For Immediate Release
Chicago, IL – November 27, 2018 – Zacks Equity Research E-Trade Financial (ETFC - Free Report) as the Bull of the Day, Jack in the Box (JACK - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon (AMZN - Free Report) , Target (TGT - Free Report) and Best Buy (BBY - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Feisty bouts of volatility in global and domestic equities markets, fueled by rising interest rates and worldwide economic uncertainty, have erased gains in many key indexes and sparked concerns about the near-term future. But investors should note that increased buying and selling from traders betting on that future can actually benefit from publicly-traded companies.
One such example is E-Trade Financial, a leader in the online brokerage industry since the 1990s. As seen in the company’s most recent earnings report, increased trading activity is creating growth for E-Trade, and now the stock is sticking out as one of the strongest in the entire financial services sector.
Plus, after strong results and strong forward-looking comments inspired several positive analyst estimate revisions, ETFC is sporting a Zacks Rank #1 (Strong Buy).
Latest Earnings & Outlook
E-Trade most recently reported earnings on October 16. Results were for the company’s fiscal quarter that ended in September. The online brokerage tallied earnings of $1.00 per share, crushing the Zacks Consensus Estimate of $0.83 and improving over 104% from the year-ago period.
Total revenue in the quarter came in at $720 million. This marked year-over-year growth of 20% and comfortably surpassed our consensus estimate of $715.2 million. Daily Average Revenue Trades (DARTs), a key metric of commissioned trades, surged 29% from the prior-year period. Total customer assets were up 29% to $472.8 billion, and the company repurchased 5.3 million shares to complete its $1 billion buyback program. E-Trade’s board also approved another $1 billion in share repurchases.
E-Trade reports a number of key metrics on a monthly basis, so we have the benefit of knowing that this growth momentum actually picked up in October. DARTs for October were up 40% from the prior-year month, and the platform notched new brokerage assets of $1.2 billion. E-Trade’s customers bought about $2.7 billion in securities during October.
Bear of the Day:
U.S. stocks on Monday gained back about a third of what they lost during the volatile Thanksgiving week, but it is certainly too early to say whether this is the start of an extended rebound—or simply a brief rally that will be met with continued selling.
There are plenty of headwinds forcing stocks lower right now, including concerns about rising interest rates and a global economic slowdown. It makes sense to avoid companies most exposed to these headwinds. Wall Street has also punished high-flying growth and momentum stocks recently, as renewed caution—and in some case, poor guidance—pressured investors to take profits and move into more defensive positions.
With that said, it still feels difficult to predict what is coming on any given day, or even what direction we are heading over the next few months. This means investors should also avoid stocks that show one specific trait likely to result in near-term volatility in all types of market environment—those with rising share prices and falling earnings outlooks. One such example is restaurant chain Jack in the Box.
Jack in the Box is a quick-service hamburger chain based in San Diego, California. The company’s system includes more than 2,000 restaurants throughout many states. It previously operated fast-casual Mexican chain Qdoba but sold that segment to public equity firm Apollo Global Management earlier this year.
The key reason why Jack in the Box is troublesome right now is that its forward-looking earnings outlook does not match its recent share price trend, and that divergence is likely to correct itself soon. The relationship between share prices and earnings trends does not always play out immediately, but over time the two indicators do tend to mirror each other. To get a sense of the problem with JACK right now, we must start with its latest earnings report.
Jack in the Box released its most recent quarterly earnings report on November 19. The burger chain posted adjusted earnings of $0.77 per share, missing the Zacks Consensus Estimate of 83 cents. Revenues were down 23.5% on a year-over-year basis to $177.5 million due to the Qdoba divesture—although these results did edge out estimates of $174 million.
Shares of JACK surged after this report, as investors appreciated the company’s comps growth of 0.5% and guidance of 0% to 2% comps growth in 2019. The stock has added about 10% since the report was posted.
But there are some reasons not to love this trend. First, this comps growth is less impressive when one considers that the 0.5% improvement compares to a year-ago quarter which saw JACK report a system-wide comps decline of 1%. Moreover, Jack in the Box’s comps guidance did not come with a strong outlook for earnings in 2019.
3 Reasons Why Stocks Rebounded Monday
U.S. stocks recovered nearly a third of their losses from the previous week shortly after the open Monday, restoring some confidence in a market that has been plagued by rising interest rates and concerns about a global economic slowdown.
Whether today’s rally is an actual indicator of impeding relief or simply a dead cat bounce remains to be seen, but Wall Street certainly had a few things to be hopeful about after returning from the shortened Thanksgiving week.
Here’s a look at three of the major talking points fueling Monday’s rally.
The Rally in Europe
European stocks mounted a relief rally of their own on Monday, and it is possible that this bullishness made its way across the Atlantic by the time U.S. markets opened. All European markets rose today, with the STOXX Europe 600 index adding as much as 1.3% from Friday’s close and 2.2% from recent 52-week lows.
One might argue that this rebound is too young to indicate a full-blown recovery for European equities, but the continent did make some positive progress on a few of the economic uncertainties that have hurt stocks this year.
Notably, reports indicated that Italy’s new populist government is considering lowering its planned budget deficit to 2% from 2.4% in an attempt to appease EU regulators. This helped lift European banking stocks and the broader financial sector.
Banks in London saw an even stronger rally Monday after EU leaders over the weekend supported Theresa May’s proposed Brexit plan. The embattled prime minister will still face an uphill battle to win parliamentary approval of the deal, but investors seemed to acknowledge this endorsement as a step in the right direction.
Respite for Oil Markets
An uptick in oil prices also lifted the mood on Wall Street this morning. Crude prices pared some losses after tumbling nearly 7% to touch a four-year low on Friday. Cheaper oil is not inherently a bad thing for non-related equities, but sudden volatility in the market raised concerns about the demand side of the business, which can signal trouble ahead for the broader global economy.
Oil’s recent decline comes just weeks after the black gold reached a four-year high ahead of U.S. sanctions on Iran, so it is still unclear exactly what’s coming next for the commodity. Traders will now look to see whether OPEC can muster further relief by controlling supply.
Black Friday and Cyber Monday
Another catalyst for Monday’s rebound was the prospect of record-breaking Cyber Monday sales on the back of a historic Black Friday.
Black Friday online sales reached $6.22 billion this year, up nearly 24% on a year-over-year basis and reaching a new all-time high, according to CNBC and Adobe Analytics. That e-commerce momentum is expected to continue on Cyber Monday, with Adobe Analytics calling for a record $7.8 billion in sales during the online shopping holiday.
This record activity has supported gains in the retail sector on Monday. Amazon shares were up nearly 4% through morning hours, while Target and Best Buy also outpaced wider indexes.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.