For Immediate Release
Chicago, IL – December 12, 2017 – Zacks Equity Research highlights SolarEdge (SEDG - Free Report) as the Bull of the Day and Fred’s (FRED - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on DXC Technology Company DXC, Anglo American NGLOY and Western Digital WDC.
Here is a synopsis of all five stocks:
Bull of the Day:
Today’s Bull of the Day is a company using two emerging technologies to bring a potent technological package. Blending solar energy with cloud-based solutions, this company is helping to power a smart energy grid for the future. I’m talking about Zacks Rank #1 (Strong Buy) SolarEdge.
SolarEdge Technologies, Inc., together with its subsidiaries, designs, develops, and sells direct current (DC) optimized inverter systems for solar photovoltaic (PV) installations in Israel, Europe, the United States, and internationally. The company’s DC optimized inverter systems include power optimizers, inverters, and cloud-based monitoring software. Its products are used in a range of solar market segments, including residential, commercial, and small utility-scale solar installations. The company sells its products directly to solar installers, as well as engineering, procurement, and construction firms; and indirectly to solar installers through distributors and electrical equipment wholesalers, as well as PV module manufacturers.
It's been all about growth for SolarEdge over the last several years. Both on the revenue side and the EPS side of the equation. Revenue growth is set to continue at a 21.98% clip this year. Over the last sixty days, two analysts have increased their earnings estimates for the current year. The bullish moves have increased our Zacks Consensus Estimates from $1.79 to $2.11 for the current year. Next year’s numbers have gone from $1.83 to $2.16.
Shares of SolarEdge have been on fire since March when the stock was trading down in the teens. From there, a sharp rally came back to retest the 50-day moving average on a few occasions. The most recent occurred about a week ago, with the stock coming down to $33. An oversold commodity channel index dipped under -200. Since then, the CCI has bounced along with the stock price. If the CCI continues its positive move and crosses over the zero line during tomorrow’s session it would give the bulls a fresh “Buy” signal to trade with.
Bear of the Day:
There are a few companies I would never want to try to compete with. Pretty much everybody’s worst nightmare in retail is Amazon. You can count the dead among several one-time giants which have been reduced to piles of rubble. One of the worst places to be is a retail shop where there’s no differentiation of products or service. The ones who just try and beat Amazon on price and convenience. That could be the case with Fred’s.
Fred's, Inc., together with its subsidiaries, sells general merchandise through its retail discount stores and full-service pharmacies. The company, through its stores, offers household cleaning supplies, health products, beauty and personal care products, disposable diapers, pet foods, paper products, various food and beverage products, and pharmaceuticals to low, middle, and fixed income families in small- to medium- sized towns. It also sells general merchandise to franchised Fred's stores. As of January 28, 2017, the company operated 628 retail stores, including 55 express stores and 3 specialty pharmacy-only locations; 362 pharmacies; 3 specialty pharmacy facilities; and 16 franchised stores in 15 states of the southeastern United States.
Last quarter the company delivered a stinker. After closing 39 underperforming outlets earlier this year, gross profit declined 14.9% year-over-year to $94.6 million. Gross margins contracted 230 basis points. This prompted analysts to drop their earnings estimates across the board. Now, the Zacks Consensus Estimate for the current year is down to a 55-cent loss while next year the company is forecast to lose 24 cents. These bearish downside estimate revisions have helped put this down at a Zacks Rank #5 (Strong Sell),
Beware of the value trap being set up here my friends. Seeing a stock come down from over $21 in December of last year to under $4 today can tempt a few investors out there. The stock has disappointed those coming in on the cheap as well. Look at the broad based the start started putting in during July and August around $6. That level broke and new lows followed. While a floor under $4 seems to be forming I’d be carefully about playing the oversold move here.
No Santa Claus This Week: Global Week Ahead
In the Global Week Ahead, it’s all about monetary policy.
But this huge talking wave is NOT likely to wash ashore and be market-moving.
Nearly all of what is about to happen has already been communicated. And well.
Wednesday, the Fed becomes the leader. Here comes that 25 basis point hike.
After that fait accompli, four western European central banks surf into global risk markets. They issue policy decisions starting Thursday. Expect none to alter their stances or offer meaningful market effects.
Another four Latin American central banks get on their boards after the Fed — to offer their latest decisions for that region. Maybe Mexico gets interesting. But it is not likely.
The FOMC meeting on Tuesday into Wednesday culminates in the policy statement at 2 pm ET, along with the Summary of Economic Projections.
That summary includes the revised ‘dot plot’ of future rate projections.
Any comment on weak U.S. Consumer Price Inflation (the CPI) will be closely watched, to see if there is any change to sentiment.
I see penciled in 3 rate hikes for 2018, but 2 is another likely call.
This will be Chair Yellen’s last press conference at the helm.
A 25 basis point hike in the Fed Funds rate, from 1.25% to 1.5% is in the cards from the meeting itself.
The first order of business is to congratulate Chair Yellen. I agree with covering analyst sentiment. She deserved a second term after a fine performance and can go out with her head held high regarding the leadership she has provided.
While she will be back to chair the January 31st 2018 meeting, that will be a statement only event, making this December meeting her last command performance.
The Bank of England (BoE) is nearly universally expected by traders to leave policy unchanged at 0.5%.
Governor Carney has already guided. A pair of rate hikes through to 2020 may be about the limit to this tightening cycle.
His exact quote about a month ago was: “We’ll see how the economy evolves. If it evolves broadly in line with our projections we would probably raise interest rates a couple of times over the next few years.”
Tuesday’s U.K. CPI report may further inform BoE policy risks. The expectation is for inflation to be topping out at about 3% and thereby averting the over-3 data that triggers the hand wringing by central bankers the world over.
The European Central Bank (ECB) head Mario Draghi is also expected to jawbone while keeping his various ECB policy measures intact.
Europe’s central bank is unlikely to be terribly exciting to watch for some time. It has already moved for extending bond purchases through to next September 2018 at a diminished pace — while guiding that rate hikes would follow much later.
The ECB is likely to reduce its bond market portfolio reinvestment well after that — if it follows the Fed’s path of reinvesting.
All of this will happen — until the ECB rate normalization process is well underway, in just a few years time.
In other words, be patient.
This global rate ‘normalization’ thing is going to take awhile.
Top Zacks #1 Rank Stocks—
For active stocks, I am watching info tech plays and mining closely.
DXC Technology Company: This is a $27 billion market-cap stock. The company plays in the Computer-IT services space. It is based in Virginia. The long-term Zacks VGM score is A.
Anglo American: This is a $26 billion market-cap mining company. Its global mine portfolio includes iron ore, manganese, metallurgical coal, copper, nickel, platinum and diamonds. The Zacks VGM score is A here, too.
Western Digital: This is a $24 billion market-cap computer storage maker. It has a big settlement talk scheduled to end this week with joint venture partner Toshiba. Again, the long-term Zacks VGM score is A, led by an A in Value and Growth.
If those settlement talks go well, WDC stock will move up hard and fast.
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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