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Stamps.com, Beyond Meat, Fastenal, Advance Auto Parts and Builders FirstSource highlighted as Zacks Bull and Bear of the Day

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Zacks Equity Research
·13-min read
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For Immediate Release

Chicago, IL – April 13, 2021 – Zacks Equity Research Shares of Stamps.com Inc. STMP as the Bull of the Day, Beyond Meat, Inc. BYND as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Fastenal Company FAST, Advance Auto Parts, Inc. AAP and Builders FirstSource, Inc. BLDR.

Here is a synopsis of all five stocks:

Bull of the Day:

Stamps.com is finally coming out of the ashes of the dot-com bubble burst, and the pandemic has been an enormous tailwind for this enterprise's inevitable revival. Packages have been flying in and out of doors like it's Christmas every day this past year, and Stamps.com had its best year in the history of the company.

The safest and easiest way to get items where they needed to go during lockdowns was with printed-out labels. Stamps.com's best-in-class shipping solutions have been a perfect conduit for digital stamps, with the promise of shipping "faster for less money with automated shipping tools and discounted USPS rates."

STMP has a history of blowing its earnings estimates out the water, with its average beat over the last 5 quarters being over 100% (according to Zacks' Consensus Estimates). Analysts have maintained a very conservative stance on STMP because of the high level of uncertainty, but STMP has consistently impressed. None the less the stock has been experiencing some wild price action over the last year and based on historical trends, now seems like a perfect time to trade this exciting company.

STMP has had a pattern of trending upward into every earnings reports and either selling out on the day earnings are released or getting a big boost that eventually levels out. Either way, this stock is always an exciting one to hold as earnings season kicks off, and with expectations remaining relatively hampered because I think STMP might be in for a boost.

Analysts are getting increasingly optimistic about this business's future, raising their full-year EPS guidance, and propelling Stamps.com into a Zacks Rank #1 (Strong Buy).

The Business

Stamps.com has been the leading online postage provider in the US since it began back in 1996. There is no better way to describe a company than from the horse’s mouth directly. Below is an expert from the company's website:

"Stamps.com was the first company to be approved by the U.S. Postal Service® to offer a software-only postage service that lets customers buy and print postage online. The Company targets its services to small businesses, home offices and online retailers, and currently has PC Postage partnerships with Avery, Microsoft, HP, the U.S. Postal Service and others."

Stamps.com surpassed 1 million quarterly customers for the first time in its final quarter of 2020, with the holiday season undoubtedly providing a positive boost to this digital shipping giant's financials. This represents a 35% increase from the prior fourth quarter. Stamps.com has adopted the new golden business model of Silicon Valley, the subscription model, which locks in a consistent and expanding revenue base. Right now, the enterprise has 732,000 monthly subscribers and growing.

The shelter-in-place initiative across the US has forced many businesses and individuals to look towards Stamps.com's best-in-class services for their shipping needs. Now a mounting group of customers are conditioned to utilize the ease and convenience of Stamps.com. This service will continue to be a staple in the post-pandemic's New Normal.

The Chart

I believe this low-beta equity (not as impacted by the broader market) is on its way back up to its seemingly quarterly resistance level of $285 (the stocks old 2018 high), or a 38% upside from where it's trading at today.

The Financials

Stamps.com has seen double-digit sales growth ranging from 10% to 70% every year for the past decade, with one exception. The exemption was 2019, which saw a one-off 2.6% decline due to the business ending its exclusive partnership with the US Postal Service (USPS) in order to "fully embrace partnerships with other carriers who (they) think will be well-positioned to win in the shipping business in the next five years."

USPS couldn't provide the 2-day shipping promise that Stamps.com was looking to achieve, a delivery timeline that is becoming a shipping industry standard because of the e-com giant Amazon's leading-edge business model.

The stock lost nearly 90% of its value from its 2018 summer high to its low in May of 2019. The company and its stock quickly recovered. Now, STMP is poised to break out past its 2018 highs, with nothing but momentum behind it.

Management opted-out of providing 2021 guidance because of the large range of potential outcomes and uncertainties. Analysts covering this company have cited that their guidance is on the conservative side, considering the ambiguities. This conservatism on estimates is providing this stock with a springboard to soar off of.

Stamps.com has a fortress of a balance sheet with more cash & equivalents than it's the sum total of liabilities. The company has tremendous financial flexibility with its consistent cash-flows, zero debt in the books, and a very liquid balance sheet.

Final Thoughts

Today the company is not only more profitable than ever before, but its growth outlay looks top notch for the coming New Normal. All the analysts covering this stock call it a strong buy today, with price targets ranging from $300 to $405. This is a massive upside from the $207 STMP trades at today.

Bear of the Day:

Beyond Meat is a meatless miracle that shares have run far past where this 'trendy' stock should be trading at. Sell-side analysts are beginning to rein in their expectations as the market euphoria surrounding this cliché new plant-based protein alternative has pushed BYND into a Zacks Rank #5 (Strong Sell).

I pitched this stock as the bear of the day about a month ago and my original bearish thesis still stands. BYND remains the one stock that stands out to me as overvalued on the Zacks Strong Sell list. I mean you don’t see many stocks with 6 sell ratings and only 2 buy ratings, considering that analysts are not very likely to recommend something as a sell unless fundamentals are way out of whack with the share price.

Why I Don't Like The Stock 

First and foremost, this small alt-protein meat enterprise will not just waltz into the consumer-packaged-goods (CPG) industry and completely monopolize this niche space. The big meat industry players like Tyson Foods, JBS Holdings, Cargill Meat, and Perdue are all making moves in the plant-based meat segment. These food giants' proven distribution and supply chain operations, along with longstanding corporate relationships, will be leveraged to outplay this start-up.

Granted, Beyond Meat has secured some lucrative partnerships with global fast-food giants like McDonald's and Yum! Brands that have justified some of BYND's upward move. However, I still believe that BYND is overextended.

I am worried that this a fad among younger consumers (which is where the primary demand is originating), and the fact that this new plant-based meat isn't actually healthier than real meat may slow its roll. Beyond Meat's products are all highly processed, and some nutritionists are saying that this faux-meat may actually be less healthy than traditional options.

BYND has appreciated over 450% from its IPO in May of 2019 (200% from its first publicly traded price) but has traded sideways for more than 10 months. The company is trading at a double-digit P/S multiple. Its deeper slips into a bottom-line and cash-flow deficit are concerning for a company with such an uncertain future.

Final Thoughts

I'm not going to be putting on a position in BYND one way or the other because of the stock's inherent volatility. I don't believe in this 'progressive' business model's story and think there are too many risks at its current valuations.

Even if plant-based meat is not just a fad but a sustained and growing business, I think Beyond Meat will be hard-pressed to compete with the capital and economies of scale of the meat industry's longstanding leaders. To put things into perspective, Tyson Foods is estimated to generate 72 times as much revenue as Beyond Meat in 2021 and robust profitability that dwarfs even BYND's sales (0 expenses taken out).

TSN is less than 3 times the market value of BYND in an industry it has operated in for decades. The risk/reward ratio in BYND shares is much too high for me to consider the stock as investable.

Additional content:

What's in Store for Fastenal (FAST) Q1 Earnings?

Fastenal Company is scheduled to report first-quarter 2021 results on Apr 13, before the opening bell.

In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 3% and 2%, respectively. On a year-over-year basis, earnings and revenues grew 6.4% and 9.6%, respectively.

Fastenal’s earnings topped the consensus mark in all the last four quarters, with the average being 6.3%.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been unchanged at 37 cents over the past 60 days. The estimated figure indicates 5.7% growth from the year-ago level. The consensus mark for revenues is pegged at $1.43 billion, suggesting a 4.9% increase from the year-ago reported figure of $1.37 billion.

Key Factors to Note

Improved End-Market Demand: This national wholesale distributor of industrial and construction supplies is likely to have witnessed improved end-market demand in the first quarter. Although weather played a spoilsport in February, it is likely to have witnessed demand recovery in March, given controllable supply chain disruptions.

Higher production, increasing capital expenditures and deferred maintenance spending are expected to have boosted sales. Having said that, lack of access to facilities and decision makers in light of COVID protocols may have been concerns.

If we go by the monthly sales report, average daily sales grew 1.5% to $21.9 million for February 2021 compared with 6.5% growth registered in January 2021 and 4.7% in the year-ago period. February 2021 growth was based on strength in safety (12.6% improvement) and growth in fastener sales (up 1.6%). Recovery in fasteners and non-residential customers is expected to reflect on March sales growth.

In terms of region, for the month of February, U.S. sales grew 3.6%, Canada/Mexico sales increased 12.1% and “rest of world” sales improved 8.3% year over year. By end market, manufacturing sales increased 6.2% and non-residential construction sales gained 4.9%, as stated by the company.

Safety sales continued to drive the company’s top line, which increased 12.6% from the prior-year period. Notably, fasteners improved 1.6% and “other” improved 4.9% from a year ago.

The Zacks Consensus Estimate for the company’s overall daily sales is pegged at $22.97 million, which indicates a sequential increase of 6.3% and year-over-year growth of 7.3%.

Margins: Fastenal’s changes in product and customer mix have been hurting gross margin for quite some time now. Negative customer/product mix — as a result of increased growth of lower-margin national accounts and safety products — along with lower proportion of higher-margin fasteners are expected to have affected its first-quarter gross margin.

Also, rising freight and product costs might have been concerning. Nonetheless, rising non-safety mix is expected to have aided the company’s gross margins.

Furthermore, to offset the tariffs placed on products sourced from China to date, Fastenal has been successfully raising prices. The company has been undertaking additional steps to counter cost pressure and incremental tariffs, which are expected to reflect on the bottom line.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Fastenal this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Fastenal carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks with Favorable Combination

Here are some companies in the Zacks Retail-Wholesale sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Advance Auto Parts has an Earnings ESP of +17.09% and a Zacks Rank #3.

Builders FirstSource has an Earnings ESP of +14.91% and holds a Zacks Rank #3.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>

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