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Boot Barn and Align Technology have been highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – October 31, 2024 – Zacks Equity Research shares Boot Barn (BOOT - Free Report) as the Bull of the Day and Align Technology (ALGN - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on GameStop Corp. (GME - Free Report) , Best Buy Co., Inc. (BBY - Free Report) and Sony Group Corp. (SONY - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Boot Barn is a Zack Rank #1 (Strong Buy) that is a leading lifestyle retail chain in the United States, focusing on western and work-related footwear, apparel, and accessories.

The company just reported an earnings beat, only to see the stock fall 20% since the report. While the move lower could simply be profit taking, news that the CEO is leaving accelerated the selling.

Investors are now looking at a long-term opportunity as the selling gets closer to support levels and earnings estimates head higher.

About the Company

Boot Barn has a market cap of $4 billion and the company employs over 11,000, including 3,100 full-time employees.

Founded in 1978 and headquartered in Irvine, California, the company operates over 420 stores across 46 states, offering a wide range of products including boots, shirts, jackets, hats, and rugged workwear for men, women, and children. In addition to its physical stores, Boot Barn also has a strong online presence, allowing customers to shop through its e-commerce websites like BootBarn.com, Sheplers.com, and CountryOutfitter.com

The stock has Zacks Style Scores of "A" in Momentum and "B" in both Value and Growth.

Q2 Earnings

On October 28th, Boot Barn reported Q2 earnings, beating estimates by 2%. Revenues came in slightly above expectations and the company raised its FY25 guidance. Boot Barn raised FY25 to a range $5.30-5.60 v the $5.38 expected, and sees Same Store Sales (SSS) at 3.0-5.0% v the prior -1% to +1.2%.

While next year looks positive, BOOT now sees Q3 at $1.96-2.07 v the $2.09 expected. So short term there was a little disappointment, which caused some selling after the earnings release.

More highlights from the earnings report include SSS up 4.9% y/y and affirming FY25 Capex. This includes the goal to open 60 new stores.

CEO Leaving

The stock traded lower by about 18% after the earnings release. But this wasn't just because of a disappointment in earnings, it was also because long-term CEO Jim Conroy is leaving to join Ross Stores in November. Conroy, who has led Boot Barn for over a decade, oversaw significant growth, including the company going public. So, investors that were big fans, might have decided to take some profits.

John Hazen, Boot Barn's current chief digital officer, will serve as interim CEO while the company searches for a permanent replacement.

Estimates Headed Higher

Typically, when we see a big move lower in a stock, the estimates are going lower. However, the CEO departure might have overshadowed the fact that estimates are going higher.

Since earnings, the current quarter has remained the same, at $2.09. Looking at next quarter we see the move in earnings estimates go from $1.15 to $1.18, or 3%.

For the current year, numbers have gone from $5.38 to $5.43

Next year, analysts are looking for $6.53, up from negative $6.47 prior to the earnings report.

To summarize, we have negative price reaction into short term stalling of growth and a CEO departure. And because the stock was up over 100% in 2024, profit taking has commenced.

However, analysts have kept price targets significantly above current trading levels.

Baird raised BOOT to an Outperform, with a target at $167, saying investors have a more favorable setup following pullback.

Benchmark reiterated its Buy and $192 target, while Citigroup lowered their target to $178.

These price targets give us a range of 30-50% above current trading levels.

The Technical Take

While those price targets look tempting to investors, a good entry point into the selling is critical. Let us look at some moving averages:

The 200-day moving average is at $118.65.

The 21-day MA is $159.

The 50-day is $154.50.

The 61.8% Fibonacci level drawn from the 2024 lows to highs is $109, while the halfway back is $120. This creates a solid buy zone just below the 200-day MA.

If Boot Barn can maintain its strong fundamental record, the selling should run into support and the stock will see a solid rally to those MA resistance levels above $150.

In Summary

Boot Barn faces short-term challenges with the departure of CEO Jim Conroy and a subsequent drop in stock price. However, the company's strong fundamentals and optimistic outlook provide a solid foundation for potential recovery.

Analysts remain bullish, with several raising their price targets significantly above current trading levels, indicating confidence in Boot Barn's growth trajectory.

As the company navigates this transition, maintaining its robust performance will be crucial for regaining investor confidence and capitalizing on its strong market position. Investors may find strategic entry points as the stock stabilizes, setting the stage for future gains.

Bear of the Day:

Align Technology is a Zacks Rank #5 (Strong Sell) that is a global leader in digital orthodontics and the creator of the Invisalign clear aligner system.

Align recently reported earnings, with an initial negative price reaction turning positive. However, the stock has already drifted lower and with price near 2024 lows, investors have a tough choice to make if the downward trend continues.

Unfortunately, the company faces bearish growth prospects as its forward-looking guidance indicates cautious expectations for the U.S. market. Additionally, anticipated flat to slightly increasing revenues in Q4 2024 are raising concerns about the sustainability of its growth trajectory.

About the Company

Founded in 1997 and headquartered in Tempe, Arizona, the company focuses on developing innovative products and technologies that enhance the practice of dentistry.

Align is valued at $16 billion and has a Forward PE of 22. The stock holds Zacks Style Scores of "B" in Growth, but "F" in Value and "D" in Momentum. The stock pays no dividend.

Q3 Earnings

Align reported Q3 EPS of $2.35, surpassing the expected $2.31. However, revenue fell short, coming in at $977.9 million compared to the anticipated $991 million.

For Q4, the company has provided lower guidance, projecting revenue between $955 million and $1.02 billion, slightly below the expected $1.02 billion.

Case shipments increased to 617.2K, up from 602K year-over-year, while the non-GAAP operating margin improved to 22.1%, compared to 21.8% in the same period last year.

In light of these results, the company stated that it continues to evaluate and evolve its business to provide doctors with the best tools and resources while managing operational challenges.

Earnings Estimates

Looking at estimates, analysts have already started to cut their numbers for most time frames.

For the current quarter, analysts have lowered estimates from $2.55 to $2.45 since EPS. This is a drop of 4%.

Next quarter estimates see a slight uptick, but when you look down the road, the numbers take a negative turn.

For the current year, estimates have dropped from $9.36 to $9.29 since the earnings report.

Next year shows a bigger trend to the downside when you look over the last 90 days. Estimates have dropped from $10.51 to $10.15, or 3.4%, including another 1.2% since earnings.

Technical Take

The stock has been on a steady downtrend since March of 2024 when it traded as high at $335. Since then, ALGN is lower by 35%.

The prior 2024 lows are $196 so a break below the $200 level could signal trouble. Weaker hands likely have stop orders below that prior low and the next support level is not seen until $172 and then the COVID low is $127.

To the upside, the 50-day MA is $232 and the 200-day MA is $263. Until those levels are taken back by the bulls, the bears have control.

In Summary

Align is navigating a challenging landscape, marked by bearish growth prospects and a lackluster revenue outlook. While the company's recent earnings report showcased some positive metrics, including an EPS beat and improved case shipments, the underlying trends paint a concerning picture for investors.

Additional content:

Trading at a Discount, Is GameStop Still in the Game?

GameStop Corp., the original "meme stock" that ignited a social media-fueled trading frenzy, is now sitting at a significant discount compared to its previous highs. Once the favorite of retail investors and Reddit forums, GameStop has recently slipped in value, tempting bargain hunters and seasoned investors alike to take a second look. But is GameStop's discounted price an opportunity or just another chapter in a volatile saga?

The video game retailer is currently trading at a forward 12-month price-to-sales (P/S) multiple of 2.56X, which positions it at a discount compared to the industry's average of 2.91X. The stock has also been trading below the high level of 4.16, as observed over the past five years.

However, shares of GameStop have just risen 0.1% in the past three months compared with the industry's growth of 5.6%. Moreover, GME has underperformed the broader Zacks Consumer Discretionary sector and the S&P 500's respective gains of 6.8% and 5.3% in the same time frame. The sluggish price movement reflects underlying challenges that could be impacting investor sentiment.

GameStop stock closed at $22.68 during yesterday's trading session, sitting 65% below its 52-week high of $64.83, achieved on May 14, 2024. The stock is trading above both its 50-day and 200-day moving averages, indicating robust upward momentum and price stability.

Is GameStop Still in the Game?

GameStop maintains a loyal following among retail investors, sustaining its status as a meme stock. The company has seen increased interest from institutional investors. This shift indicates a growing recognition of GameStop's potential beyond its meme stock identity. Institutional buying could provide additional support to the stock, helping stabilize prices and enhance credibility in the eyes of retail investors.

GameStop's business model is undergoing significant transformation. The company is steadily shifting toward becoming a more digital-centric entity. GameStop is leveraging the shift toward digital commerce with an increased focus on e-commerce and digital gaming. This transition is critical, especially as consumer shopping habits evolve, making it essential for GameStop to capitalize on the digital marketplace.

Another positive aspect is GameStop's improving balance sheet. As of the end of the second quarter of fiscal 2024, the company reported cash, cash equivalents and marketable securities totaling $4.2 billion. This strengthened cash position, combined with reduced debt, provides a solid financial foundation that enables GameStop to pursue strategic investments without excessive leverage. Furthermore, the recent completion of its "at-the-market" equity offering program, which involved selling a maximum of 20 million shares for approximately $400 million in gross proceeds, will support acquisitions and other investment opportunities.

GameStop's collaborations with industry leaders in the gaming and technology sectors position it for future growth. The company's focus on innovative technologies and expanding its offerings in collectibles and merchandise indicates a commitment to diversifying its revenue sources and engaging a wider audience.

Still an Uphill Task for GameStop?

Despite these positive developments, several factors have contributed to a recent slowdown in GameStop's stock momentum. Market corrections, changing investor sentiment and broader economic pressures have all played a role. As enthusiasm waned and trading volumes normalized, the stock retreated from its previous highs. Investor scrutiny has intensified due to ongoing concerns about the company's strategic direction and ability to navigate the rapidly evolving gaming industry.

The gaming industry has been experiencing a rapid shift from physical game purchases to digital downloads, which challenges GameStop's traditional business model. As more consumers opt to buy games online through digital platforms, GameStop's reliance on physical sales could impact revenue growth. This shift is compounded by an increasing number of gamers embracing subscription services, diminishing the demand for physical copies of games.

GameStop reported a sharp decline in net sales for the second quarter of fiscal 2024, reaching $798 million, down from $1,163.8 million in the same period last year. This 31.4% year-over-year fall suggests a potential struggle to retain market share and indicates waning demand for GameStop's products amid a rapidly changing gaming landscape.

Sales across key segments — hardware and accessories, software and collectibles — experienced notable declines of 24.4%, 47.7% and 17.9%, respectively.

GameStop faces competition from Best Buy Co., Inc. and Sony Group Corp.. These competitors have a stronghold on digital game sales and subscriptions, making it challenging for GameStop to maintain market share.

What Should Be Your Strategy for GME?

GameStop stands at a critical juncture, marked by potential and risk. The company's shift toward a more digital-focused business model and improved financial position indicate a proactive response to evolving market demands. However, the notable decline in sales and intense competition from industry giants underscore the challenges it faces.

As GameStop works to redefine its identity beyond its meme stock status, investors must weigh the possibilities for recovery against the risks presented by a changing gaming landscape. Long-term investors are advised to hold their positions while closely monitoring the company's progress. Meanwhile, new investors should exercise caution. GME currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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