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Li Autio and Avis Budget Group have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – March 13, 2024 – Zacks Equity Research shares Li Autio (LI - Free Report) as the Bull of the Day and Avis Budget Group (CAR - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Baker Hughes Company (BKR - Free Report) , Diamondback Energy, Inc. (FANG - Free Report) and Matador Resources Co. (MTDR - Free Report) .
Zacks Rank #1 (Strong Buy) stock Li Autio is an electric vehicle (EV) manufacturer known for its innovative approach to sustainable transportation. Unlike traditional electric car companies, Li Auto specializes in extended-range electric vehicles (EREVs) that integrate a small gasoline engine to charge the battery, offering a solution to "range anxiety" commonly associated with pure electric cars. This unique design, coupled with advanced technology and a focus on luxury, has positioned Li Auto as a critical player in the rapidly growing EV market, catering to consumers' desire for efficiency and convenience.
LI Reports a "Double Beat"
Late last month, Li Auto posted a double beat for the quarter. Revenue came in at $5.88 B for a year-over-year increase of 129.70% (beat Wall St. estimates by $398 M). Meanwhile, EPS of $0.30 was enough to beat Wall St. estimates by $0.01 to grow EPS by a robust 130.77% year-over-year.
Digging Deeper into LI's Electrifying Numbers
Apart from the headline figures of EPS and revenue, one standout metric is growing vehicle margins. While Tesla, the legacy EV leader, has been grappling with declining automotive gross margin, LI has seen vehicle margins expand notably by 150 basis points quarter-over-quarter to reach 22.7%. In fact, profit margins for the company reached new highs in the recent quarter.
The company attributes this improvement to its growing scale, supply chain optimization, and consistently enhanced efficiency. Despite an anticipated slowdown in Q1 deliveries due to the seasonal nature of auto sales in China, LI experienced robust demand, with deliveries nearly tripling year-over-year to 131,805 units.
LI's management team anticipates the momentum to continue and foresees a 90-96% increase in deliveries to 100,000-103,000 vehicles in Q1. Meanwhile, LI's strong execution is not the only catalyst – the company is gearing up to launch its Mega MPV Minivan.
Survived "The Kitchen Sink"
Even in a vacuum, LI Auto's recent EPS report would be quite impressive. However, when you add context to the recent earnings report, the numbers are even more eye-popping. China's economy and stock market have been in freefall for five years, losing some 44%. However, recent positive earnings reactions from Chinese equities like JD.com and Bilili signal that the worst may be behind Chinese stocks.
The FXI ETF is probably the best proxy U.S.-based investors use to measure China. Currently, FXI is breaking out of a textbook inverse head-and-shoulders pattern. Inverse head-and-shoulders patterns are considered bullish and are one of the most reliable indications of a potential trend reversal from a downtrend to an uptrend.
If China's equity market and economy stabilize, it will be yet another bullish catalyst for Li Auto.
Bull Flag Set Up
After Li's positive EPS report, shares jumped 18% on massive volume – a sign of bullish accumulation. Now, shares are resetting in a picture-perfect bull flag pattern on the daily chart, allowing investors to take advantage of a strong reward-to-risk zone potentially.
Bottom Line
Li Auto is witnessing expanded EPS and margins due to its innovative extended-range electric vehicles (EREVs). Despite challenges in China's equity market, LI remains resilient, with solid demand and plans for significant delivery increases.
Zacks Rank #5 (Strong Sell) stock Avis Budget Group is a leading provider of vehicle rental services globally. The company offers various rental options, including cars, trucks, and vans, catering to leisure and business travelers.
Avis Budget operates through its well-known brands, such as Avis, Budget, Zipcar, and Payless, providing customers with convenient access to transportation solutions in over 180 countries. With a focus on innovation and customer service, Avis Budget aims to deliver reliable and affordable rental experiences to meet the diverse needs of its clientele.
Car Rental Industry Disruption Is Here
Blockbuster Video's leadership famously dismissed the concept of DVD mail delivery (and later streaming) and declined to acquire Netflix. The outcome is well-known – Blockbuster met its demise while NFLX became a Wall Street favorite.
Now, innovation is again reshaping an industry landscape, posing challenges for Avis. Turo, a peer-to-peer car-sharing platform owned partially by public company IAC, allows individuals to rent out their own vehicles to others. By linking car owners with short-term renters, Turo presents a diverse array of vehicle options. It offers an alternative to conventional car rental services, providing a more comprehensive range of choices.
Both car owners and renters enjoy the flexibility and convenience provided by Turo's platform, often resulting in a more personalized, local experience compared to legacy rental car agencies. It's akin to Airbnb,but it's for cars. While Turo may not yet threaten Avis's existence, it's beginning to disrupt the industry and create potential headwinds in the future.
FOREX Risk Mixed with Slowing EPS
Because Avis Budget generates ~21% of its revenues internationally, the company is susceptible to fluctuations in foreign currency exchange rates. For example, in 2022, the company's international revenues were adversely affected by $310 million due to shifts in currency exchange rates.
To make matters worse, Zacks Consensus Estimates predict negative earnings growth for full-year 2024, which is highly disappointing when you account for the recent bull market and earnings growth of many other companies on Wall Street.
Poor Price Action Despite Positive EPS Surprises
Investors can learn much observing how a stock reacts to positive news. CAR has delivered positive surprises over the past four quarters, generating an average EPS surprise of 55.46%.
Nevertheless, the stock is down a brutal 40% over the past year, dramatically underperforming the S&P 500's 32.9% gain over the same period. If CAR can't perform well after beating Wall St. estimates in a bull market, what happens if the stock misses earnings and the market deteriorates?
Bottom Line
Amidst the ever-evolving landscape of the car rental industry, Avid Budget's stock poses several risks, such as FOREX risk, slowing growth, and growing competition.
Additional content:
Permian Rig Count Falls After 2-Straight Up-Weeks
In its weekly release, Baker Hughes Company stated that the U.S. rig count was lower than the prior week's figure. The rotary rig count, issued by BKR, is usually published in major newspapers and trade publications.
Baker Hughes' data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the week-ago figure indicates the demand trajectory for the company's oilfield services from exploration and production companies.
Rig Count Data in Detail
Total U.S. Rig Count Falls: The number of rigs engaged in the exploration and production of oil and natural gas in the United States was 622 in the week ended Mar 8. The figure is lower than the week-ago count of 629. The figure decreased after increasing for two straight weeks. There has been a slowdown in drilling activities since many analysts believe that shale producers are getting more efficient, requiring fewer rigs, while some doubt whether certain producers have enough prospective land to drill. The current national rig count is also lower than the year-ago level of 746.
Onshore rigs in the week that ended on Mar 8 totaled 601, decreasing from the prior week's count of 608. In offshore resources, 21 rigs were operating, in line with the week-ago count.
U.S. Oil Rig Count Falls: The oil rig count was 504 in the week ended Mar 8, decreasing from the week-ago figure of 506. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — is down from the year-ago figure of 590.
U.S. Natural Gas Rig Count Falls: The natural gas rig count of 115 was lower than the week-ago figure of 119. The count of rigs exploring the commodity was also below the year-ago week's 153. Per the latest report, the number of natural gas-directed rigs is 92.8% lower than the all-time high of 1,606 recorded in 2008.
Rig Count by Type: The number of vertical drilling rigs totaled 13 units, lower than the week-ago count of 16. The horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations, also known as shale formations) of 609 declined from the prior-week level of 613.
Rig Count in the Most Prolific Basin
Permian — the most prolific basin in the United States — recorded a weekly oil rig count of 307, lower than the week-ago figure of 309. The number decreased after increasing for two straight weeks.
Outlook
The West Texas Intermediate crude price is trading near the $80-per-barrel mark. Although the commodity pricing scenario is favorable for exploration and production operations, there has been a slowdown in drilling activities, which may continue as upstream players are prioritizing stockholder returns rather than boosting output.
Amid the backdrop, investors seeking medium to long-term gains may keep an eye on energy stocks such as Diamondback Energy, Inc. and Matador Resources Co.
Diamondback Energy, a leading pure-play Permian operator, has reported ongoing enhancements in the average productivity per well in the Midland Basin. The exploration and production company is likely to continue witnessing increased production volumes. FANG, carrying a Zacks Rank #3 (Hold), also has an investment-grade balance sheet. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Matador Resources has a strong presence in the oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. Promising oil prices are likely to aid it in increasing production volumes. Matador acquired Advance Energy Partners Holdings, LLC, which comprises several oil and natural gas-producing properties and undeveloped acreage. Zacks #3 Ranked MTDR expects the buyout to be accretive to important valuation and financial metrics.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% 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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Li Autio and Avis Budget Group have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 13, 2024 – Zacks Equity Research shares Li Autio (LI - Free Report) as the Bull of the Day and Avis Budget Group (CAR - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Baker Hughes Company (BKR - Free Report) , Diamondback Energy, Inc. (FANG - Free Report) and Matador Resources Co. (MTDR - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Zacks Rank #1 (Strong Buy) stock Li Autio is an electric vehicle (EV) manufacturer known for its innovative approach to sustainable transportation. Unlike traditional electric car companies, Li Auto specializes in extended-range electric vehicles (EREVs) that integrate a small gasoline engine to charge the battery, offering a solution to "range anxiety" commonly associated with pure electric cars. This unique design, coupled with advanced technology and a focus on luxury, has positioned Li Auto as a critical player in the rapidly growing EV market, catering to consumers' desire for efficiency and convenience.
LI Reports a "Double Beat"
Late last month, Li Auto posted a double beat for the quarter. Revenue came in at $5.88 B for a year-over-year increase of 129.70% (beat Wall St. estimates by $398 M). Meanwhile, EPS of $0.30 was enough to beat Wall St. estimates by $0.01 to grow EPS by a robust 130.77% year-over-year.
Digging Deeper into LI's Electrifying Numbers
Apart from the headline figures of EPS and revenue, one standout metric is growing vehicle margins. While Tesla, the legacy EV leader, has been grappling with declining automotive gross margin, LI has seen vehicle margins expand notably by 150 basis points quarter-over-quarter to reach 22.7%. In fact, profit margins for the company reached new highs in the recent quarter.
The company attributes this improvement to its growing scale, supply chain optimization, and consistently enhanced efficiency. Despite an anticipated slowdown in Q1 deliveries due to the seasonal nature of auto sales in China, LI experienced robust demand, with deliveries nearly tripling year-over-year to 131,805 units.
LI's management team anticipates the momentum to continue and foresees a 90-96% increase in deliveries to 100,000-103,000 vehicles in Q1. Meanwhile, LI's strong execution is not the only catalyst – the company is gearing up to launch its Mega MPV Minivan.
Survived "The Kitchen Sink"
Even in a vacuum, LI Auto's recent EPS report would be quite impressive. However, when you add context to the recent earnings report, the numbers are even more eye-popping. China's economy and stock market have been in freefall for five years, losing some 44%. However, recent positive earnings reactions from Chinese equities like JD.com and Bilili signal that the worst may be behind Chinese stocks.
The FXI ETF is probably the best proxy U.S.-based investors use to measure China. Currently, FXI is breaking out of a textbook inverse head-and-shoulders pattern. Inverse head-and-shoulders patterns are considered bullish and are one of the most reliable indications of a potential trend reversal from a downtrend to an uptrend.
If China's equity market and economy stabilize, it will be yet another bullish catalyst for Li Auto.
Bull Flag Set Up
After Li's positive EPS report, shares jumped 18% on massive volume – a sign of bullish accumulation. Now, shares are resetting in a picture-perfect bull flag pattern on the daily chart, allowing investors to take advantage of a strong reward-to-risk zone potentially.
Bottom Line
Li Auto is witnessing expanded EPS and margins due to its innovative extended-range electric vehicles (EREVs). Despite challenges in China's equity market, LI remains resilient, with solid demand and plans for significant delivery increases.
Bear of the Day:
Zacks Rank #5 (Strong Sell) stock Avis Budget Group is a leading provider of vehicle rental services globally. The company offers various rental options, including cars, trucks, and vans, catering to leisure and business travelers.
Avis Budget operates through its well-known brands, such as Avis, Budget, Zipcar, and Payless, providing customers with convenient access to transportation solutions in over 180 countries. With a focus on innovation and customer service, Avis Budget aims to deliver reliable and affordable rental experiences to meet the diverse needs of its clientele.
Car Rental Industry Disruption Is Here
Blockbuster Video's leadership famously dismissed the concept of DVD mail delivery (and later streaming) and declined to acquire Netflix. The outcome is well-known – Blockbuster met its demise while NFLX became a Wall Street favorite.
Now, innovation is again reshaping an industry landscape, posing challenges for Avis. Turo, a peer-to-peer car-sharing platform owned partially by public company IAC, allows individuals to rent out their own vehicles to others. By linking car owners with short-term renters, Turo presents a diverse array of vehicle options. It offers an alternative to conventional car rental services, providing a more comprehensive range of choices.
Both car owners and renters enjoy the flexibility and convenience provided by Turo's platform, often resulting in a more personalized, local experience compared to legacy rental car agencies. It's akin to Airbnb,but it's for cars. While Turo may not yet threaten Avis's existence, it's beginning to disrupt the industry and create potential headwinds in the future.
FOREX Risk Mixed with Slowing EPS
Because Avis Budget generates ~21% of its revenues internationally, the company is susceptible to fluctuations in foreign currency exchange rates. For example, in 2022, the company's international revenues were adversely affected by $310 million due to shifts in currency exchange rates.
To make matters worse, Zacks Consensus Estimates predict negative earnings growth for full-year 2024, which is highly disappointing when you account for the recent bull market and earnings growth of many other companies on Wall Street.
Poor Price Action Despite Positive EPS Surprises
Investors can learn much observing how a stock reacts to positive news. CAR has delivered positive surprises over the past four quarters, generating an average EPS surprise of 55.46%.
Nevertheless, the stock is down a brutal 40% over the past year, dramatically underperforming the S&P 500's 32.9% gain over the same period. If CAR can't perform well after beating Wall St. estimates in a bull market, what happens if the stock misses earnings and the market deteriorates?
Bottom Line
Amidst the ever-evolving landscape of the car rental industry, Avid Budget's stock poses several risks, such as FOREX risk, slowing growth, and growing competition.
Additional content:
Permian Rig Count Falls After 2-Straight Up-Weeks
In its weekly release, Baker Hughes Company stated that the U.S. rig count was lower than the prior week's figure. The rotary rig count, issued by BKR, is usually published in major newspapers and trade publications.
Baker Hughes' data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the week-ago figure indicates the demand trajectory for the company's oilfield services from exploration and production companies.
Rig Count Data in Detail
Total U.S. Rig Count Falls: The number of rigs engaged in the exploration and production of oil and natural gas in the United States was 622 in the week ended Mar 8. The figure is lower than the week-ago count of 629. The figure decreased after increasing for two straight weeks. There has been a slowdown in drilling activities since many analysts believe that shale producers are getting more efficient, requiring fewer rigs, while some doubt whether certain producers have enough prospective land to drill. The current national rig count is also lower than the year-ago level of 746.
Onshore rigs in the week that ended on Mar 8 totaled 601, decreasing from the prior week's count of 608. In offshore resources, 21 rigs were operating, in line with the week-ago count.
U.S. Oil Rig Count Falls: The oil rig count was 504 in the week ended Mar 8, decreasing from the week-ago figure of 506. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — is down from the year-ago figure of 590.
U.S. Natural Gas Rig Count Falls: The natural gas rig count of 115 was lower than the week-ago figure of 119. The count of rigs exploring the commodity was also below the year-ago week's 153. Per the latest report, the number of natural gas-directed rigs is 92.8% lower than the all-time high of 1,606 recorded in 2008.
Rig Count by Type: The number of vertical drilling rigs totaled 13 units, lower than the week-ago count of 16. The horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations, also known as shale formations) of 609 declined from the prior-week level of 613.
Rig Count in the Most Prolific Basin
Permian — the most prolific basin in the United States — recorded a weekly oil rig count of 307, lower than the week-ago figure of 309. The number decreased after increasing for two straight weeks.
Outlook
The West Texas Intermediate crude price is trading near the $80-per-barrel mark. Although the commodity pricing scenario is favorable for exploration and production operations, there has been a slowdown in drilling activities, which may continue as upstream players are prioritizing stockholder returns rather than boosting output.
Amid the backdrop, investors seeking medium to long-term gains may keep an eye on energy stocks such as Diamondback Energy, Inc. and Matador Resources Co.
Diamondback Energy, a leading pure-play Permian operator, has reported ongoing enhancements in the average productivity per well in the Midland Basin. The exploration and production company is likely to continue witnessing increased production volumes. FANG, carrying a Zacks Rank #3 (Hold), also has an investment-grade balance sheet. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Matador Resources has a strong presence in the oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. Promising oil prices are likely to aid it in increasing production volumes. Matador acquired Advance Energy Partners Holdings, LLC, which comprises several oil and natural gas-producing properties and undeveloped acreage. Zacks #3 Ranked MTDR expects the buyout to be accretive to important valuation and financial metrics.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% 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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https://www.zacks.com
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.