For Immediate Release
Chicago, IL – February 13, 2020 – Zacks Equity Research Shares of Synaptics (SYNA - Free Report) as the Bull of the Day, Columbia Sportswear (COLM - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Uber (UBER - Free Report) and Lyft (LYFT - Free Report) .
Here is a synopsis of all four stocks:
Bull of the Day:
Synapticsis a Zacks Rank #1 (Strong Buy) and following a very big beat, it is a safe bet that the stock will remain a Zacks Rank #1 (Strong Buy). Earnings beats play a role in the rank, but the movement in earnings estimates is a much more important factor to the Rank. Let's take a look at why I believe this stock will remain at the strongest Rank for at least the next few weeks.
Synaptics Incorporated develops, markets, and sells intuitive human interface solutions for electronic devices and products worldwide. The company sells its products through direct sales, outside sales representatives, distributors, and resellers. It serves mobile and PC original equipment manufacturers; Internet of Things manufacturers; and consumer electronics manufacturers. The company was founded in 1986 and is headquartered in San Jose, California.
On February 6, the company reported EPS of $2.04 when the Zacks Consensus Estimate was calling for $1.44. That 60 cent beat translates into a positive earnings surprise of 41%
Revenues came in at $388M, almost 10% ahead of the Wall Street consensus for revenue.
The company also guided sales for next quarter to $330M - $350M as compared to the Wall Street consensus of $300M at the time of the report.
SYNA has a good history of beating the number. I see each of the last four reports have come in ahead of the Zacks Consensus Estimate. For the most part, the beats are big, as the average positive earnings surprise over the last year is 36%.
Wow. That is all I could say as I look at the estimate moves for SYNA. The current quarter jumped to $1.47 from $0.69. That is a huge move for one quarter, but wait, there is more!
Next quarter lifted to $1.06 from $0.66.
The fiscal year moved from $4.00 to $5.78.
Next fiscal year jumped to $5.22 from $4.42.
Those are some huge moves!
Those huge moves in estimated EPS have brought the valuation down to great levels. I see 14x forward earnings and a price to book of just about 4x. Price to sales at only 2x is also a great level.
Margins have moved from 6% to 6.6% and are now at 8% --- and you have to love that as more sales turn into even more EPS.
Bear of the Day:
Columbia Sportswearis a Zacks Rank #5 (Strong Sell) after missing earnings on February 6. We will take a look at the report and then what at least one analyst had to say about the stock. This is the Bear of the Day.
Headquartered in Portland, OR, Columbia Sportswear Company engages in the sourcing, marketing and distribution of outdoor and active lifestyle apparel, footwear, accessories and equipment in the U.S. and internationally.
The company offers products under four well-established brands – Columbia, Sorel, Mountain Hardwear and prAna. Amongst other brands, The OutDry and The Pacific Trail are worth mentioning.
The high quality products manufactured by the company under different banners makes them ideal for a range of sporting activities.
Before The Report
Pivotal Research Group came out two days before the report and lowered their target on COLM to $110 from $117. In the report the anlayst suggested that he modeled in the high end of guidance and maybe a little upside given a history of recent beats. At the same time he called for second half outlook to come in as channel inventory was a primary concern.
So a little good and bad in that report... and then the quarter came.
On 2/16/20 COLM reported EPS of $1.58 and that was 8 cents below the Wall Street Consensus. Revenues came in at $954M and beat the expectation of $949M.
Guidance called for FY20 EPS of $4.75-$4.90 when the consensus was looking for $5.09.
Following The Report
Pivotal downgraded COLM after the report and took their target down to $101 from $110. The analyst called the print "mixed" and he noted how the company might have been a little aggressive with inventory in November.
But really, who could blame them? I mean it was snowing hard on Halloween in Chicago so there was good reason to increase inventory. The problem was a much warmer than expected November and early December.
COLM reports again on April 30, so investors might be well served to wait and see how inventory looks at that point.
COLM has seen its earnings estimates fall following the recent miss. The current quarter slipped from $1.13 to $0.86 over the last 30 days.
The full year number has moved from $5.13 to $4.83 over the same time period.
Ridesharing’s Race to Profitability
Uber and Lyft have been battling it out in the streets of every major city and now the financial markets. Lyft was first to debut its shares to the public at the end of March last year, and the markets quickly priced out venture capitalist overzealous valuation.
When Uber IPO’d about a month later, public investors were much more conservative on their initial pricing. UBER traded sideways until its massive Q2 miss, which sent these share tumbling alongside its partner in crime, LYFT. These ridesharing stocks have been making a comeback since the beginning of the year as their valuations ripen. UBER is up almost 40% and LYFT is up only 14%, due to the share price break down following its Q4 earnings.
Both UBER and LYFT reported robust Q4 results to round out their first year as public companies, but their shares went very different directions.
Uber met its expectations when it released its full-year results on February 6th, but it didn’t hit expectations out of the park. The big news was a shortened timeline to profitability with CEO Dara Khosrowshahi promising a positive EBITDA by the end of this year instead of its original goal of 2021. This excited investors and UBER jumped over 7% the following day and has continued to rally since.
Analysts across the board raised their estimates and price targets on the news of the advanced profitability timetable, pushing UBER into a Zacks Rank #2 (BUY).
Lyft reported excellent financials last night (February 11th), not only breaking through the $1 billion quarterly revenue mark but destroying EPS estimates by 28%, narrowing its losses. The company beat on every metric, and management raised its guidance for 2020. This seemingly good news wasn’t good enough for investors, and LYFT has fallen almost 10% in morning trading.
For these unprofitable ridesharing companies, forward guidance is much more important than past quarter results. Uber and Lyft have been pushing growth no matter what the cost since their inception, now investors want to see this growth turn a profit. These firms can’t continuously burn cash as they have in the past. It’s time for these ridesharing giants to show their savvy management ability and demonstrate profitable growth.
Lyft’s earnings disappointed investors because of the high they were riding following Uber’s profitable growth story it depicted in its Q4 earnings call. Investors wanted more from Lyft’s earning, specifically its timeline to profitability, which now sits behind Uber’s.
Conservatism is what Lyft does best with a big top and bottom-line beat on its last 3 earnings reports. I don’t think that the shares’ massive drop off is warranted, and this could be a buying opportunity. I see Lyft and Uber hitting profitability at similar times based on how these firms have progressed and Uber’s lack of conservatism.
Ridesharing’s race to the end of their capital may no longer be the central issue. Now it is a race to profitability. Once these companies start to see a positive bottom-line, their shares are going to run.
The markets appear to be putting their bets on the larger of the ridesharing duopoly, Uber, with its diverse portfolio, broader operation, and more capital to burn. But Lyft’s (nearly) pure-play strategy could end up being its competitive advantage with Uber’s other segments only producing more substantial losses.
Both companies will continue to develop their strategies, and I see both of these stocks a reasonable long term investments, though I would limit my exposure considering the volatility.
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