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AXT Inc. is a Zacks Rank #1 (Strong Buy) and has that growth divergence that I love to see. That means it has an A for Growth and a D for Value – telling me right away that this stock is what growth investors are looking for. That isn't the only reason that is is the Bull of the Day... let's take a look at the other reasons why this stock is headed higher.
I have seen a lot of chip related names post some good quarters of late and AXT was one of them.
Earnings History
The company reported a loss of a penny when a loss of a nickel was expected. That four cent beat translates into a positive earnings surprise of 80%.
Prior to that I see two consecutive beats of the Zacks Consensus Estimate and one meet. Over the course of the last four reports, the average positive earnings surprise is 35%.
Estimate Revisions
Lately we have seen stocks that have earnings estimates that just hold still become Zacks Rank #2 (Buy) where they would normally be Zacks Rank #3 (Hold). AXTI is seeing earnings estimates move higher, so it is a well deserved Zacks Rank #1 (Strong Buy).
I see this quarter increasing by a penny and the full year numbers running from a loss of three cents to a gain of three cents. That is a huge move!
The 2021 numbers are holding still at $0.21, so there is some huge earnings growth expected.
Valuation
This is the hard part… the forward PE doesn’t reach the 2021 numbers yet, so it is skewed a bit and shows 189x forward earnings. If we use the $0.21 number as the “E” in PE, the multiple shrinks to 26x. I see a price to book of 1.1x and that is something that the true value players most love to see. A price to sales multiple of 2.55x is also somewhat low for a chip stock.
At the end of the day, chip names have been very strong of late… if we are to see the resurrection of animal spirits on Wall Street, these will be among the fist stocks they run to grab.
Clean Harbors is a Zacks Rank #5 (Strong Sell) despite a recent earnings beat. Let's take a look at why this stock has the lowest Zacks Rank and if there is a better play in the same space.
Description
Clean Harbors, Inc. provides environmental, energy, and industrial services in North America. The company operates through two segments, Environmental Services and Safety-Kleen. The Environmental Services segment collects, transports, treats, and disposes hazardous and non-hazardous waste. The Safety-Kleen segment offers specially designed parts washers; automotive and industrial cleaning products, such as degreasers, glass and floor cleaners, hand cleaners, absorbents, antifreeze, windshield washer fluids, mats, and spill kits. Clean Harbors, Inc. was founded in 1980 and is headquartered in Norwell, Massachusetts.
Earnings History
As noted, the most recent report was a beat of the Zacks Consensus Estimate. I see the company reported EPS of $0.28 when $0.10 was expected and that translates into a positive earnings surprise of 180%.
The beat broke a streak of two miss and another small beat before that. So two beats and two misses in the last four quarters isn't horrible.
Estimate Revisions
Estimate for CLH have been falling and that is the main reason the stock is Zacks Rank #5 (Strong Sell) . I see estimates for this quarter falling from $0.75 to $0.71, then down to $0.30 7 days ago. Now the estimate for this quarter stands at $0.14 and that is a long ways away from the $0.75 it was at 60 days ago.
Full year estimates carry more weight on the Zacks Rank, and they have fallen from $2.24 to $1.00 for this year. Next year has dropped from $2.67 to $1.58.
Valuation
The lower estimates have helped the forward PE to balloon higher. I see a 58x forward earnings multiple with only 1.5% topline growth in the most recent quarter. Price to book at 2.5x is low enough to attract interest from value investors, but growth investors will not like the 0.9x price to sales multiple as that suggests that each incremental sales dollar is not being rewarded by Wall Street.
Additional content:
Coronavirus Slammed Retail. Can Direct-to-Consumer Prevail?
The coronavirus pandemic has upended the lives of people around the globe. Doctors, nurses, and other essential workers are on the front lines fighting the outbreak, and the rest of us are doing our best in isolation, trying to stay sane and help curb the spread of the virus.
Along with the halting of our daily routines, the way we operate as consumers has been dramatically altered, as restaurants, retailers, hotels, and other non-essential businesses have either temporarily closed their doors or shuttered for good.
Maybe we’re ordering takeout from our favorite local restaurant to help support their business, but we’re mostly spending money on groceries and paper products, stocking up at Walmart or Costco for weeks at a time.
Maybe we’re buying some new loungewear to spruce up our stay-at-home wardrobe, but we’ve mostly stopped spending entirely for fear of a looming economic crisis.
Maybe we were planning on taking a once-in-a-lifetime trip to Europe this summer, but we’ve mostly put any future travel plans on hold until it feels safer to do so.
Industries across the board are feeling the effects of this new, more cautious consumer, but retail is taking the brunt of it. We still don’t know what the lasting impact of the pandemic will be, and what retail will look like afterwards.
Right now could be the beginning of a direct-to-consumer takeover, where shoppers can buy from their favorite brands and not worry about any middlemen. But what brands would be leading the way?
What are Direct-to-Consumer Brands?
Direct-to-consumer brands are just that: brands that sell their product directly to consumers, via an online platform and forgoing a supply chain and third-party distribution. It allows start-up businesses to have control over their growth story, their image, their price range, and their expansion.
This kind of retail model has surged over the past few years, and new companies selling running shoes or mattresses were seemingly popping up out of the blue. Brands like Away, Allbirds, Outdoor Voices, Interior Define, Warby Parker, and Casper exploded in popularity, and each boast a loyal following.
What differentiates direct-to-consumer from traditional retail?
Primarily, it’s the focus on not only the relationship between customer and company, but creating an appealing, approachable brand.
Let’s look at Away.
Founded in 2015, Away has successfully shaken up the saturated luggage market. Coming in at a much lower price point than Tumi or Rimowa, Away offers luxury, functionality, and most importantly, approachability.
Away isn’t “just another luggage company,” as they like to say, but a broader travel company, churning out travel-related content through their magazine, Here, and even hosting a podcast a couple years back.
The company has also smartly utilized social media platforms like Instagram—they currently have 550k followers—and partnered with influencers and celebrities to help showcase their product.
This kind of marketing expertise and customer engagement helped Away reach unicorn status last year.
Many D2C companies have begun to open brick-and-mortar store fronts as well. Here in Chicago, on Armitage Avenue in the Lincoln Park neighborhood, is where many brands have set up shop, so to speak (others like Glossier and Everlane built pop-up stores in the West Loop neighborhood last year).
Even though there’s more overhead and operating costs in brick-and-mortar, there’s a reason the model has yet to completely disappear. A specific type of customer connection is formed while shopping in-store, and D2C companies have used that to capitalize on their already strong brands.
But there’s also a reason why retail giants like Nike have adopted the D2C model.
Gone are the days where a company must depend on a third-party distributor to sell their product. Now, Nike can sell its shoes and apparel online directly to the consumer, enhancing its core brand and improving every aspect of the customer experience.
Will the D2C Model Prevail?
It’s important to understand that D2C companies are not immune to the negative impacts from the pandemic.
Just like many other retailers, Away, for instance, had to furlough roughly half of its team and is laying off an additional 10%. This is not surprising news, since air travel is at a standstill and consumers are saving rather than spending.
What we have to think about now is the after. What brands and companies will survive?
That, of course, is the million-dollar question.
D2C companies inherently have all the right components to succeed in a changed retail landscape. I can purchase new sneakers, home goods, and even eyeglasses all from the comfort of my home, from brands that I trust, and without having to visit a crowded mall or store.
Those brands that already had a difficult time attracting customers to their website and stores before the coronavirus crisis took hold will find it even tougher to draw in shoppers in a tightened economic environment.
The companies that will thrive, I think, will go beyond just cutting costs or offering deep discounts; they will be the ones that maintained a strong connection—this could be anything from more personal marketing campaigns to simple communication about the state of business—to their customers.
It’s an extremely emotional time for everyone, and there’s something to be said about a sense of community. When brands listen, trust is built. And trust will be key for retailers going forward.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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/performancefor information about the performance numbers displayed in this press release.
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AXT, Clean Harbors, Walmart, Costco and Nike highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – May 1, 2020 – Zacks Equity Research Shares of AXT Inc. (AXTI - Free Report) as the Bull of the Day, Clean Harbors (CLH - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Walmart (WMT - Free Report) , Costco (COST - Free Report) and Nike (NKE - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
AXT Inc. is a Zacks Rank #1 (Strong Buy) and has that growth divergence that I love to see. That means it has an A for Growth and a D for Value – telling me right away that this stock is what growth investors are looking for. That isn't the only reason that is is the Bull of the Day... let's take a look at the other reasons why this stock is headed higher.
I have seen a lot of chip related names post some good quarters of late and AXT was one of them.
Earnings History
The company reported a loss of a penny when a loss of a nickel was expected. That four cent beat translates into a positive earnings surprise of 80%.
Prior to that I see two consecutive beats of the Zacks Consensus Estimate and one meet. Over the course of the last four reports, the average positive earnings surprise is 35%.
Estimate Revisions
Lately we have seen stocks that have earnings estimates that just hold still become Zacks Rank #2 (Buy) where they would normally be Zacks Rank #3 (Hold). AXTI is seeing earnings estimates move higher, so it is a well deserved Zacks Rank #1 (Strong Buy).
I see this quarter increasing by a penny and the full year numbers running from a loss of three cents to a gain of three cents. That is a huge move!
The 2021 numbers are holding still at $0.21, so there is some huge earnings growth expected.
Valuation
This is the hard part… the forward PE doesn’t reach the 2021 numbers yet, so it is skewed a bit and shows 189x forward earnings. If we use the $0.21 number as the “E” in PE, the multiple shrinks to 26x. I see a price to book of 1.1x and that is something that the true value players most love to see. A price to sales multiple of 2.55x is also somewhat low for a chip stock.
At the end of the day, chip names have been very strong of late… if we are to see the resurrection of animal spirits on Wall Street, these will be among the fist stocks they run to grab.
Bear of the Day:
Clean Harbors is a Zacks Rank #5 (Strong Sell) despite a recent earnings beat. Let's take a look at why this stock has the lowest Zacks Rank and if there is a better play in the same space.
Description
Clean Harbors, Inc. provides environmental, energy, and industrial services in North America. The company operates through two segments, Environmental Services and Safety-Kleen. The Environmental Services segment collects, transports, treats, and disposes hazardous and non-hazardous waste. The Safety-Kleen segment offers specially designed parts washers; automotive and industrial cleaning products, such as degreasers, glass and floor cleaners, hand cleaners, absorbents, antifreeze, windshield washer fluids, mats, and spill kits. Clean Harbors, Inc. was founded in 1980 and is headquartered in Norwell, Massachusetts.
Earnings History
As noted, the most recent report was a beat of the Zacks Consensus Estimate. I see the company reported EPS of $0.28 when $0.10 was expected and that translates into a positive earnings surprise of 180%.
The beat broke a streak of two miss and another small beat before that. So two beats and two misses in the last four quarters isn't horrible.
Estimate Revisions
Estimate for CLH have been falling and that is the main reason the stock is Zacks Rank #5 (Strong Sell) . I see estimates for this quarter falling from $0.75 to $0.71, then down to $0.30 7 days ago. Now the estimate for this quarter stands at $0.14 and that is a long ways away from the $0.75 it was at 60 days ago.
Full year estimates carry more weight on the Zacks Rank, and they have fallen from $2.24 to $1.00 for this year. Next year has dropped from $2.67 to $1.58.
Valuation
The lower estimates have helped the forward PE to balloon higher. I see a 58x forward earnings multiple with only 1.5% topline growth in the most recent quarter. Price to book at 2.5x is low enough to attract interest from value investors, but growth investors will not like the 0.9x price to sales multiple as that suggests that each incremental sales dollar is not being rewarded by Wall Street.
Additional content:
Coronavirus Slammed Retail. Can Direct-to-Consumer Prevail?
The coronavirus pandemic has upended the lives of people around the globe. Doctors, nurses, and other essential workers are on the front lines fighting the outbreak, and the rest of us are doing our best in isolation, trying to stay sane and help curb the spread of the virus.
Along with the halting of our daily routines, the way we operate as consumers has been dramatically altered, as restaurants, retailers, hotels, and other non-essential businesses have either temporarily closed their doors or shuttered for good.
Maybe we’re ordering takeout from our favorite local restaurant to help support their business, but we’re mostly spending money on groceries and paper products, stocking up at Walmart or Costco for weeks at a time.
Maybe we’re buying some new loungewear to spruce up our stay-at-home wardrobe, but we’ve mostly stopped spending entirely for fear of a looming economic crisis.
Maybe we were planning on taking a once-in-a-lifetime trip to Europe this summer, but we’ve mostly put any future travel plans on hold until it feels safer to do so.
Industries across the board are feeling the effects of this new, more cautious consumer, but retail is taking the brunt of it. We still don’t know what the lasting impact of the pandemic will be, and what retail will look like afterwards.
Right now could be the beginning of a direct-to-consumer takeover, where shoppers can buy from their favorite brands and not worry about any middlemen. But what brands would be leading the way?
What are Direct-to-Consumer Brands?
Direct-to-consumer brands are just that: brands that sell their product directly to consumers, via an online platform and forgoing a supply chain and third-party distribution. It allows start-up businesses to have control over their growth story, their image, their price range, and their expansion.
This kind of retail model has surged over the past few years, and new companies selling running shoes or mattresses were seemingly popping up out of the blue. Brands like Away, Allbirds, Outdoor Voices, Interior Define, Warby Parker, and Casper exploded in popularity, and each boast a loyal following.
What differentiates direct-to-consumer from traditional retail?
Primarily, it’s the focus on not only the relationship between customer and company, but creating an appealing, approachable brand.
Let’s look at Away.
Founded in 2015, Away has successfully shaken up the saturated luggage market. Coming in at a much lower price point than Tumi or Rimowa, Away offers luxury, functionality, and most importantly, approachability.
Away isn’t “just another luggage company,” as they like to say, but a broader travel company, churning out travel-related content through their magazine, Here, and even hosting a podcast a couple years back.
The company has also smartly utilized social media platforms like Instagram—they currently have 550k followers—and partnered with influencers and celebrities to help showcase their product.
This kind of marketing expertise and customer engagement helped Away reach unicorn status last year.
Many D2C companies have begun to open brick-and-mortar store fronts as well. Here in Chicago, on Armitage Avenue in the Lincoln Park neighborhood, is where many brands have set up shop, so to speak (others like Glossier and Everlane built pop-up stores in the West Loop neighborhood last year).
Even though there’s more overhead and operating costs in brick-and-mortar, there’s a reason the model has yet to completely disappear. A specific type of customer connection is formed while shopping in-store, and D2C companies have used that to capitalize on their already strong brands.
But there’s also a reason why retail giants like Nike have adopted the D2C model.
Gone are the days where a company must depend on a third-party distributor to sell their product. Now, Nike can sell its shoes and apparel online directly to the consumer, enhancing its core brand and improving every aspect of the customer experience.
Will the D2C Model Prevail?
It’s important to understand that D2C companies are not immune to the negative impacts from the pandemic.
Just like many other retailers, Away, for instance, had to furlough roughly half of its team and is laying off an additional 10%. This is not surprising news, since air travel is at a standstill and consumers are saving rather than spending.
What we have to think about now is the after. What brands and companies will survive?
That, of course, is the million-dollar question.
D2C companies inherently have all the right components to succeed in a changed retail landscape. I can purchase new sneakers, home goods, and even eyeglasses all from the comfort of my home, from brands that I trust, and without having to visit a crowded mall or store.
Those brands that already had a difficult time attracting customers to their website and stores before the coronavirus crisis took hold will find it even tougher to draw in shoppers in a tightened economic environment.
The companies that will thrive, I think, will go beyond just cutting costs or offering deep discounts; they will be the ones that maintained a strong connection—this could be anything from more personal marketing campaigns to simple communication about the state of business—to their customers.
It’s an extremely emotional time for everyone, and there’s something to be said about a sense of community. When brands listen, trust is built. And trust will be key for retailers going forward.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>
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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/performancefor information about the performance numbers displayed in this press release.