For Immediate Release
Chicago, IL – September 12, 2023 – Zacks Equity Research shares Amazon (
AMZN Quick Quote AMZN - Free Report) as the Bull of the Day and Foot Locker ( FL Quick Quote FL - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Uber Technologies, Inc. ( UBER Quick Quote UBER - Free Report) , LivePerson, Inc. ( LPSN Quick Quote LPSN - Free Report) and Tencent Holdings Ltd. ( TCEHY Quick Quote TCEHY - Free Report) .
Here is a synopsis of all five stocks.
Amazon, the world's leading ecommerce and cloud services provider, is benefiting from strong growth across its business segments, boosting analysts’ expectations for the stock and giving it a Zacks Ranks #1 (Strong Buy) rating.
Notable developments at Amazon include continued growth in Amazon Prime users, a reacceleration of cloud service sales growth as businesses shift their focus from cost-cutting to workload expansion, and huge adv ances in its burgeoning advertising business.
In addition to the multitude of business progresses at Amazon, the stock is also breaking out from a compelling technical chart pattern. These bullish catalysts make Amazon one of the most appealing stocks in the market today.
Earnings Climb Aggressively Higher
At its most recent quarterly earnings report, Amazon crushed analysts’ estimates. Earnings of $0.65 per share were 89.5% above expectations of $0.34 per share, while sales of $134.4 billion surprised to the upside by 2.3% and showed an 11% YoY increase.
North America revenues (61% of sales) rose 11% YoY, International revenues (22% of sales) increased 10%, and Amazon Web Services revenues (17% of sales) rose 12% YoY.
Amazon is having incredible success with its newer Advertising business, which is suddenly bringing in $10 billion a quarter. The margins for this business are very high and it is growing 22% annually. Even more impressive is that the advertising business is growing rapidly while incumbent advertising businesses like Meta Platforms and Alphabet deal with slowdowns.
Following such stellar quarterly results and strong business momentum, analysts have unanimously upgraded Amazon’s earnings expectations. Current quarter earnings estimates have been revised higher by 49% and are projected to climb 190% YoY to $0.58 per share. FY23 earnings estimates have been lifted by 43% and are forecast to grow 214% YoY to $2.23 per share.
EPS are expected to grow at nearly 34% annually over the next 3-5 years, while sales are expected to grow more than 10% annually over the next two years.
Amazon stock has been trading sideways and building out a convincing bull flag over the last 6 weeks. On Monday, the stock broke out above the upper bound of the range, signaling a breakout. So long as the stock doesn’t trade back into the trading range, AMZN should continue higher into the year end.
Amazon has been one of the best performing stocks ever, compounding at 32% annually since its IPO. Additionally, it has always carried a very high, and somewhat confusing earnings multiple, because of the slim margins in e-commerce and huge reinvestment opportunities.
However, now that the company has matured significantly, it is a bit easier to understand the business model, and it now boasts one of the most reasonable earnings multiples in the company’s history.
Today, Amazon is trading at a one year forward earnings multiple of 62x which is above the industry average of 33x but is well below its 20-year median of 80x.
Amazon remains one of the market’s preeminent technology stocks. It continues to dominate both the e-commerce and cloud services industries, which are some of the fastest growing industries in the world and is innovating new businesses such as advertising like it is in start up mode.
Furthermore, it is likely to be a major beneficiary of the Artificial Intelligence revolution. As companies realize the power this new technology offers, they are forced to dramatically increase their computing abilities. Amazon Web Services is going to be a direct recipient of this new demand for processing power.
Foot Locker, a retailer of athletic shoes and apparel with nearly 2,600 stores worldwide is fighting to find its place in the dynamic retail landscape as sales decline and earnings are revised lower, giving it a Zacks Rank #5 (Strong Sell) rating. These developments, among others, make Foot Locker stock one that investors should avoid until management can shift the focus of the company.
Demonstrating just how challenging the retail industry is, FL stock has returned just 3.3% annually over the last 20 years, substantially underperforming the broad market, which returned 10% annually. However, that poor performance is still better than the industry average of just 2.8% annual return over the same period.
Foot Locker’s bleak outlook is highlighted by its anemic sales growth. Q2 sales of $1.8 billion missed analyst estimates and showed a -9.9% YoY decline. Next quarter and FY23 sales are also expected to see YoY declines of -9%.
Analysts have unanimously revised Foot Locker’s earnings estimates lower over the last two months. Current quarterly earnings expectations have been lowered by -56% and are projected to fall -78% YoY to $0.28 per share. FY23 earnings estimates have been downgraded by -35% and are forecast to decline -73% YoY to $1.36 per share.
Accenting just how badly FL is struggling was the large drop in margins in the recent quarterly report. Gross margins fell 460 basis points YoY due to higher promotional activity and markdowns.
Even with these bearish developments, Foot Locker still trades above its historical valuation. Today, FL is trading at a one year forward earnings multiple of 13.4x, which is below the industry average, and above its 10-year median of 12x.
There is a bright spot for the company though, as its digital business has been performing well. Foot Locker has been investing in its digital presence to bolster its omni-channel capabilities allowing customers the option to “Shop My Store,” buy online and pickup in person, a membership program, and the option to make purchases using Apple Pay and Google Pay.
However, while e-commerce developments are promising, there is still a way to go before FL is worth investing in. Investors can start to consider the stock again once it begins to see its earnings estimates trend higher again.
Additional content: Uber Inks Deal with the NFL Uber Technologies, Inc. recently announced that it has entered into a four-year deal with the National Football League (NFL). With this, Uber became the official on-demand delivery partner and official rideshare partner of the NFL.
With the 2023 NFL season beginning, Uber will offer football fans special deals, limited-edition promotions, and unique integrations. Additionally, to pamper fans watch the game at home, Uber will also offer accessibility to grocery and convenience stores nationwide anytime.
Apart from extending its partnership with NFL, Uber Eats will launch in-venue mobile ordering at SoFi Stadium in Los Angeles for the Los Angeles Chargers home opener on Sep 10. At SoFi Stadium, fans can order food and drinks from the Uber Eats app.
Since Uber is featured with both delivery and mobility offerings, this latest expanded partnership should help football fans access their demand easily. This should strengthen Uber’s competitive position as a global player.
Molly Spychalski, global head of Brand Partnership Marketing at Uber, stated, "We're thrilled to be expanding our partnership with the NFL to offer Uber customers even more ways to enjoy this upcoming season. We know that fans use Uber to get to games and Uber Eats to order gameday favorites when they watch from home, so teaming up with the NFL to make this season even more effortless for fans is a true touchdown."
Zacks Rank and Other Stocks to Consider
Currently, Uber sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks from the Zacks
Computer and Technology sector are LivePerson, Inc. and Tencent Holdings Ltd. Each of these companies presently sports a Zacks Rank of 1.You can see the complete list of today’s Zacks #1 Rank stocks here.
LivePerson has an expected earnings growth rate of 59% for the current year. LPSN delivered a trailing four-quarter earnings surprise of 81.94%, on average.
The Zacks Consensus Estimate for LPSN’s current-year earnings has improved more than 100% over the past 90 days.
Tencent has an expected earnings growth rate of 23.86% for the current year. TCEHY delivered a trailing four-quarter earnings surprise of 1.85%, on average.
The Zacks Consensus Estimate for TCEHY’s current-year earnings has improved 2.3% over the past 90 days.
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