For Immediate Release
Chicago, IL – August 9, 2022 – Zacks Equity Research shares Taiwan Semiconductor Manufacturing TSM as the The Clorox Company CLX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon.com Inc. AMZN, Shopify Inc. SHOP and PayPal Holdings, Inc. PYPL.
Here is a synopsis of all five stocks:
Bull of the Day:
Semiconductors, also called microchips, are a bright highlight of technology. From freezers to computers, they allow the devices we rely on daily to work smoothly and efficiently.
One company that typically comes to mind when considering semiconductor stocks is Taiwan Semiconductor Manufacturing, the world's largest dedicated integrated circuit foundry.
TSM is engaged in the manufacturing and sale of integrated circuits and wafer semiconductor devices. You can find TSM chips in PCs, electronics, automotive equipment, and many other daily applications.
In addition, the company is responsible for supplying chips to many tech titans, including Apple, Advanced Micro Devices, and Nvidia. Clearly, the company is of mass importance.
The company sports a Zacks Rank #1 (Strong Buy), making shares appear very enticing and raising a valid question: how does the semiconductor titan currently stack up? Let's take a closer look.
Year-to-date, TSM shares are deep in the red, losing more than a fourth of their value and drastically underperforming the S&P 500.
However, the price action of TSM shares has changed vividly over the last month. Buyers have been out in full force, pushing shares up a spectacular 11% and outperforming the general market by a wide margin.
Valuation multiples have come down extensively amid the rough stretch of share performance.
TSM currently carries a 14.2X forward earnings multiple, well below its five-year median of 19.9X and representing an enticing 41% discount relative to its Zacks Computer & Technology Sector.
Growth Estimates & Quarterly Performance
Analysts have been overwhelmingly bullish over the last 60 days, helping push the company into a Zacks Rank #1 (Strong Buy).
For the current fiscal year, growth projections indicate serious growth. The Zacks Consensus EPS Estimate for FY22 resides at $6.30, reflecting a substantial 52% uptick in earnings year-over-year.
Of course, the growth doesn't stop there – TSM is forecasted to rake in a mighty $78 billion in revenue during FY22, penciling in a 37% double-digit year-over-year increase from FY21 annual sales of $57 billion.
In addition, TSM has been on a blazing-hot earnings streak, chaining together seven consecutive bottom-line beats. Just in its latest quarter, the company exceeded the Zacks Consensus EPS Estimate by a solid 3.3%.
One of the best ways investors can find expected winners within the market is by utilizing the Zacks Rank – one of the most potent market tools out there that does all of the hard work.
A portfolio consisting of Zacks Rank #1 (Strong Buy) stocks has beaten the market in 26 of the last 31 years with an average annual return of an incredible 24%.
Additionally, 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.
Taiwan Semiconductor Manufacturing would be an excellent bet for investors looking to add a solid stock to their portfolios, as displayed by its Zack Rank #1 (Strong Buy).
Bear of the Day:
It's been a tough stretch for many stocks throughout 2022, and The Clorox Company has been no exception. The company has landed itself into a Zacks Rank #5 (Strong Sell) and carries an overall VGM Score of a D – a pairing that one never wants to see.
Let's take a closer view of why the company has found itself in such an unfavorable ranking.
Analysts have extensively dialed back their earnings outlook over the last 60 days, a big reason why the company is a Zacks Rank #5 (Strong Sell).
In addition, the Zacks Consensus EPS Estimate of $0.93 for the upcoming quarter reflects a disheartening 23% drop in earnings year-over-year. Pivoting to the top-line, the quarterly revenue projection for the upcoming print of $1.8 billion pencils in a 2% year-over-year decrease.
Clorox shares trade at high valuation multiples, and the company carries a Style Score of an F for Value.
The company's forward earnings multiple resides at a steep 33.8X, well above its five-year median of 24.9X, and representing a rich 65% premium relative to its Zacks Consumer Staples Sector.
Bottom-line results have left much to be desired as of late, with the company reporting quarterly EPS below the Zacks Consensus EPS Estimate in two of its previous three quarters. Just in its latest quarter, Clorox penciled in a 2.1% bottom-line miss.
Clorox shares have been the victim of a deep double-digit valuation slash year-to-date, with sellers remaining in complete control. This adverse price action, paired with overwhelmingly negative estimate revisions, paints a grim picture for the company in the short term.
The company is a Zacks Rank #5 (Strong Sell) and a stock that investors will be better off staying away from for now.
Instead, investors should pivot to stocks that either carry a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) – the odds of reaping considerable gains are much higher within the companies that carry these ranks.
These Companies' Earnings Suggest Continued Growth in eCommerce
Online retailers have not been popular investments since the worst of the pandemic, as physical retail has come back strongly with more people moving outdoors. Inflation is a top concern right now, and retail in general is not looking so good as a result.
But despite these negatives, earnings reports from one established and another relatively new online retailer show that not all companies are the same. While pandemic-style strength in demand is absent, the companies continue to grow, supporting the theory that some of the shift online has been permanent.
Amazon.com Inc. reported an earnings miss of 33.3% in the last quarter that came from sales that beat the Zacks Consensus Estimate by 1.3%.
The Zacks Rank #3 (Hold-rated) stock's revenue growth remains extremely strong, with the growth rate up 40% above the rate during the pandemic-influenced May 2020-May 2021 and the compound annual growth rate (CAGR) since the pandemic +25%.
In the last quarter, product revenue missed analyst estimates by 3.2% while services revenue beat by 4.0%.
By segment, both North America and AWS beat analyst estimates by a respective 6.0% and 1.6%. International was the disappointment, missing by 8.8%.
Physical stores beat by 4.7% while online sales fell 2.8% short. Other metrics were also a mixed bag: Third party seller services revenue was ahead of estimates (by 6.4%) as was advertising services revenue (by 1.4%) and other (by 90.8%, off a smaller base). But subscription services revenue missed by 1.2%.
Segment-wise operating income shows that North America and International losses came in 67.7% and 7.4% lower than expected. However, AWS profit was also 4.2% below estimates. The lower-than expected losses came from improvement in the fulfilment network that offset some of the cost pressures at worldwide stores, inflationary pressures (particularly in energy electricity rates) and fixed cost deleverage. Worldwide shipping costs were also 3.2% lower than expected.
Amazon continues to leverage the Prime subscription to generate sales growth.
In the September quarter, analysts on average expect the North America, International and AWS segments to grow 13.2%, 8.7% and 29.6%, respectively. While online sales are expected to grow 10.6%, the much smaller contribution from physical stores is expected to grow 8.5%. Total product sales growth is expected to be 11.6% and services sales growth 20.1%. Subscription services are expected to grow 16.2%.
Zacks #3 ranked Shopify Inc., a provider of essential internet infrastructure for commerce, missed earnings estimates by 40.0% in the June quarter (loss of 14 cents versus earnings of 15 cents a year ago) on sales that also missed by around 3.0%.
Sales did grow 15.7%, however.
"While commerce through offline channels grew faster in Q2, where our exposure is lower but growing, we continued to see increased adoption of our solutions, enabling our merchants to remain agile against a challenging macro environment and highlighting the breadth and resilience of our business model," said Amy Shapero, Shopify's CFO.
As a result, Subscription Solutions (28% revenue share) grew 10% to beat analyst estimates by 0.3% while Merchant Solutions (the balance) grew 18% to miss analyst estimates by 5%. Therefore, Merchant solutions was clearly responsible for the revenue miss, although it grew more than Subscriptions.
Gross Merchandise Volume (GMV) grew 11% from the year-ago quarter and at a three-year CAGR of 50%, but missed analyst estimates by 4.7%.
Gross Payments Volume (GPV) grew to 53% of GMV in the quarter from 48% a year ago. GPV, which increased 31% over the past year, also disappointed, missing analyst estimates by 1.4%.
The monthly recurring revenue (MRR) missed by 2.6%. Shopify Plus (31% of MRR) continued to grow, beating analyst estimates by 2.5%.
For the September quarter, analysts are looking for a 14.3% year-over-year increase in Subscription revenues and a 33.0% increase in Merchant revenues. GMV is expected to increase 23.5% and GPV 29.8%. MRR is expected to increase 16.3% and Shopify Plus contribution 3.0%.
PayPal Holdings, Inc. reported June quarter earnings that beat the Zacks Consensus Estimate by 20.4% on revenue that beat by less than a percentage point.
The reason for the lackluster topline can be traced to the its transaction revenues, which fell 0.9% short of analyst estimates despite growing 8.2% from the year-ago quarter for a 92% share of total revenue. Revenues from other value-added services grew 21.1% to beat by 9.3%.
U.S. revenues (57% of total revenue) grew 18.1%, topping analyst estimates by 0.9%. International revenues declined 0.8% to miss estimates by 0.6%.
Therefore, the revenue miss was on account of lower-than-expected transactions in International.
Total payment volume, although up 9.3% from last year missed analyst estimates by 1.5%. TPV was below expectations in both U.S. (by 0.9%) and International (by 1.2%). The total take rate was more or less in line with estimates as was the transactions take rate. The transaction expense rate and loan loss rate were also in line with expectations. And the transaction margin was only slightly off (by 0.05%).
Active customer accounts increased 6.5%, missing analyst estimates by 0.9%. The number of payment transactions grew 16.4%, but was just short of estimates (by 0.07%). Payment transactions per active account grew 12.8% and were more or less in line with estimates. Read together, this suggests that business was quite strong during the quarter.
For the September quarter, analysts expect transaction revenue to increase 14.6% year over year with revenue from other services expected to decline 2.0%. U.S. revenue is expected to increase 12.1% and International 12.6%.
TPV is expected to increase 15.0% with U.S. TPV increasing 20.7% and International 6.6%. The transaction take rate is expected to be flat at 1.81. However, both the transaction expense rate and the loan loss rate are expected to increase to 0.88 and 0.13, respectively. So, the transaction margin is expected to decline 10.5%.
Active customer accounts will increase 5.2%, the number of transactions will increase 16.8% and the number of transactions per active account 13.9%.
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