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Carvana and Polaris have been highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – October 31, 2023 – Zacks Equity Research shares Carvana (CVNA - Free Report) as the Bull of the Day and Polaris (PII - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Hershey (HSY - Free Report) , Walmart (WMT - Free Report) and The TJX Companies (TJX - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Carvana is a Zacks Rank #1 (Strong Buy) that operates an e-commerce platform for buying and selling used cars. The company has an end-to-end business model that transformed traditional used-car sales.

The stock was on fire over the summer after some impressive earnings numbers created a short squeeze. During the squeeze, CVNA lifted from under $10 to hit a high of $57.

It has since pulled back 50%, so the upcoming earnings report is a huge catalyst.

The bulls hope another earnings beat can start another squeeze. The bears are looking for a miss, that would put the stock back below its 200-day moving average for the first time since June.

While the current price action is poor, earnings estimates have been ticking higher, giving a slight edge to the bulls as we go into the print in early November.

About the Company

Carvana was founded in 2012 and is headquartered in Tempe, AZ.

Its platform allows customers to research and identify a vehicle; inspect it using the company's 360-degree vehicle imaging technology; obtain financing and warranty coverage; purchase the vehicle; and schedule delivery or pick-up from their desktop or mobile device

The stock has a Zacks Style Score of "A" in Growth and "B" in Momentum. However, the company has negative earnings and has a score of "D" in Value. CVNA currently employs over 16,000 and has a market cap of $5 billion.

Q2 Earnings Beat and Q3 Guide

In July, Carvana reported a 51% EPS beat and announced plans to restructure its debt.

Q2 came in at -$105M v the -$439M last year and revenue was $2.97B v $2.62B. Carvana set a company record for adjusted EBITDA and gross profit per unit, which was up 94% year-over-year, all while continuing to lower expenses.

The stock shot higher, moving from the low $40s into the high $50s. The squeeze was on as hedge funds were forced to cover their short position in the stock.

A few weeks later, Carvana raised its Q3 adjusted EBITDA to $75M v the $45M expected. Management noted early momentum in the quarter citing strong execution and fundamental gains in Retail and Wholesale GPU.

The stock didn't react to the news but then started to move higher in September on positive debt exchange news.

But since then, the stock has made a steady move lower as the overall market has weakened. Higher interest rates are making investors nervous, especially when it comes to smaller companies and businesses whose customers are impacted by interest rates.

This is why the upcoming earnings report on November 2nd is a huge catalyst.

Analyst Estimates

Looking at analyst estimates ahead of earnings, the numbers are giving the bulls hope as they have been trending higher.

Looking at the current quarter, have estimates moving 11% higher over the last 90 days. For the next quarter, estimates have gone from -$0.99 to -$0.84 over that same time frame, or 15%.

Looking at the longer term, estimates are moving higher as well.

For the current year, analysts have taken numbers from -$4.16 to -$3.70, or 11%. For next year, we see estimates go from -$3.09 to -$2.68, or 13%.

William Blair was recently out with a positive note ahead of EPS. The firm says that its web analysis suggests that Carvana will post its first sequential increase in retail units sold since June 2022. They see a 5% sequential increase to roughly 80,000 cars, about 3,000 cars ahead of consensus and above guidance for units sold similar to the second quarter.

William Blair maintains its Market Perform based on valuation.

If that outlook is correct and the company reports better than expected, the stock likely trades higher.

The Technicals

The stock is off about 50% since its highs over the summer. While a pullback is likely justified after the short squeeze, there does seem to be an opportunity on the long side if earnings come in better than expected.

The 200-day moving average is at $24 and the bulls can lean against that level. Upside areas for profit-taking are the $34 area and the $40 level, which is right below the 50-day moving average.

Bottom Line

Carvana is in a good spot to post another earnings beat, which would be its fourth in a row. While earnings momentum looks to be going in the right direction, the stock price is not.

If the company can surprise to the upside on earnings, the bulls can force another squeeze. However, long-term investors should be cautious based on Wall Street's valuation concerns.

Bear of the Day:

Polaris is a Zacks Rank #5 (Strong Sell) that designs, engineers, manufactures, and markets power sports vehicles worldwide.

The stock started 2023 off on a positive note, with three straight earnings beats. This helped the stock start up 40% on the year, but since late July Polaris has plummeted and is now down 15% for the year.

So what happened?

The market sell-off did not help, but the sellers have been motivated by rising manufacturing costs and lack of consumer demand. This led to an earnings miss and a guidance cut that forced analysts to drop estimates.

About the Company

Polaris was founded in 1945 and is headquartered in Medina, MN.The company, which employs over 16,000 people, provides its products through dealers and distributors, and online.

It operates through three segments: Off-Road, On-Road, and Marine. Within these segments, Polaris products include snowmobiles, snow bikes, motorcycles, pontoon boats, side-by-sides, commercial vehicles, and more.

Polaris is valued at $5 billion and has a Forward PE of 9. PII holds Zacks Style Scores of "B" in Value, but "D" in both Growth. The stock pays a dividend of 3%.

Q3 Earnings

The stock started to trend lower well before the earnings report on October 24th. Investors anticipated trouble in September as the stock broke the 200-day moving average and they were right to be bearish.

Q3 earnings came in slightly below expectations, 0.37% below the Zacks consensus. The real trouble was realized when the company cut its FY23 guidance citing elevated manufacturing costs and an increasingly cautious consumer environment.

Margins were a big issue, coming in at 22.6% or -127bbs y/y.

The stock fell on the news, and in response, the company announced a $1B share buyback.


The guide forced analysts to lower their numbers significantly.

Over the last 7 days, numbers for the current quarter plummeted from $3.28 to $2.61 or 20%. For the next quarter, earnings estimates have fallen from $189 to $1.45 or 23%.

Looking at the longer term, estimates are still falling, but the magnitude is lower. For next year, estimates have fallen from $10.55 to $9.18 over the last 60 days or almost 13%.

Technical Take

The stock is down over 35% off its July high of $138.49. Price is well below the 200-day moving average at $112. The 50-day is at $103 and the 21-day is at $95.

While a relief bounce may be overdue, the trend is decidedly bearish. Polaris is at levels not seen since 2020 and likely tests the $80 support level. This is where PII saw strong buying before the COVID crash.

In Summary

Investors have two things working against them when it comes to Polaris. First, the fundamentals are not there as costs rise and demand drops. Second, the technicals show us one of the worst-looking charts you can find.

Until one of these factors turns, investors should look elsewhere.

Additional content:

3 Halloween Stocks to Buy

The index of large-cap U.S. equities, the S&P 500, entered the correction territory on Oct 27 for the 103rd time in history. The tech-laden Nasdaq had already closed in correction territory last week. However, investors shouldn't freak out! This isn't a bear market, and the U.S. economy accelerated in the third quarter.

Most importantly, Halloween is approaching, and it marks the best span of growth, traditionally, for the stock market. Investors tend to start investing in All Hallows' Eve after restraining in the prior six-month period, a tactic known as the Halloween Strategy. The demand for candies and costumes, in particular, increases, which eventually drives sales of U.S. retailers, including discount stores.

Halloween spending, in reality, is estimated to touch a record $12.2 billion this year, more than last year's record of $10.6 billion, per the National Retail Federation (NRF). More number of Americans (73%) are expected to participate in Halloween this year versus last year's 69%.

Similar to previous years, several consumers are projected to splurge on candies (68%), home decoration (53%) and costumes (50%). On an individual basis, consumers are expected to spend $108.24 each, more than the previous per-person spending record of $102.74 in 2021, added the NRF.

Total spending on candy is projected to reach $3.6 billion this year, up from $3.1 billion in 2022. Decoration spending is expected to come in at $3.9 billion, which is more or less on par with last year. Additionally, outlays on costumes are estimated to reach a record $4.12 billion, up from $3.6 billion last year.

Consumers are willing to spend as the economy continues to show signs of strength despite the Federal Reserve's aggressive monetary policy stance to curb stubbornly high inflation and a slew of other global headwinds at the moment.

According to the U.S. Bureau of Economic Analysis, the third-quarter GDP of the United States increased at an annualized rate of 4.9%, the fastest pace in almost two years. The blowout GDP growth was primarily boosted by an uptick in consumer outlays.

To spend this Halloween, 40% of shoppers will go to discount stores, 39% to costume stores, and 32% will do online searches. This calls for investors to keep an eye on stocks such as Hershey, Walmart and The TJX Companies due to an increase in footfall.

Hershey is one of the major confectionary manufacturers in the United States. The company is known for producing chocolates and candies across the globe. Hershey's expected earnings growth rate for the current and next year are 11.9% and 7.2%, respectively.

Its shares are estimated to rise 8.4% over the next five-year period, while its shares have already gained 11.9% in the past five years. HSY currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.

Walmart is one of the biggest retailers worldwide that sells a wide variety of Halloween-related products, including costumes. Walmart's expected earnings growth rate for the current and next year are 2.4% and 8.9%, respectively.

Its shares are estimated to rise 6.6% over the next five-year period, while its shares have already gained 6.7% in the past five years. WMT, currently, has a Zacks Rank #2 (Buy).

TJX Companies provides apparel and home fashions in the United States, and are well-poised to benefit from the pickup in costume sales this Halloween. TJX Companies' expected earnings growth rate for the current and next year are 19.6% and 8.6%, respectively.

Its shares are estimated to rise 11.1% over the next five-year period, while its shares have already gained 9.6% in the past five years. TJX, presently, has a Zacks Rank #2.

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