Yahoo Finance Pinterest and Guess have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – November 29, 2023 – Zacks Equity Research shares Pinterest PINS as the Bull of the Day and Guess GES as the Bear of the Day. In addition, Zacks Equity Research provides analysis on American Eagle Outfitters AEO, Deckers Outdoor DECK and Target TGT.
Here is a synopsis of all five stocks.
Bull of the Day:
Pinterest, the social media and discovery platform with 482 million MAUs (Monthly Active Users) is a well-established and high growth technology company with a Zacks Rank #1 (Strong Buy) rating.
In addition to the top Zacks Rank, Pinterest has several notable bullish catalysts making it a compelling investment consideration. The company has both a fair earnings multiple and high earnings growth forecasts giving it a discount PEG ratio. Furthermore, the stock’s price action is forming a convincing technical chart pattern giving traders a measured risk-reward setup.
Investors looking to add exposure to the high growth, mid-cap technology stocks, which continue to build momentum in this bull-friendly market should read on. Pinterest is part of the Internet-software industry, which currently sits in the Top 12% (31 out of 251) of the Zacks Industry Rank.
Company Summary
Pinterest, founded in 2008 is a platform that shows its users (called Pinners) visual recommendations (called Pins) based on their personal taste and interests. Users then save and organize these recommendations into collections (called Boards).
Pinterest generates revenue by delivering ads on its website and mobile application. The company is helping advertisers reach millennials and Gen Z audience who are more active on immersive mobile platforms.
Earnings estimates have been trending higher over the last several months, giving PINS its top Zacks Rank. Current quarter earnings estimates have been revised higher by 8.7% over the last month and are expected to jump 72.4% YoY to $0.50 per share. FY23 earnings estimates have increased 11.5% in the last month and are forecast to climb 72.5% YoY to $1.07 per share.
Annual sales are projected to grow 9% to $3.1 billion this year and 16.8% next year to $3.6 billion.
Discount Valuation
After trading through the boom-bust market of 2020-2022, Pinterest stock is trading just 32% above its IPO price from 2019. That means investors are paying just a small premium to the IPO price, while annual sales have nearly tripled in that time.
Today, Pinterest stock is trading at 30x forward earnings, while its EPS are expected to grow 36% annually over the next 3-5 years. This means that the company has a PEG Ratio of 0.84x, indicating a discount valuation based on its growth prospects.
Technical Perspective
After forming a very large stage one base over the last two years, Pinterest is again drawing in buyers. Now, after a strong Q3 earnings report and gap higher, the stock has been building out a convincing bull flag from which investors can trade a breakout.
If PINS stock can trade and close above the $32.30 level, it would signal a technical breakout, and likely push the stock to new two-year highs. Alternatively, if the stock reverses at the level again, and moves below the $31.50 level, investors may want to wait for another opportunity.
Bottom Line
The trifecta of fair valuation, upward trending earnings revisions, and technical momentum setup makes Pinterest a worthy consideration for any investor’s portfolio.
Bear of the Day:
The fashion brand Guess has been struggling in recent years, unable to move its stock price higher. Unfortunately, the current outlook is not much improved as sales are forecast to remain flat in the coming years, and earnings estimate revisions are decidedly lower, giving the stock a Zacks Rank #5 (Strong Sell) recommendation.
Because of the lackluster company expectations, and inherent challenges of the fashion and apparel business, Guess stock should be avoided until a significant turn in the data.
Company Summary
Guess is an American fashion brand known for its clothing, accessories, and footwear. Founded in 1981, it is recognized for its iconic denim products and distinctive style. Guess operates globally and has a reputation for its trendy and edgy youthful designs.
Over the last ten years Guess stock is essentially unchanged, down -5% over that period. This is below the industry returns, which should be noted are not much better at just 9% over the last ten years, and significantly worse than the broad market. However, GES has paid a dividend since 2008, which today stands at a hefty 5.6% yield.
The poor industry performance speaks to the inherent challenges associated with the fashion industry. Because trends regularly come and go, it is hard for the brands to maintain steady and enduring sales growth. As is seen in GES, where sales growth is flat over the last 11 years, these instances can be brutal for shareholders.
Sales and Earnings
Sales this year and next are expected to continue mostly unchanged, with FY24 expecting 2.2% YoY growth and FY25 forecasting 1.9% YoY growth. With no sales growth prospects, I think it is likely that Guess stock will continue to languish as is has the last decade.
Earnings estimates aren’t encouraging either, reflected by the Zacks #5 (Strong Sell Rating). Current quarter earnings have been revised lower by -7.5% and are expected to drop -8% YoY to $1.6 per share. FY23 earnings have been lowered by -7.6% and are projected to grow just 1.4% YoY to $2.78 per share.
Guess is a part of the Textile – Apparel Industry, which sits in the Bottom 30% (175 out of 251) of the Zacks Industry Rank.
Bottom Line
This year has been an exceptional one in the stock market, and thus there are a litany of exciting companies to pick from. This makes Guess a stock that is very much worth avoiding, as it has few if any bullish catalysts currently.
However, Guess does have a well-known brand, and still does over $2.7 billion in annual sales indicating it still maintains some relevance in the fashion world. Furthermore, it is trading at a forward earnings multiple of 8x, which is below the industry average of 14.6x and its 10-year median of 17.5x.
Thus, if Guess can instigate a growth campaign and sway analysts to improve earnings estimates, it could at some point be an interesting investment. However, for now investors should look elsewhere for opportunities.
Additional content:
3 Top Retail Stocks to Buy as Holiday Spending Rises
Americans opened up their wallets in the busy holiday shopping period, thereby fueling economic growth and squashing concerns about an imminent recession. Black Friday sales touched record highs as online sales picked up after retailers extended their deals beyond brick-and-mortar outlets.
According to a report from MasterCard, in-store sales during Black Friday advanced 1.1% year over year, while online sales climbed 8.5%. MasterCard added that overall Black Friday sales increased 2.5%. Adobe Analytics, meanwhile, said that Black Friday sales came in at a record $9.8 billion across the length and breadth of the country, while e-commerce spending jumped 7.5% from a year earlier.
Thanks to both online and offline deals, price-conscious consumers splurged a lot more during this year’s Thanksgiving holiday shopping compared to last year, when higher food and gas prices impacted their propensity to spend. Consumers were on a shopping spree and spent heavily on items such as televisions, smartwatches, gaming, and toys, to name a few.
But it’s just not about Black Friday sales, the National Retail Federation (NRF) earlier stated that consumers will spend between $957.3 billion and $966.6 billion on various retail products throughout November and December, which will be an uptick of 3% and 4% over the same period last year. NRF, in reality, found out that a greater number of consumers have already started to spend on holiday items such as gifts and decorations since October.
Consumers, in the meantime, are spending more on nonobligatory items and are eventually boosting retail sales solely because the Federal Reserve’s aggressive monetary policy has made incremental progress in curbing price pressures. With inflation showing signs of cooling down and the Fed now expected to pause interest rate hikes, consumers are all set to splurge even more in the near term. Moreover, retailers have already lured bargain-hunting customers with enticing Cyber Monday deals.
Hence, courtesy of an increase in consumer outlays, retailers are positioned to gain as spending plays a crucial role in determining their revenues. We have, thus, selected three retailers, namely, American Eagle Outfitters, Deckers Outdoor and Target, which flaunt a Zacks Rank #2 (Buy) and should make meaningful additions to your portfolio. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories, and footwear for men and women. The Zacks Consensus Estimate for its current-year earnings has moved up 3.1% over the past 60 days. AEO’s expected earnings growth rate for the current year is 37.1%.
Deckers Outdoor is a leading designer, producer and brand manager of innovative, niche footwear and accessories. The Zacks Consensus Estimate for its current-year earnings has moved up 4.5% over the past 60 days. DECK’s expected earnings growth rate for the current year is 20.9%.
Target has evolved from just being a pure brick-and-mortar retailer to an omni-channel entity. The Zacks Consensus Estimate for its current-year earnings has moved up 9.9% over the past 60 days. TGT’s expected earnings growth rate for the current year is 38.5%.
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Target Corporation (TGT) : Free Stock Analysis Report
American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report
Guess?, Inc. (GES) : Free Stock Analysis Report
Pinterest, Inc. (PINS) : Free Stock Analysis Report
