For Immediate Release
Chicago, IL – March 21, 2017 –Zacks Equity Research highlights Leucadia National (NYSE: (LUK - Free Report) – Free Report ) as the Bull of the Day, Target (NYSE: (TGT - Free Report) – Free Report ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Facebook Inc. (NASDAQ:(FB - Free Report) – Free Report ) and Twitter Inc. (NYSE:(TWTR - Free Report) – Free Report ).
Here is a synopsis of all four stocks:
Bull of the Day :
Leading the market out of the gate on Election Day, financials certainly had their day in the sun. The fundamental driving forces behind the move higher were interest rates on the rise and small business optimism. The hope was that Trump’s infrastructure spending and tax plans would provide a huge boost to the domestic economy. Companies in the lending business would be positioned to benefit greatly from these policies.
One of those financials is today’s Bull of the DayLeucadia National (NYSE: (LUK - Free Report) – Free Report ). Leucadia is a Zacks Rank #1 (Strong Buy). Leucadia Leucadia National Corporation operates as a diversified holding company that focuses on financial service businesses and investments in the Americas, Europe, and Asia. Its services include equities research, sales, and trading; financing, securities lending, and other brokerage; wealth management; fixed income sales and trading; futures; equity capital markets, debt capital markets, and financial advisory; and asset management services. The company also provides online foreign exchange trading, contract for difference trading, spread betting, and related services.
In addition to the favorable Zacks Rank, Leucadia has Value and Momentum Style Scores of B to go along with a Growth Style Score of B. A big reason for the rank is an analyst has increased their EPS estimate from $1.32 to $1.56 for the current year. The company is also coming off a big quarter where their earnings came in at 37 cents versus expectations for 23 cents per share.
Bear of the Day :
It’s no secret that the brick-and-mortal retail crowd has been struggling in the face of increased online sales. As a result, we’ve seen several stocks get beat down in the wake of their earnings reports. When it comes to today’s Bear of the Day, they are in a fight against online and some familiar foes.
Target (NYSE:(TGT - Free Report) – Free Report ) has the dubious honor of being today’s Bear of the Day. Target Corporation operates as a general merchandise retailer. It offers household essentials, including pharmacy, beauty, personal care, baby care, cleaning, and paper products; dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and pet supplies; and apparel for women, men, boys, girls, toddlers, infants, and newborns, as well as intimate apparel, jewelry, accessories, and shoes. The company also provides home furnishings and décor, such as furniture, lighting, kitchenware, small appliances, home décor, bed and bath, home improvement, and automotive products, as well as seasonal merchandise, such as patio furniture and holiday décor; music, movies, books, computer software, sporting goods, and toys, as well as electronics, such as video game hardware and software
Target is coming in at a Zacks Rank #5 (Strong Sell) in a sector that ranks dead last in our Zacks Sector Rank. A big reason for the rank is six analysts have dropped their earnings estimates for the current quarter and next year. The bearish attitude has brought the Zacks Consensus Estimate for the current quarter down from $1.35 to 89 cents. Next year’s number is even more bleak, with our Zacks Consensus Estimate going from $5.87 to $3.95. That number now represents a year-over-year contraction in earnings.
It should come as no surprise that the stock has come under pressure over the last year. For most of 2016, the $65 price handle provided some support. That level was broken in mid-January but shares rallied above that critical level ahead of the last earnings report. Earnings brought with it some bad news and TGT crumbled, falling to fresh 52-week lows yesterday below $54. The 50-day moving average sits well above the current price action at $63, confirming the bearish trend here.
Does Snap Deserve Its First “Buy” Rating?
Finally, Snap Inc. is being recommended to investors. On Monday, James Cakmak, an analyst from boutique equity research firm Monness, differed themselves from the rest of the tech analysts and gave Snap its first “buy” rating.
Snap raised $3.4 billion in the biggest tech IPO in the last two years. Since then, Snap’s stock has not been able to recreate the momentum that once convinced investors and analysts. It ended with a post-IPO low of $19.54 per share last week, falling more than 20% on Friday compared to its IPO price. Several analysts have been giving either a “hold” or “sell” rating to the company after its IPO on March 3.
“There is substantial execution risk, but we’re prepared to give the benefit of the doubt at this stage knowing what we know about Snap, and knowing what we know about the efforts of competitors,” Cakmak wrote in a note on Monday.
Despite having less users than its competitors like Facebook Inc. (NASDAQ:(FB - Free Report) – Free Report ) and Twitter Inc. (NYSE:(TWTR - Free Report) – Free Report ) , a Monness analyst argued that Snap’s decision to brand itself as a “camera company,” and the chance to avoid the ending up like Twitter are the reasons for the “buy” rating.
The hardware of a phone’s camera constantly sees improvement but the camera app has seen little innovation. The analyst says “Snap takes users to a decision tree on what to make of the captured memory.” It engages users and challenges them to create and share content.
If the disappearing photo-sharing app can harness enough creative firepower to avoid becoming just another social media platform, Cakmak sees potential for the company to grow its revenues seven times faster than its competitors, as its competitors’ margins have also likely peaked.
Why Not Buy?
Snap is fairly new to the game of social media advertising , as it only started selling ads at the beginning of 2015 but it has introduced several innovative ways to insert ads. However, these factors can only get Snap so far until it can produce results for marketers. Here are two major obstacles that Snap needs to overcome to attract more marketers.
First, Snap needs to provide detailed measurement statistics that allow marketers to optimize their ad spend. Both Twitter and Facebook allow marketers to run different ads at the same time and provide tools to see which one performs better. With more platforms to introduce ads through, the detailed measurements from Snap become increasingly important for smaller brand companies, as they don’t have the budget like big brand companies to campaign on multiple platforms. This could be a big revenue source for Snap if it can satisfy the needs of small business markets.
Second, Snap’s ad engagement is declining. One of the biggest selling point for Snap before its IPO was that the average user spends 25 to 30 minutes per day on Snapchat. However, app engagement doesn’t equal ad engagement. The customer acquisition firm Fluent said that 69% of the surveyed users “often” or “always” skip ads on Snapchat and the percentage climbed up to 80% among 18-to 24-year-olds users.
Though the sponsored lenses and location overlay are still very engaging, it is hard to solely rely on that. There is limited inventory for the original ads format and also the ads are both expensive to buy and produce.
Snap holds a bright future if the company can navigate past these obstacles. Monness analysts put a price target of $25 per share on Snap’s stock. The company is trading up almost 2% to $19.90 per share after the “buy” rating was released on Monday. Reuters reported five analysts have recommended selling while four other analysts have neutral ratings for Snap.
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
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