For Immediate Release
Chicago, IL – January 8, 2020 – Zacks Equity Research Shares of Sony (SNE - Free Report) as the Bull of the Day, Funko, Inc. (FNKO - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on EOG Resources (EOG - Free Report) , Diamondback Energy (FANG - Free Report) and Chevron (CVX - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Sonyis picking up momentum as it's set to launch the PlayStation 5. This Zacks Rank #1 (Strong Buy) has finally busted out to new 5-year highs.
Sony is a global technology, entertainment and gaming company headquartered in Japan.
Sony is Back in the Public Eye
After putting a turnaround strategy in place several years ago, Sony is set to reveal the fruit of its labor in 2020.
At the Las Vegas Consumer Electronics Show in January, Sony surprised audiences by unveiling an electric concept car. The car isn't mean to be sold to the masses, per say, but it was to highlight its semiconductor segment, which has seen big growth in recent quarters.
The car, called Vision-S, has 33 sensors, which can detect people and other vehicles and objects inside and outside the car. This is part of Sony's vision for the future of AI and the automobile.
It also highlighted a new infotainment system with surround sound speakers in every seat.
Sony already sells some of the technology to Toyota and Lexus but this surprise launch at CES is the company sending a signal that it's engineers are in the game.
PlayStation 5 Anticipation Builds
Also at CES, Sony was expected to unveil the new PlayStation 5 console, but, instead, all it did was reveal the new logo.
Sony did confirm that it will available next holiday season, however.
Diehard fans will have to wait a little bit longer to actually see it.
But there is no doubt that this product is going to be one of the hottest items for next holiday season. It should give a boost to earnings, as gaming has been lackluster as fans have been waiting for the new console and not purchasing the old one.
Earnings Moving Higher
Sony has always given conservative guidance so it has been beating most quarters.
The fiscal 2019 earnings estimates are on the rise in the last 90 days. The F2019 Zacks Consensus Estimate is now at $4.05 up from $3.73. That's still an earnings decline of 37% as the company made $6.43 in Fiscal 2018.
But Fiscal 2020 is expected to rise 14.9% to $4.65, up from $4.18 just 3 months ago.
Sony reports fiscal third quarter results on Feb 4 so the estimates will likely be revised again shortly.
Shares Break Out to New Highs
Sony shares have lagged the tech sector over the past few years but in 2019, they finally caught a bid.
Shares are up 41.2% over the last year and are at new 5-year highs.
They are still attractively priced, however, with a forward P/E of just 17.
Bear of the Day:
Funko, Inc.has fallen to a Zacks Rank #5 (Strong Sell) despite analysts expecting the company to see big earnings growth this year and next.
Funko makes pop culture consumer products, including vinyl figures, action toys, plush, apparel, housewares and accessories for consumers who have favorite pop culture brands and characters. This includes movie, television and book characters, and sports figures, including popular coaches.
Another Beat in the Third Quarter
On Oct 31, Funko reported its third quarter results and beat for the fourth quarter in a row. Earnings were $0.38 versus the Zacks Consensus of $0.31. It beat by 22.6%.
Net sales rose 26% to $223.3 million from $176.9 million in the third quarter of 2018, driven by strong sales demand in the United States and Europe.
Funko had 627 active properties in the third quarter, up 13% from 553 in the third quarter of 2018.
Sales in the US were up 21% to $147.3 million while international sales jumped 37% to $76 million, fueled by growth in Europe.
Figures continued to drive the business, with sales up 24% to $176.5 million but its other product lines including games also saw double digit growth in the quarter, up 33% to $46.8 million.
Reaffirmed Full Year Guidance
Funko reaffirmed its full year guidance, even after spending more on SG&A in the third quarter, thanks to continued expansion of the company's office, retail and warehouses.
It saw earnings in the range of $1.15 to $1.22 a share while sales are expected to be between $840 million to $850 million.
Why Is It a Zacks #5 (Strong Sell)?
One analyst lowered his estimate for 2019 and 2020 in the last 2 months and that appears to be enough to send the Rank down to (Strong Sell).
The 2019 Zacks Consensus has been sitting at $1.21 for the past 3 months. That is within the company's guidance range.
The 2020 Zacks Consensus Estimate has fallen to $1.40 from $1.42 within that same time. It's still earnings growth of 16% over 2019.
Remember, the Zacks Rank is a short-term recommendation of just 1 to 3 months. It can change daily, depending on analyst changes to estimates.
Funko will report fourth quarter results in February. The Rank will likely change at that time as analysts get guidance on 2020.
Shares Are Still Cheap
It's been a volatile 2-year ride for the shares with big highs, and then sharp pullbacks.
Over the last year, Funko shares are up just 5.5%.
But is this a buying opportunity?
The company trades with a forward P/E of just 11.8.
And given its growth projections, it has a PEG ratio of only 0.6. A PEG ratio under 1.0 means it's a rare growth and value stock.
Also, Funko is one of the few companies that will be coming out with Baby Yoda toy. Pre-ordering is now available for the figure which apparently will be available in May.
Energy Stocks to Buy on the Oil Upswing
Energy stocks are on an uptick in the face of recent supply concerns and alleviated demand-side skepticism. Energy companies substantially underperformed the market in 2019. Investors and traders have been crushing shares of energy stocks as they price in estimated oil price declines, but have these shares been oversold?
Investors are beginning to think so, as the global economic outlook brightens, and concerns about declining demand are eased. Oil prices have rallied 20% since the beginning of October to their highest level in 8 months. Oil bears are beginning to leave the market and opening up buying opportunities for the most prudent energy stocks.
The 2019 energy bust was driven by demand-side concerns with little focus on supply. Investors and analysts were concerned about global geopolitical issues like the US-China trade war, Brexit, and negative interest rates. Now demand concerns are abating, and supply uncertainty is taking center stage as tensions in Iran heighten. Following the US’s assassination of one of Iran’s top generals, the country has called for revenge, and oil companies in the region appear to be a likely target.
Exploration & Production (E&P)
This segment is known for its volatility, and with demand outlook looking dim throughout 2019 shares of our favorite E&P got hammered. These stocks are finally seeing the light of day.
This stock is the largest player in the space and provides an excellent long term investment at its current valuation. Investors are finally realizing the opportunity of this undervalued equity and have driven this stock up over 18% in the past 30 days. Despite its negative performance, EOG has been able to substantially outperform its industry in the last 52-weeks (as shown below).
EOG has demonstrated reliable cash flows along with a robust growing dividend. EOG is sporting a price/cash flow of 5.8x, which is on the lowest end of its 5-year range of 4.5x to 27x.
I believe that Diamondback is a diamond in the rough. The firm has been able to exhibit almost exponential topline growth with year-over-year expansion in the high double to triple digits. FANG stumbled following its weak Q3 earnings at the beginning of November but has since been on the upswing.
This company is riskier than EOG due to its volatile free-cash-flows. Diamondback consistently produce growing cash flows from operations, but this cash is often eaten up by Cap-Ex and dividend payouts. The firm is demonstrating debt to total capital of 23.5%, which gives me some comfort concerning its financial flexibility.
This stock is trading at the lowest end of both its price to cash-flow and P/E metrics. FANG’s forward P/E is trading at 10.9x, a substantial discount to the broader E&P market average of 18.6x.
21 out of 22 analysts are calling this stock a buy right now with an average upside of 33% from what it is trading at today.
Integrated Energy Companies
Integrated energy firms are a much safer bet on the space as they are self-hedged. These companies enjoy economies of scope as they own all aspects of the value chain from production to your gas tank. Stocks in this segment typically yield investors a hefty dividend
CVX is my integrated pick. The company has recently completed some mega-projects, including an LNG facility in Australia. Its capital spending is now down to normalized levels and can sit back and reap the benefits of above-average production growth (3 – 4%).
Chevron has been able to produce free-cash-flows that far surpass its closest rivals, giving it flexibility for high NPV projects, dividend expansion, and continued stock repurchase.
CVX has outperformed its space over the past 52-weeks (as you can see below), and I expect this to continue as its calculated management team continues to achieve operational excellence.
CVX yields investors a robust 4% dividend and is repurchasing shares at a pace of $1.25 billion quarterly.
11 of 13 analysts are calling CVX a buy right now with an average target price that would represent a 16% share price appreciation from what it is trading at today.
Oil is entering a bull market with this volatile commodity rallying 20% since October. Traders and investors are starting to see that the energy sector is trading at a discounted valuation. The industry has rallied hard since the beginning of December. Now is an excellent time to jump into energy’s best-positioned equities before their cheap valuations disappear.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>
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.