For Immediate Release
Chicago, IL – September 7, 2018 – Zacks Equity Research highlights Ally Financial (ALLY - Free Report) as the Bull of the Day, At Home Group (HOME - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Netflix (NFLX - Free Report) , Apple (AAPL - Free Report) and Disney (DIS - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
The finance sector has had a rather lethargic year so far, but there have been some interesting investing opportunities to emerge periodically. Notably, earnings expansion and positive estimate revisions make Ally Financial stand out as a potential growth and value target right now.
Ally Financial provides consumer loans for car purchases. It is the largest automotive finance company in the U.S., serving nearly 20,000 dealerships and more than 4 million retail consumers.
Much has been made about the sluggishness of domestic auto stocks this year, but a lack of overall sales has not been the major shortcoming. While the threat of new tariffs has battered auto stocks throughout 2018, overall sales have shown year-over-year growth in certain months. Sure, total sales volume is likely to continue to tick down from 2016’s record highs, but we’re seeing some positive trends, such as a continued shift toward more expensive—and more profitable—SUVs and trucks.
For a financer like Ally, that likely spells good news. Moreover, Ally itself has worked to diversify its revenue base, improve margins, and reward shareholders. This helps explain its solid earnings trend and its Zacks Rank #1 (Strong Buy). Let’s take a closer look.
Latest Earnings and Outlook
Ally most recently reported earnings on July 26, 2018. The company notched adjusted earnings of 83 cents per share, crushing the Zacks Consensus Estimate of 71 cents. That result also marked a significant improvement from earnings of 58 cents per share in the prior-year quarter.
Total net revenue ticked higher to reach $1.46 billion, offsetting a slight uptrend in expenses. Ally repurchased shares worth $195 million in the quarter.
Bear of the Day:
An overvalued stock with negative earnings estimate revisions on its record is one that could cause trouble in any market environment, and with headwinds like trade war woes threatening broader indexes, the risk is exacerbated. Unfortunately, that risk is exactly what is present in At Home Group right now.
At Home Group is an owner and operator of home-décor accessories stores, primarily in the U.S. It is essentially a big-box retailer focused on furniture, home furnishing, wall décor, and various other housewares.
A strong labor market and a solid overall consumer economy should buoy companies like this to an extent, but investors have plenty of opportunities to cash in on these trends, and they’ll want to be make sure they are picking the best ones. HOME, with its Zacks Rank #5 (Strong Sell) and “F” grade in the Value section of our Style Scores system, does not look like that.
You see, At Home has actually witnessed a number of positive earnings estimate revisions recently. But it’s where the negative revisions have come in that is particularly troubling.
Indeed, within the past 60 days, At Home as witnessed four negative revisions to its earnings estimates for the quarter ending January 2019—also known as the holiday quarter. At Home should be seeing an uptick from seasonal décor sales and gift shopping during the holiday period, but if analysts don’t think that will result in stronger earnings, we may be stumbling upon a problem.
Another concern is the general sluggishness seen throughout At Home’s industry. We tend to think the strongest stocks come from the strongest industries, and it’s entirely possible that even the brightest stars in an otherwise lackluster group can struggle to generate momentum. To get a read on this, we use the Zacks Industry Rank.
The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.
Unfortunately, At Home’s “Retail – Home Furnishings” group is currently ranked in the Bottom 5% of the Zacks Industry Rank.
Netflix Jumps on New Price Target: Time to Buy?
Netflix saw its stock price surge over 2% on Thursday after RBC Capital Markets slapped a new price target on the stock. The firm raised its NFLX target because it feels that Netflix has a dominant position in the streaming market, which will become even more important with the arrival of Apple and Disney.
RBC Capital Markets lifted its price target for Netflix shares from $360 to $440 per share. This new price represented a 29% upside to Wednesday's closing price of 341.18 per share. The firm also reiterated its “outperform” rating for NFLX stock. “We believe these results largely confirm Netflix's strong Value Prop and Competitive Position,” analyst Mark Mahaney wrote in the note to clients Wednesday.
“We also view Netflix as one of the best derivatives off the strong growth in online video viewing and in Internet connected devices (tablets, smartphones, Internet TVs), with our proprietary survey data tracking significantly improved customer satisfaction levels.”
RBC pointed directly to its own consumer survey as another reason to be upbeat about the streaming company. The firm surveyed more than 1,500 U.S. consumers and found that 68% of Netflix subscribers were either "extremely" or "very satisfied" with the company’s service. “We believe that Netflix has achieved a level of sustainable scale, growth, and profitability that isn't currently reflected in its stock price," Mahaney continued.
The new price target reflects, in part, the company’s significant selloff following its second-quarter earnings release. And shares of NFLX climbed over 2% to $356.00 through mid-morning trading on the back of RBC’s positivity.
Shares of Netflix are down roughly 4% over the last three months, but are still up over 90% over the last 52 weeks. So now let’s dive a little deeper to see if investors should think about buying Netflix.
Netflix closed the second quarter with 130 million subscribers worldwide, which marked an approximately 25% surge from the year-ago quarter. However, Netflix failed to meet its own subscriber growth estimates by a wide margin. Making matters worse, the streaming company had beat its own forecasts in seven out of the previous nine periods, including beats in the trailing four quarters.
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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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