For Immediate Release
Chicago, IL – February 4, 2020 – Zacks Equity Research Shares of Wix (WIX - Free Report) as the Bull of the Day, Wynn Resorts (WYNN - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Beyond Meat (BYND - Free Report) , Owens & Minor (OMI - Free Report) and Advantest (ATEYY - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Enterprises around the world are moving to the internet and are in need of a smooth transition. Wix.com is well-positioned to take on the growing digital demand. Wix has traded all over the board the past 52-weeks but since Christmas these shares have surged over 20%. Analysts have been guiding their EPS estimates upward on this enterprise of the future and pushing WIX into a Zacks Rank #1 (Strong Buy).
Wix.com is a subscription service that provides users with a one-stop cloud-based platform for all of their website needs. Wix is based out of Tel Aviv and has been going strong for 13 years. The company provides services to over 160 million users in 190 countries.
The platform enables anyone, no matter their technical or coding background, the tools to develop, create, and contribute. Wix’s product offering gets your business online, whether you are an artist, an entrepreneur, developer, or IT professional.
Wix Editor offers a drag-and-drop website creating software to design and edit any website with no coding background needed. Wix’s Artificial Design Intelligence (ADI) is the first-ever AI-backed program that can design a website for you based on your needs. The firm offers a much broader portfolio of products that could solve almost any website need.
Wix has built out its product offering substantially since it started back in 2006, and its customer base has grown along with it. The total user base has close to doubled, while its premium paying customer base has more than doubled. Registered users hit 160 million in Q3, with premium users sitting at 4.4 million.
Wix’s subscription-based model enables it to demonstrate quarter-over-quarter growth since the company went public back in 2014. The firm hasn’t seen a quarter with year-over-year growth of less than 25%, and analysts are estimating this will continue through 2020.
Wix has seen tremendous customer retention, and its ability to progressively drive up average revenue per user gives this business reliable revenue streams. Despite Wix toeing the line of profitability, the company has been able to grow its free-cash-flow (FCF) year-over-year consistently, with management anticipating $125 million full-year FCF for 2019 (23% growth). This steady growth in cash flows and $776 million in cash gives Wix financial flexibility that most growing firms are unable to achieve.
The company currently employs zero salespeople with the entire growth of the company occurring naturally through word of mouth, and other organic ways. Wix doesn’t need a sales team because the platform sells itself.
Wix is an innovation-driven company, with 50% of its employees being found in the R&D department. The company continues to drive out new products which further propel its product offering to the top of its space.
Wix’s growing international penetration gives this enterprise a head-up on its competitors because not only does this hedge the firm’s bets, but gives it a massive addressable market.
Competition includes tech powerhouses like Square's Weebly and Shopify, both of which enhance companies’ online presence.
Sell-side analysts like this stock with 12 out of 16 analysts calling this a buy right now.
Look for Wix’s final 2019 report before the bell on Wednesday, February 19th. Analysts are estimating an EPS of $0.27 on sales of $205 million, according to Zacks Consensus estimates. This would represent top-line growth of 25% but an EPS decline of 36%.
Wix.com has proven an uncanny ability to drive steady and reliable growth globally. The website making space is saturating quickly, but Wix has been able to stay ahead of the curve. Its ability to retain customers while at the same time increases revenue per user gives me confidence in this stock as a long-term play.
Bear of the Day:
Wynn Resorts has been on a wild ride since the beginning of the US-China trade war due to its excessive exposure in the region. The coronavirus has only exacerbated its issues in the country, as the tourist market has effectively shut down till this virus can be contained. WYNN analysts are pricing in the problem and have been dropping their EPS estimates, pushing this stock into a Zacks Rank #5 (Strong Sell).
Wynn Resorts has a substantial presence in Macau, the Las Vegas of the East. In fact, roughly 70% of the company’s sales are driven by this region. The coronavirus has empty this party capital and its casinos during the city’s busiest time, Chinese New Year (also referred to as Spring Festival). The full impact of this virus on the overly exposed WYNN is still yet to be seen.
Shares have fallen 15.3% since coronavirus anxiety began roughly two weeks ago. The stock has broken down 34.5% since the US-China trade war started in the summer of 2018. WYNN appeared to be rallying up until the virus shut down its primary profit driver.
The coronavirus has now infected roughly 17,500 with 17,308 on the China mainland, almost 3 times the figure one week ago, and there is little sign of the dissemination of the disease slowing down. It could be months before this widespread disease is under control, and Wynn Resorts casinos in Macau will be re-opened. This will cost the company tens if not hundreds of millions, and I think these shares have more room to fall.
WYNN is a sell in the short-term due to the obvious concerns surrounding the coronavirus. Once the dust settles and the quantitative implication of this disease can be understood, these shares can adequately price in the impact. This stock still has long-term potential, but its short-term risks may outweigh this potential at the moment.
Beyond Meat Now Beyond Expectations
While recent news coming out of Beyond Meat is mixed, it’s weighted toward the positive side.
That’s why investors weren’t completely put out with the unsuccessful trial at Restaurant Brand International’s Tim Hortons outlets in Canada. The Beyond Burger apparently wasn’t quite what their customers wanted. So, following a scale-down in September to two provinces, Ontario and British Columbia, the chain parted ways.
It was always meant to be a limited-period item to help management separate the demand from the hype. But it was a big disappointment for Beyond Meat investors, because the company was expecting to get into 4,000 of its 4,800 locations in the U.S. and Canada. However, both parties said they might collaborate again later.
This bit of bad news came at around the same time as some good news. It was reported that the family Diner Denny’s had concluded a very successful trial in its Los Angeles restaurants, after which the company decided to bring the Beyond Burger, called “Denny’s Beyond Burger” to all its 1,700 locations across the U.S. and Canada.
The company is touting the same advantages over beef to those wanting to go “flexitarian”: more protein, less saturated fat, no cholesterol, and as far as vegetarian sourcing goes, no soy, no gluten, no GMO. What’s more, participating restaurants were offering guests a free Beyond Burger with the purchase of any beverage between 11:00 a.m. and 10:00 p.m.as part of a single-day promotion campaign.
And that isn’t all. Perhaps the most important news is that KFC, also thrilled with the reception the company’s Beyond Fried Chicken received at its first trial location in Atlanta, has decided to expand the test to 63 more locations in and around Nashville, Tennessee and Charlotte, North Carolina. The broader test is designed to help it determine the uptake at its other locations across the U.S.
The companies have particularly focused on taste and texture with the vegan fried chicken offering, as taste is what gives KFC its popularity and texture is very important in a chicken offering because of the way that meat falls apart when bitten into. KFC can take Beyond Meat international, as the company has 23,000 stores in 140+ countries and is the number one fast food chain in China.
Denny’s is already a done deal and KFC looks like it’s getting ready for a big launch. So the question then is, will the company be able to serve up this big order? Turns out, it anticipated a surge in demand in 2020 and so, in November, tripled its pea protein supplies for the year.
Last month, it extended its agreement with French pea protein supplier Roquette for an additional period of three years. Now, Roquette is also scaling up its capabilities. It’s investing more than half a billion euros over five years to expand its existing facility in France and open a new one in Manitoba, Canada.
It’s also making acquisitions to boost its textured protein capabilities. Pea protein is the primary source ingredient, so it makes sense to corner supply. The fact that it seems to have succeeded in this, says a lot about its growth prospects this year.
Beyond Meat’s valuation makes it impossible to recommend buying the stock. The shares have all the good news priced in and then some. Investor optimism seems ludicrous at this point. Okay, the company seems to be doing everything right, it’s winning deals and all, but everyone seems to be discounting the upcoming competition from traditional meat producers, other vegan meat producers and lab meat producers that will very soon flood the market with alternatives.
So even if the product is better than the competition, the fact that there’ll be more competition will have an effect on prices, and therefore, its profitability. Prices have to come down or growth has to catch up, or a little bit of both. So if you’ve already put in money, hold tight, because this ship is unlikely to move much lower. But if you haven’t, the risk to picking up shares is significant.
Stocks worth buying instead are Owens & Minor or Advantest, since all of them have a Zacks Rank #1 (Strong Buy).
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