For Immediate Release
Chicago, IL – December 27, 2018 – Zacks Equity Research Dr. Reddy’s Laboratories (RDY - Free Report) as the Bull of the Day, Dillard’s Inc (DDS - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Facebook (FB - Free Report) , Netflix (NFLX - Free Report) and Amazon Prime (AMZN - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Obviously, the last three months have been brutal for equity investors. Fears about interest rates, the yield curve, trade wars, budget impasses, Brexit, and a host of other concerns have conspired to take almost all stocks lower – in many cases sharply lower.
Blue-chips, tech stocks, small caps, and even the usually defensive sectors like heath care and consumer staples have all been sold off broadly. It’s hard to find a stock that has even managed to keep its head above water as uneasiness turned to fear and then to panic.
Not all stocks have been battered, though.
Since the S&P 500 began the steep decline at the beginning of October that has taken that broad market index down 20%, Dr. Reddy’s Laboratories has actually gained almost 12%.
An Admirable Mission That’s Also Profitable
Founded by a scientist who recognized that life-saving medications were often too expensive for a large portion of the world’s population, Dr. Reddy’s goal was to accelerate access to affordable and innovative medicines for as many people as possible. The realization of that goal is a state of the art research facility, employing 800 research scientists as well as extensive support personnel and with several strategic partnerships.
RDY’s business is fully vertically integrated, offering products and services at all levels of the pharmaceutical supply chain – starting materials, intermediates, active ingredients and finished dosages. Their research encompasses cancer, diabetes, cardiovascular disease, inflammation and bacterial infection, serving the world markets, focusing on India, the US, Europe and Russia.
The company is divided into three units, Pharmaceutical Services and Active ingredients, Global Generics and Proprietary Products.
Experience in navigating the various regulatory requirements in all of the jurisdictions in which they operate allows them to be first to market with in-demand and life-saving medications all around the world. In their most recent report to investors, the company lists “Actively work with the regulatory agencies for accelerating the new product approvals” as one of its key priorities.
Earlier in December, Dr. Reddy’s won an important decision in US Federal Circuit court that will allow it to sell its generic version of Suboxone, which is widely prescribed to treat opioid use disorder – a potentially enormous market for RDY as that epidemic continues to grow in the US, and also potentially a life-saver for those who are afflicted.
Having earned $1.01/share in FY 2018, future estimates are on the rise for RDY, with the Zacks Consensus Estimate for FY 2019 currently at $1.42/share – an increase of 40%. Estimates for FY 2020 show even stronger growth, up another 50% to $2.13/share.
Dr. Reddy’s Laboratories is a Zacks Rank #1 (Strong Buy).
Though it currently trades at a forward P/E ratio of 26X, which is a premium to the Drug Industry average of 19X, RDY’s strong balance sheet boasts a debt/equity ratio of just 21%, well below the industry average of 66%, potentially allowing the company to make strategic investments and/or acquisitions that might not be feasible for the competition.
Even when the market looks dark for almost all stocks, there are still some shining stars out there, and Dr. Reddy’s Laboratories has certainly been one of them.
Bear of the Day:
Through the good and bad periods for the equity markets in 2018, it’s been an especially interesting environment for retail stocks. In many cases, it has been feast or famine with some spectacular success stories and some real duds.
Lululemon and Restoration Hardware are both still showing outstanding 2018 gains even in a weak overall market, and Macy’s and Kohl’s Stores are certainly holding their own as well, with double-digit YTD returns that look awfully good compared to an 11% loss in the S&P 500.
Dillard’s Inc is unfortunately one of the retailers that has not fared nearly as well and analyst estimates going forward are not optimistic about an imminent turnaround.
Dillard’s finds itself in an uncomfortable position in the retail space, not high-end enough in terms of brand cache to command premium margins, yet with its goods not inexpensive enough to attract the more budget minded customers.
Third quarter results at DDS showed an increase of 3% in same store sales – typically a good sign for retailers, yet net earnings were only $0.27/share, well below the $0.50 they posted in net earnings in the same quarter in 2017 and badly missing the Zacks Consensus Earnings Estimate of $0.56/share.
CEO William T. Dillard II explained, “While we are encouraged by our 3% comparable sales performance, this was a disappointing quarter as markdowns weighed heavily on gross margin, particularly in the first month.”
Basically, increased sales numbers don’t matter much if you have to drop prices to achieve them.
Shares of DDS are nearly 40% off of their 52-week highs reached in June.
After the big miss, analysts began revising their full year earnings forecasts downward and the consensus has fallen from $6.48/share 60 days ago, to $5.73/share currently.
The consensus estimate for 2020 has fallen by a similar percentage, from $6.03/share to $5.42/share.
Citron Turns Bullish: Buy Facebook (FB - Free Report) in 2019?
Shares of Facebook surged over 8% Wednesday after Citron Research and Andrew Left raised their price target for the embattled social media powerhouse, citing Facebook's long-term appeal. So the question is should investors buy Facebook stock on the dip as we inch closer to 2019?
Well-known short seller Andrew Left of Citron thinks that Facebook stock could reach $160 per share in 2019. The firm pointed out that the company’s user data and privacy scandals have had little impact on Facebook’s user base and revenues.
Citron and Left dove into just how impressive Facebook’s user base is, which should help it continue to attract advertisers as non-ad supported platforms such as Netflix and Amazon Prime attract more and more customers. Plus, the firm presented its case as to why Facebook is hardly “evil” compared to many other firms in a report titled “Citron Research Backing Up the Sleigh on Facebook.”
“Books have been written and movies have been made on the Facebook is evil topic, but never before has Facebook been this compelling of an investment opportunity,” Citron wrote.
“As investors have become overly concerned about the short-term noise of privacy and propaganda, they have forgotten to look at the earnings power and potential of the most advanced advertising tool with global reach in messaging, networking, and the future of shopping. The Facebook platform has advanced a long way and has turned this research firm from a one-time skeptic to a major bull.”
Shares of Facebook climbed over 8% to reach $134.18 per share Wednesday after investors reacted positively to Citron calling the social media giant its “2019 S&P Stock of the Year.” Despite Wednesday’s climb, FB stock would have room for roughly 20% growth before it hit Citron’s 2019 target.
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