0.37 to $4.28, which is an incredible CAGR of 10.3%.
PAYX has also paid out a dividend every year over the last 25 years. It currently yields 3% and has increased the payment by an average of 8.5% annually over the last five years.
With a Zacks Rank #2 (Buy) rating, PAYX has experienced some slight earning estimate upgrades over recent months. Next quarter estimates have been revised higher by 1% and are projected to grow 11.1% YoY. FY23 earnings expectations have also been increased by 1% and are forecast to grow by 9.4% YoY.
Paychex is trading at a one-year forward earnings multiple of 25.3x, which is above the industry average of 20.6x, and below its five-year median of 28x.
CME Group
CME Group is the largest futures exchange in the world in terms of trading volume as well as notional value traded. The Chicago Mercantile Exchange was originally formed as a non-profit organization in 1898 but was converted to a for-profit company in 2000. It became the first publicly traded financial exchange in the U.S. in Dec 2002.
CME Group offers a broad range of products covering major asset classes, based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, and metals. Trades are executed through CME Group's electronic trading platforms, open outcry and privately negotiated transactions. CME Group also operates one of the world's leading central counterparty clearing providers through CME Clearing and CME Clearing Europe, which offer clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives.
CME has more than 10x'd both its sales and earnings over the last 25 years. Annual sales have grown from $430 million to $5.1 billion, and EPS has climbed from $0.69 to $8.29 per share.
The company introduced a dividend 20 years ago and it has since grown from $0.13 per share to $8.60 per share. Today CME has a dividend yield of 2.4% and has raised it an average of 9.8% annually over the last five years.
CME has experienced some earnings estimate upgrades over the last two months, reflected by its Zacks Rank #2 (Buy). Analysts have unanimously upgraded estimates across timeframes. Current quarter earnings estimates have been revised higher by 2.4% and are expected to grow 8.1% YoY.
CME Group is trading at a one year forward earnings multiple of 20.8x, which is below the industry average of 25x, and below its five-year median of 26.7x. This is just off the ten year low in terms of forward earnings and offers a compelling opportunity.
Adobe
Adobe is one of the largest software companies in the world collecting licensing fees from customers, which form the bulk of its revenue. ADBE also offers technical support and education, which accounts for the balance.
Not only have Adobe earnings grown steadily, but they have accelerated considerably in the last decade, forming the always desirable hockey stick chart. Adobe's EPS have compounded at a ridiculous 14.4% annually over the last 25 years and its stock has appreciated over 9,000% over that period.
Adobe also has a Zacks Rank #2 (Buy), indicating upward trending earnings revisions. Current quarter earnings estimates have been revised higher by 3% and are expected to grow 16.8% YoY. FY23 earnings estimates have been upgraded by 2% and are projected to increase by 14.5% YoY.
Adobe is trading at a one year forward earnings multiple of 40.4x, which is above the industry average of 34.2x, and below its five-year median of 44.4x.
Bottom Line
It is hard to go wrong buying industry-leading stocks at historical discounts. If you are an investor with a longer time horizon, these may be perfect fits for your portfolio. Additionally, with the strong earnings revisions trends they all demonstrate, the near-term expectations of the stocks are also strong.
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/performancefor information about the performance numbers displayed in this press release.
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Shopify and The Allstate Corporation have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 14, 2023 – Zacks Equity Research shares Shopify (SHOP - Free Report) as the Bull of the Day and The Allstate Corporation (ALL - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Paychex (PAYX - Free Report) , CME Group (CME - Free Report) and Adobe (ADBE - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
"Software is Eating the World"
In a 2011 Wall Street Journal Article, famous founder, technologist, and venture capital legend Marc Andreessen once wrote that "Software is eating the world." The quote was in response to the fact that, at the time, many Wall Street analysts were arguing that tech companies had valuations that were too high.
However, in a brilliant act of foresight, Andreessen correctly predicted the wave of software into the economy by saying, "My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy." While the article dates back to 2011, the meteoric shift that Andreesen predicted is still taking place today, and Zacks Rank #1 (Strong Buy) stock Shopify is at the forefront.
Company Overview
Shopify provides a cloud-based commerce platform for small and medium-sized businesses. In simple terms, people use the Shopify platform to help create and manage their online businesses. Shopify empowers online businesses with website setup, product showcases, payment processing, and shipping.
With Shopify, users can choose from various templates to design and customize their store to fit their brand and brand goals. From its IPO in 2014, the stock was a market leader from a fundamental and technical perspective. Shares rose from single digits to more than $140 per share.
Strong Earnings Growth Anticipated
Though the stock finally corrected at the end of 2020, it remains the dominant player in its space. While the stock fell during and in the aftermath of COVID-19, the fall was likely not company-specific but rather due to profit-taking and the macro environment. Ironically, the COVID-19 pandemic became a massive catalyst because it sped up e-commerce adoption and, thus, SHOP.
Analysts agree. Analysts who cover Shopify foresee robust earnings over the coming quarters.
A Positive Earnings ESP Score
The company also beat earnings by 125% last quarter and sports a positive Earnings ESP score which suggests that it is likely to beat earnings when it reports in early August.
Technical Breakout
Finally, the price chart is shaping up. Earlier this year, the 50-day moving average crossed above the 200-day moving average to form a bullish golden cross. Yesterday, SHOP broke out of a multi-week base structure on massive volume turnover.
Valuation
Though Shopify has grown its earnings dramatically since its IPO in 2015, its price-to-sales ratio is hovering near all-time lows. Furthermore, analysts predict record earnings within the next two years. Meanwhile, the stock is well off its all-time high of over $160.
Industry Strength
The old saying that "birds of a feather tend to flock together" applies in the stock market. That's good news for Shopify investors. Other software names, such Unity Software and Salesforce broke out this week – lending more credibility to the move in Shopify.
Conclusion
Shopify stands out from all angles. The software leader has top-tier fundamentals, a historically low valuation, strong analyst estimates, and an attractive chart pattern. Expect Shopify shares to be much higher into 2024.
Bear of the Day:
Founded in 1931 and headquartered in Northbrook, IL, The Allstate Corporation is the third-largest property-casualty (P&C) insurer and the largest publicly-held personal lines carrier in the U.S. Beyond property insurance, the company also provides a range of life insurance and investment products to its diverse customer base.
Headwinds
Catastrophic Loss Risk
The risk of losses due to catastrophic losses is unavoidable for companies like Allstate that are in the property insurance business. Though Allstate's management can do its best to reduce such losses through its catastrophe management strategy and reinsurance programs, it cannot control the weather. Weather-related losses over the years have put a strain on the company and have increased dramatically since 2019.
For example, in 2022, the company incurred roughly $3.1 billion in catastrophic losses. Meanwhile, in 2023, losses from weather-related damages are expected to more than double year-over-year.
Ballooning Debt
The catastrophic losses incurred by the company have led to exploding levels of debt. Since 2020, Allstate's debt-to-equity ratio has more than doubled. Remember, the more debt a company incurs, the more interest it will pay.
Lack of Growth and High Valuation
The two main investor baskets that exist are growth and value – or a combination of the two (Growth at a Reasonable Price, or GARP). Unfortunately for Allstate's stock, the company is unattractive from both perspectives. Last quarter, the company posted a loss of $1.30 per share in EPS. Meanwhile, abysmal single-digit sales growth is expected until the end of 2024.
Conversely, despite the lack of growth and expected growth moving forward, Allstate remains overvalued. ALL's price-to-book ratio of 1.84 is much higher than its peer groups price to book of 1.62.
Relative Weakness
Allstate is a relatively stable, slow-growth, old economy type company. In the current risk-on market environment, stocks like Allstate are lagging, while growthy, tech-oriented stocks outperform.
Takeaway
Unpredictability, a high valuation, and rising debt are reasons to avoid Allstate shares. Furthermore, the stock is in a poor environment, and the chart indicates relative weakness.
Additional content:
3 Incredible Stocks Trading at Historical Discounts
When great stocks go on sale investors must act decisively.
Rarely do the best companies trade down to deep discounts, but when they do finally get below their historic averages, it can be a powerful signal for strong forward returns.
Today I will share three extremely high-quality businesses, with long histories of successful execution, winning business models, and high Zacks Ranks. For investors looking to add long-term holdings to their portfolios these may be great picks for the next few years.
Paychex, CME Group and Adobe all boast exceptional business staying power ensuring their future returns and have outperformed the market index over the last 10 years.
Paychex
Paychex is a prominent provider of payroll, human resources, and benefits outsourcing solutions for businesses of all sizes. With a strong market presence, Paychex offers comprehensive services, including payroll processing, tax administration, employee benefits, and regulatory compliance assistance.
The company's reliable and user-friendly platforms empower organizations to streamline their HR operations effectively. PAYX serves over 740,000 customers in the US and Europe and delivers one out of every 12 American workers' paycheck.
Paychex has grown with incredible consistency on both the top and bottom line over the last 25 years. Sales have grown from $1 billion to $5 billion over that time, with just two years that didn't experience growth. EPS have grown from $0.37 to $4.28, which is an incredible CAGR of 10.3%.
PAYX has also paid out a dividend every year over the last 25 years. It currently yields 3% and has increased the payment by an average of 8.5% annually over the last five years.
With a Zacks Rank #2 (Buy) rating, PAYX has experienced some slight earning estimate upgrades over recent months. Next quarter estimates have been revised higher by 1% and are projected to grow 11.1% YoY. FY23 earnings expectations have also been increased by 1% and are forecast to grow by 9.4% YoY.
Paychex is trading at a one-year forward earnings multiple of 25.3x, which is above the industry average of 20.6x, and below its five-year median of 28x.
CME Group
CME Group is the largest futures exchange in the world in terms of trading volume as well as notional value traded. The Chicago Mercantile Exchange was originally formed as a non-profit organization in 1898 but was converted to a for-profit company in 2000. It became the first publicly traded financial exchange in the U.S. in Dec 2002.
CME Group offers a broad range of products covering major asset classes, based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, and metals. Trades are executed through CME Group's electronic trading platforms, open outcry and privately negotiated transactions. CME Group also operates one of the world's leading central counterparty clearing providers through CME Clearing and CME Clearing Europe, which offer clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives.
CME has more than 10x'd both its sales and earnings over the last 25 years. Annual sales have grown from $430 million to $5.1 billion, and EPS has climbed from $0.69 to $8.29 per share.
The company introduced a dividend 20 years ago and it has since grown from $0.13 per share to $8.60 per share. Today CME has a dividend yield of 2.4% and has raised it an average of 9.8% annually over the last five years.
CME has experienced some earnings estimate upgrades over the last two months, reflected by its Zacks Rank #2 (Buy). Analysts have unanimously upgraded estimates across timeframes. Current quarter earnings estimates have been revised higher by 2.4% and are expected to grow 8.1% YoY.
CME Group is trading at a one year forward earnings multiple of 20.8x, which is below the industry average of 25x, and below its five-year median of 26.7x. This is just off the ten year low in terms of forward earnings and offers a compelling opportunity.
Adobe
Adobe is one of the largest software companies in the world collecting licensing fees from customers, which form the bulk of its revenue. ADBE also offers technical support and education, which accounts for the balance.
Not only have Adobe earnings grown steadily, but they have accelerated considerably in the last decade, forming the always desirable hockey stick chart. Adobe's EPS have compounded at a ridiculous 14.4% annually over the last 25 years and its stock has appreciated over 9,000% over that period.
Adobe also has a Zacks Rank #2 (Buy), indicating upward trending earnings revisions. Current quarter earnings estimates have been revised higher by 3% and are expected to grow 16.8% YoY. FY23 earnings estimates have been upgraded by 2% and are projected to increase by 14.5% YoY.
Adobe is trading at a one year forward earnings multiple of 40.4x, which is above the industry average of 34.2x, and below its five-year median of 44.4x.
Bottom Line
It is hard to go wrong buying industry-leading stocks at historical discounts. If you are an investor with a longer time horizon, these may be perfect fits for your portfolio. Additionally, with the strong earnings revisions trends they all demonstrate, the near-term expectations of the stocks are also strong.
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.
See Stocks Free >>
Media Contact
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/performancefor information about the performance numbers displayed in this press release.