For Immediate Release
Chicago, IL – October 2, 2018 – Zacks Equity Research highlights Magnolia Oil & Gas Corp. (MGY - Free Report) as the Bull of the Day, Bed Bath & Beyond Inc. (BBBY - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Apple Inc. (AAPL - Free Report) , Sony Corporation (SNE - Free Report) and PayPal Holdings, Inc. (PYPL - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Magnolia Oil & Gas Corp. may be in the right place at the right time as crude has hit a multi-year high. This Zacks Rank #1 (Strong Buy) is expected to see rising earnings heading into 2019.
Magnolia Oil & Gas is an independent oil producer ("E&P") with assets located in the Eagle Ford Shale and Austin Chalk formations in South Texas. It has a market cap of $3.5 billion.
Acquiring Harvest Oil's South Texas Assets
On Aug 21, Magnolia announced it was acquiring Harvest Oil & Gas Corporation's South Text Assets for $135 million in cash and 4.2 million shares of the company's Class A common stock valued at $56 million as of Aug 20.
The acquisition was expected to close on Aug 31.
The company said it would be immediately accretive. It would add 15 net locations to the core Karnes County inventory and about 114,000 net acres to the Giddings Field position.
In the first half of 2018 it produced 4,800 barrel of oil equivalent per day (boe/d) with 1,400 boe/d in Karnes County being 69% oil/83% liquids and 3,400 boe/d in Giddings Field at 27% oil/53% liquids.
Estimates on the Move Higher
With crude trading above $75 at 4-year highs, the analyst earnings estimates are being adjusted.
In the last 60 days, one has moved higher, but also one estimate was lowered, for 2018. The Zacks Consensus Estimate is looking for $1.50.
2 estimates have also been raised in the last 2 months for 2019, with the 2019 Zacks Consensus at $1.60, which is up 6.9% from 2018.
Shares Up But Valuation Still Attractive
The shares have been on a tear since the company rebranded itself at the end of July, Formerly TPG Pace Energy, it combined with EnerVest to become Magnolia as of Aug 1, 2018.
The shares have added 20% since the re-naming.
But they're still attractively priced, with a forward P/E of just 10.
If the oil analysts are right that WTI will go to $80, then the smaller E&P companies are where investors will want to be.
Those investors interested in the energy plays should keep Magnolia on their short list.
Bear of the Day:
Bed Bath & Beyond Inc. had another disastrous quarter, sending the shares to new 5-year lows. This Zacks Rank #5 (Strong Sell) can't figure out how to turn its business around.
Bed Bath & Beyond operates the Bed Bath & Beyond branded stores as well as numerous other brands including Cost Plus, buybuy BABY, Harmon, and Christmas Tree Shops. It also operates e-commerce sites for these brands as well as One Kings Lane and Chef Central, which only sell online.
A Big Miss
On Sep 26, Bed Bath & Beyond reported fiscal 2018 second quarter results which missed the Zacks Consensus Estimate by 13 cents. Earnings were $0.36 versus the consensus of $0.49.
But the bigger issue with the retailers is really same-store-sales.
Bed Bath & Beyond's same-store-sales fell 0.6% year-over-year with the press release saying that "included strong sales growth from the Company's customer-facing digital channels" even as sales from stores declined in the mid-single-digit percentage range.
It doesn't know how big the decline was at the stores? Of course it does so why not just say it?
It's still struggling to come up with a plan that gets it into the game against Amazon. It believes it will be home decor, but shareholders will have to wait until 2020 to see if works.
The company is in the middle of its "turnaround" plan which is expected to continue until 2020.
It expects to see moderate declines in operating profit and net earnings per diluted share in fiscal 2018 and fiscal 2019.
For fiscal 2018, it now expects earnings to be at the low end of its previous guidance, at about $2.00.
When was the last time the company's earnings per share were that low? All the way back in the dark period just after the Great Recession.
Earnings in Fiscal 2009: $1.65
Earnings in Fiscal 2010: $2.30
Expected earnings in Fiscal 2018: $2.00
Analysts expected earnings in Fiscal 2019: $1.64
Earnings per share are, literally, expected to be back to 2009 levels next year except the company is in the midst of a huge share buyback program which means there are less shares this time around.
Why Is there a Share Buyback Program?
In the second quarter of 2018, while business was horrible, it bought back $41 million in stock under its massive $2.5 billion share repurchase program.
As of Sep 1, 2018, there was still $1.4 billion left under the program.
The company also continues to pay a dividend, currently yielding 3.4%.
There's been no discussion of suspending either program.
Meanwhile, the business's operating margin continues to decline and was under 3%, at 2.9%, in the most recent quarter.
Is it a Value Stock or a Trap?
Shares have plunged another 33% year-to-date and are down 80.9% over the last 5 years.
It has a forward P/E of 7.5.
But 10 analysts have cut full year estimates for Fiscal 2018 and 9 have done so for Fiscal 2019.
With falling estimates, this stock is a value trap.
3 Blue-Chip Tech Stocks to Buy Now
After several months of volatility, tech-heavy indexes are back near their all-time highs, and bullish investors look ready to push things even higher. The world’s tech leaders have dominated Wall Street over the past two years, and now, investors might have a fresh chance to buy these red-hot stocks as they look to establish a new range.
Of course, this year’s volatility has made some investors hesitant, with bearish traders quick to draw similarities between this latest tech rally and the infamous dot-com bubble of the late 90s and early 2000s.
However, unlike the dot-com bubble, there is real earnings and revenue growth fueling this tech rally. In fact, the average P/E ratio of our “Computer and Technology” sector currently sits at 21.8, which compares favorably to the dot-com era’s average that soared into the 100s for a few weeks.
Another interesting trend in today’s tech rally is that, rather than obsessing over the next big thing, investors seem to rewarding tried-and-true brands for their respectable growth. This means that some of the strongest tech stocks are the household names that consumers already know and love.
With that said, check out these three blue chip tech stocks to buy now:
1. Apple Inc.
Tech behemoth and iPhone maker Apple has become a backbone stock for many investors in recent years, and the company recently made Wall Street history by reaching the $1 trillion market cap threshold for the first time ever. Plus, the stock is sporting a Zacks Rank #1 (Strong Buy) and has its eyes set on the near and distant future.
Indeed, Apple just introduced three new iPhones in early September, underscoring its new model which places the flagship smartphone at the center of diverse ecosystem of other devices and services, such as the Apple Watch, AirPods, and Apple Music.
And after another great quarter, Apple has seen a tidal wave of positive estimate revisions for future fiscal periods, indicating that analysts are still growing more bullish on the company. Investors also have an opportunity to get in on the cheap, with shares trading at just 19.2x forward earnings right now.
2. Sony Corporation
This Japanese electronics giant has a dominant position with many key products, including audio and video equipment, televisions, displays, semiconductors, game consoles, computers and computer peripherals, and telecommunication equipment. Sony is currently sporting a Zacks Rank #1 (Strong Buy) and looks like a promising tech stock for both the near term and in the coming years.
Sony shares have soared nearly 62% over the past year, but the stock is still trading at 14.5x earnings and 1.0x sales. Meanwhile, management is generating $5.94 in cash per share, which should strengthen the company’s ability to invest in new technologies. Earnings growth is expected to reach nearly 27% fiscal year, and that should be inspired by revenue growth, expansion expected to continue on the top line going forward.
3. PayPal Holdings, Inc.
Traditionally speaking, blue chips are going to have a lot more trading history than PayPal, which debuted as an individual stock just over three years ago. But PayPal had already established itself as the top dog in online payments well before its spin-off, and all the stock has done since then is build one of the most consistent and attractive charts on Wall Street.
Now, PayPal is a household name with a market cap over $100 billion. The stock currently sports a Zacks Rank #2 (Buy) and is projected to see a long-term annual earnings growth rate of nearly 18%. Plus, the stock has a PEG of 2.1, so that EPS growth is coming at a decent price right now. PayPal has never missed earnings estimates since it IPO’d and has put together several impressive years.
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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.
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