For Immediate Release
Chicago, IL – November 11, 2019 – Zacks Equity Research Shares of Chegg (CHGG - Free Report) as the Bull of the Day, C.H. Robinson Worldwide, Inc. (CHRW - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Tilray (TLRY - Free Report) , Anheuser-Busch InBev (BUD - Free Report) and Novartis (NVS - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Shares of Chegg have surged over 15% since the company posted stronger-than-projected third-quarter financial results on November 4. The firm, which began as an online textbook hub, has expanded into a diverse digital educational platform that looks poised to grow in a changing educational environment.
CHGG allows students, particularly college students, to buy, rent, and sell textbooks online. Chegg’s tagline used to be “Saving broke students one textbook at a time.” The firm still boasts that people can “save up to 90% on textbooks,” which is a solid niche market in an e-commerce age where Amazon dominates online book sales.
Today, however, the Santa Clara, California-headquarter firm is much more of a learning services-focused company, or what it calls a “direct-to student learning platform.” Chegg offers online tutors, test prep, and other help on everything from math to writing.
Plus, the company runs an online internship and job search platform and other tools that aim to help college students find employment. More recently, Chegg in early September announced that it entered into a definitive agreement to acquire “online skills-based learning platform,” Thinkful for roughly $80 million in an all-cash transaction.
Thinkful, which saw its sales surged 30% last year to hit $14 million, offers customers the chance to learn tech-focused skills such as coding through a “bootcamp-style curriculum and 1-on-1 mentorship.” The company also claims that if its users don’t get a job in tech within six months of graduating, they get their tuition back. That is quite the offer in an age where technology careers are in high demand.
Quick Q3 Overview
As we mentioned at the top, CHGG posted strong Q3 results recently, with revenue up 27% to $94.2 million. The company also saw its adjusted earnings skyrocket over 155% from the year-ago period to $0.18 cents per share to crush our $0.09 Zacks Consensus Estimate.
More specifically, Chegg’s services sales jumped 28% to account for roughly 75% of total net revenues. The company closed the quarter with 2.2 million subscribers, up 29% from Q3 2018. The company also announced that it has a new agreement with FedEx, and is poised to roll out an upgraded bundle packed called Chegg Study over the course of 2020, with a bigger second-half push during the back-to-school period.
Chegg shares were trading at under $5 in early 2016 and have clearly soared since then to their current price of roughly $34 per share. CHGG stock is up over 25% in the last 52-weeks. With that said, Chegg stock rests 25% off its 52-week highs of over $45 per share after. This could give the stock plenty of room to run despite already climbing 15% in a week.
On top of that, Chegg is part of our Internet – Software industry that rests in the top 30% of our 252 Zacks industries. CHGG also holds “B” grades for both Growth and Momentum in our Style Scores system.
And although Chegg has been a growth stock and looks poised to expand for years, its valuation picture is not crazy compared to its industry. Chegg is trading at 38.9X forward earnings, which represents a discount against its industry’s 59.5X average.
Outlook & Earnings Trends
Looking ahead, our Zacks Consensus Estimates call for the online educational firm’s fourth quarter sales to climb 29% to $123.2, which would top last quarter’s 27% expansion. Chegg’s full-year fiscal 2019 revenue is projected to surge 27.3% to reach $408.6 million, with 2020 also projected to jump over 27% above our current-year estimate to touch $520.4 million.
At the bottom end of the income statement, CHGG’s adjusted Q4 earnings are projected to jump 24% to $0.31 per share. Meanwhile, CHGG’s full-year fiscal 2019 and 2020 EPS figures are expected to climb 58% and 13%, respectively.
Chegg has also blown by our quarterly earnings estimates recently, including a 49% average bottom-line beat over the trailing four periods. Perhaps more importantly, the company’s earnings estimate revision activity has trended heavily upward since it posted its Q3 results.
College, as many currently understand it, might look much different and a lot more digital in the somewhat near future as tuition at four-year colleges continue to skyrocket and U.S. student debt climbs above $1.5 trillion. Therefore, Chegg, which is a Zacks Rank #1 (Strong Buy), looks like a solid tech stock to consider at the moment.
Bear of the Day:
C.H. Robinson Worldwide, Inc. stock tumbled roughly 15% after it posted worse-than-projected quarterly results on October 29. The third-party logistics powerhouse’s outlook appears to be headed in the wrong direction amid a global economic slowdown.
C.H. Robinson is a third-party logistics firm that provides everything from freight transportation and logistics to outsource solutions and more from North America to Asia. The company has recently fallen victim to a broader economic slowdown. C.H. Robinson, like economic bellwether Caterpillar, has been hurt by the fact that businesses have started to hold off on big purchases and other growth initiatives amid macroeconomic uncertainty, made worse by the U.S.-China trade war.
CHRW’s Q3 revenue fell 8.7% (the fourth straight period it failed to top our revenue estimates), while income from operations tumbled 18.2%. Meanwhile, the company’s adjusted quarterly earnings fell over 14% to $1.07 per share to come in well short of our $1.16 a share Zacks Consensus Estimate. Year-to-date, company revenues are down 7.8 percent, driven by declines across transportations units.
C.H. Robinson CEO Bob Biesterfeld summed up the company’s current situation and how the worldwide economic picture is set to impact his company in prepared third-quarter remarks.
“We anticipated an aggressive industry pricing environment coming into the second half of this year driven by excess capacity and softening demand and knew we faced difficult comparisons versus our strong double-digit net revenue growth in the second half of last year. Our results were negatively impacted by truckload margin compression in North America,” Biesterfeld said.
“Looking ahead, we expect that North American routing guides will continue to reset at lower prices in response to the falling cost environment and decline in spot market freight opportunities. While industry data suggests capacity continues to exit the North America truckload market, we believe capacity will exceed available shipments for the next few quarters.”
CHRW stock is down over 13% in the past 12 months and its shares tumbled from $90.52 to $77.08 per share in one day after it posted its third quarter results. Investors will also notice just how quickly and dramatically C.H. Robinson’s longer-term earnings picture has turned in the wrong direction. The company is also part of our Transportation – Services industry that sits in the bottom 27% of our 252 different Zacks industries at the moment.
On the positive side, the Minneapolis, Minnesota-based firm currently pays an annualized dividend of $2.00 per share, for a solid 2.53% yield. CHRW is also trading at a discount against its industry at 17.8X forward earnings estimates compared to 18.2X, while XPO Logistics comes in at 21.2X.
Q4 Outlook & Earnings Trends
C.H. Robinson’s fourth quarter revenues are projected to slip 7.2% to $3.84 billion, based on our Zacks Consensus Estimates at the moment. Overall, the company’s full-year fiscal 2019 sales are projected to fall 7.7% to $15.36 billion.
The logistics firm’s Q1 fiscal 2020 sales are then projected to dip nearly 3%. CHRW’s full-year fiscal 2020 revenue is actually expected to pop almost 2% above our current-year estimate, but this would still come in far below the company’s 2018 results.
At the bottom end of the income statement, CHRW’s adjusted Q4 earnings are projected to plummet 24.6% from the year-ago period, with full-year FY19 set to slip more than 6%. C.H. Robinson’s first quarter fiscal 2020 earnings are projected to fall 14.7%, which is expected to help drag down its full-year FY20 EPS figure by 1%.
Clearly, many of C.H. Robinson Worldwide’s current problems are outside of its control. But there are no moral victories on Wall Street and investors should remember that the International Monetary Fund in October announced that it expects the global economy to grow at its slowest pace since 2009 this year.
C.H. Robinson Worldwide is a Zacks Rank #5 (Strong Sell) at the moment that also sports an “F” grade for Momentum in our Style Scores system.
Tilray (TLRY - Free Report) Set to Report Q3 Earnings: Will It Continue to Plunge?
Tilray is set to report its third quarter results after the closing bell Tuesday, November 12. The company’s stock has plummeted in 2019 thus far, down over 67% as the cannabis industry as a whole has been hit with a variety of headwinds.
With all the setbacks that the marijuana industry has experienced, investors have been hesitant to jump into pot stocks despite the untapped potential that the emerging market has. As with any budding industry, it is difficult to gauge the trajectory of the young emerging companies. Let’s take a closer look at Tilray and where they might be headed in the near future.
Tilray Bets on CBD and Eyes US Market
Tilray is taking its partnership with brewing giant Anheuser-Busch InBev to the next level. The marijuana manufacturer and the beverage titan will be working together to produce and market non-alcoholic beverages containing cannabidiol (CBD). The CBD-infused drinks will go on sale in Canada once regulations allow, and potentially as early as December.
CBD is a non-psychoactive component of the cannabis plant. Unlike tetrahydrocannabinol (THC), CBD doesn't get people high. CBD has gained popularity because of its perceived health benefits like pain and stress relief. Analysts at market research company Brightfield Group forecast the CBD market to grow to nearly $24 billion by 2023, up from approximately $620 million in 2018.
Following the licensing backlog that Canada has experienced, investor worries grew about the timeline of the true emergence of the legal cannabis industry in the country. To mitigate the supply issues in Canada, the cannabis giant has set its sights on the US market. The Canadian cannabis producer announced that it has exported medical cannabis to the United States for a clinical study.
Tilray said this study will evaluate the use of medical cannabis in patients with breast cancer who suffer from taxane-induced peripheral neuropathy (TIPN). If the clinical trial succeeds then it would bode well for Tilray because of its focus on medical cannabis research and its partnership with pharmaceutical giant Novartis.
The company also acquired the world's largest hemp food company, Manitoba Harvest, in its effort to further expand its operations into the US. The move represents an important opportunity given that hemp became legal at the federal level in December of last year. According to some estimates, the US hemp industry will mature into a $1.3 billion market, while others claim that sales of hemp-derived CBD products could reach $20 billion by 2024.
The company’s willingness to branch out its operations from Canada could bode well for the company and help the firm reach profitability. However, the cannabis producer’s international strategy hasn’t yet been vindicated, as Tilray's net losses have generally widened. Its adjusted net loss of $31.9 million for the second quarter was significantly worse than the loss of $12.8 million it recorded during the prior year's period.
Our Q3 consensus estimates project over a 390% revenue increase to $49.59 million while earnings plummet over 260% to a loss of $0.29 per share. Looking ahead to the company’s full fiscal 2019 figures, our estimates anticipate a top-line jump of 300.19% to $172.6 million and a bottom-line decline of 91.23% to a loss of $1.09 per share. As of now, Tilray sits at a Zacks Rank #3 (Hold).
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