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Netflix and CVS Health have been highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL –June 14, 2024 – Zacks Equity Research shares Netflix NFLX, as the Bull of the Day and CVS Health CVS, as the Bear of the Day. In addition, Zacks Equity Research provides analysis on GitLab GTLB, Alphabet GOOGL and NVIDIA NVDA.

Here is a synopsis of all five stocks:

Bull of the Day:

Netflix is considered a pioneer in the streaming space, evolving from a small DVD rental provider to a dominant streaming service provider. The stock has enjoyed positive earnings estimate revisions across the board, landing the stock into the highly-coveted Zacks Rank #1 (Strong Buy).

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In addition to favorable earnings estimate revisions, the stock resides in the Zacks Broadcast Radio and Television industry, currently ranked in the top 26% of all Zacks industries. Let’s take a closer look at how the company currently stacks up.

Netflix

Netflix recently enjoyed a solid quarter, posting $2.1 billion in free cash flow and seeing its year-to-date operating margin moving higher to 28.1% (20.6% in FY23). The company also maintained its free cash flow outlook of $6 billion for FY24 and repurchased 3.6 million shares throughout the period.

Concerning headline figures, the company’s sales climbed 14% year-over-year, whereas EPS jumped 80% partly thanks to margin expansion. Shares faced pressure post-earnings initially but have since recovered, up 7% overall over the last three months.

NFLX’s growth outlook continues to remain bright, with consensus expectations for its current fiscal year suggesting 52% EPS growth on 15% higher sales.

Peeking ahead to FY25, consensus expectations presently allude to a 20% pop in earnings on a 12% increase in sales. The stock sports a Style Score of ‘A’ for Growth.

It’s critical to note that the company’s initiatives, such as its password-sharing crackdown and ad-supported tiers, have led to strong membership growth – NFLX's latest subscriber account totaled 269.6 million, reflecting a 16% jump year-over-year.

Bottom Line

Investors can implement a stellar strategy to find expected winners by taking advantage of the Zacks Rank – one of the most powerful market tools that provides a massive edge.

The top 5% of all stocks receive the highly coveted Zacks Rank #1 (Strong Buy). These stocks should outperform the market more than any other rank.

Netflix would be an excellent stock for investors to consider, as displayed by its Zack Rank #1 (Strong Buy).

Bear of the Day:

Zacks Rank #5 (Strong Sell) stock CVS Health is the largest retail pharmacy chain in the United States. The company operates in four main segments: health care benefits, health services, pharmacy and consumer wellness, and corporate/other. Though CVS is a household name, has been in business for more than 60 years, and is highly profitable, the company’s stock is facing several bearish headwinds that are company-specific and industry-wide.

Retail Theft Plagues Pharmacy Industry

Since 2018, the amount of lost retail revenue due to theft has grown each year consecutively and soared overall. For example, in 2018, retailers lost about $50 billion to theft. By 2024, projections call for retail theft losses to balloon to more than $130 billion and a whopping $143 billion by 2025. According to Capital One Financial (COF), “Retailers lost $112.1 billion in gross revenue and $84.9 billion in fraudulent sales returns in 2022.” Meanwhile, “The average shoplifting incident cost retailers $461.86 in 2020.”

Indeed, there is plenty of time and room for the political blame game. However, as investors, we must focus on what is going on and how it will impact the market while leaving the politics to the dinner table. Brazen organized retail incidents are becoming commonplace. What’s worse, shoplifters are caught roughly 2% of the time and arrested 1% of the time. The troubling trend is leading to higher expenses and worse profit margins.

As a result, CVS and its main drugstore competitor, Walgreens Boots Alliance (WBA), have closed numerous stores in hard-hit areas of the country, such as California and New York. However, customers are turning away from brick-and-mortar drugstores in several open locations. In heavy crime zones like Manhattan, customers must flag down associates to gain access to the growing number of items locked behind protective glass. Instead of accepting the frustrating situation, many retail customers are taking their e-commerce business elsewhere

Poor Medicare Advantage Rating Squeezes CVS Profits

Medicare Advantage ratings, or Medicare Star Ratings, measure the performance of Medicare Advantage Part D plans. In 2023, CVS suffered a signficant setback when its largest MA plan, Aetna National PPO, saw its rating plunge from 4.5 to 3.5 stars.

Because of the headwinds above, year-over-year revenue growth at CVS has plunged since 2020.

Relative Performance of CVS Shares Trending Down

CVS shares are down-trending and underperforming the general market by a wide margin – a sign of relative price weakness.

Bottom Line

Drugstore giant CVS faces numerous bearish headwinds, which are industry and company-specific. Investors should avoid shares over the next 6-12 months.

Additional content:

Does GitLab's (GTLB) Growing Clientele Make the Stock a Buy?

GitLab is benefiting from an expanding clientele, driven by the strong adoption of its DevSecOps platform. Its strong partner base, which includes cloud service platforms like Alphabet, is helping the company rapidly expand its footprint among large enterprise customers.

GitLab has more than 30 million registered users on its platform. More than 50% of Fortune 100 are GitLab customers.

Customers with more than $5K of Annual Recurring Revenues (ARR) increased 21% year over year to 8,976 in first-quarter fiscal 2025. Customers with more than $100K of ARR jumped 35% year over year to 1,025. Moreover, the dollar-based Net Retention Rate was 129% in the reported quarter.

GitLab’s robust portfolio has been driving clientele expansion. Enterprises, including NVIDIA and Google Cloud, have adopted GitLab’s solutions to accelerate AI development and streamline security.

NVIDIA chose GitLab Geo to address scalability and security concerns. It lets NVIDIA's remote teams work more efficiently and effectively by shortening the time taken to clone and manage projects.

GitLab Inc. price-consensus-chart | GitLab Inc. Quote

GitLab and Alphabet have collaborated to integrate GitLab’s unique capabilities within Google Cloud. The collaboration combined GitLab’s source code management, planning, CI/CD workflow, enhanced security and compliance capabilities with Google's Cloud console and Artifact Registry’s single data plane. This integration is currently in public beta.

In the fiscal first quarter, GitLab announced that it will integrate its products with Google Console to help customers improve developer experience and decrease context switching across GitLab and Google Cloud.

Expanding Portfolio Benefits GitLab’s Prospects

GitLab’s total addressable market is estimated to be $40 billion. It has been winning accolades due to a robust pipeline. Gartner, in its 2023 Magic Quadrant for DevOps platforms, put GitLab in the Leader quadrant above Microsoft and Atlassian.

GitLab is leveraging AI to boost the potency of its portfolio. It has introduced AI throughout the entire software development cycle that improves productivity and security without sacrificing speed. Customers are fast adopting its AI offerings Gitlab Duo and GitLab Duo Pro.

In April, GTLB announced the general availability of GitLab Duo Chat. The solution brings the GitLab Duo suite of AI capabilities together into a single, easy-to-use, natural language chat interface to connect DevSecOps workflows across the entire software development lifecycle.

In May, GTLB unveiled GitLab Duo Enterprise. This end-to-end AI add-on combines the developer-focused AI capabilities of GitLab Duo Pro — organizational privacy controls, code suggestions, and chat — with enterprise-focused AI capabilities.

The new solution will help organizations proactively detect and fix security vulnerabilities, summarize issue discussions and merge requests, resolve CI/CD bottlenecks and failures, and enhance team collaboration.

It also released GitLab 17 featuring GitLab Duo Enterprise, an end-to-end AI add-on to integrate secure AI-driven capabilities across every step of the software development lifecycle.

GitLab Revenue Estimate Revisions Positive

For the second quarter of fiscal 2025, GitLab expects revenues between $176 million and $177 million, indicating growth rate of 26-27% year over year.

The Zacks Consensus Estimate for fiscal second quarter revenues is pegged at $176.41 million, indicating year-over-year growth of 26.39%.

Non-GAAP operating income is expected to be $10-$11 million for the fiscal first quarter.

Moreover, non-GAAP earnings are expected between 9 cents and 10 cents per share. The consensus mark for earnings is pegged at 9 cents per share, up 80% over the past 30 days.

Conclusion

GitLab Shares have declined 26.5% year to date, underperforming the broader Zacks Computer & Technology sector’s return of 8% and the Zacks Internet Software industry’s gain of 13.9%.

However, a strong portfolio and an expanding partner base are expected to help GTLB shares recover in the near term.

This Zacks Rank #2 (Buy) stock has a Growth Style Score of A and Momentum Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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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.

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Netflix, Inc. (NFLX) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

CVS Health Corporation (CVS) : Free Stock Analysis Report

Alphabet Inc. (GOOGL) : Free Stock Analysis Report

GitLab Inc. (GTLB) : Free Stock Analysis Report

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