Yahoo Finance Wells Fargo and Hertz Global have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – April 30, 2024 – Zacks Equity Research shares Wells Fargo & Company WFC as the Bull of the Day and Hertz Global Holdings HTZ as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Apple AAPL, Lenovo LNVGY and HP HPQ.
Here is a synopsis of all five stocks.
Bull of the Day:
Zacks Rank #1 Wells Fargo & Company is one of the largest financial services companies in the United States, with nearly $2 trillion in assets as of April 2024. The San Francisco-based Wells Fargo specializes in banking, insurance, trust and investments, mortgage banking, investment banking, retail banking, brokerage services, and consumer and commercial finance through over 4,000 retail bank branches. Wells Fargo has an extensive automated telling machines (ATMs) network, coupled with its website and other distribution channels across North America and the globe.
Positive EPS Surprise History
The banking sector has been uncertain, to say the least. A little more than a year ago Silicon Valley Bank (SVB) completely collapsed amidst soaring interest rates and a downturn in the tech sector. The collapse of SVB sparked a banking crisis, leading to collapses in other banks, such as First Citizens Bank, the 30th-largest bank in the U.S. in terms of assets at the time of its collapse.
However, investors looking at Wells Fargo’s EPS surprise history in a vacuum would be hard-pressed to notice any banking turmoil. Over the past 15 quarters, WFC has delivered EPS that eclipsed Zacks Consensus Estimates in all but one quarter.
Strong Balance Sheet
WFC’s cash and cash equivalents are reaching new heights this year.
1. The company is growing its deposit base recently as retail clients move away from smaller, more risk prone regional banks, back to more traditional banking juggernauts like WFC.
2. WFC has been prudent in its expense management initiatives to support its financials.
3. Wells has a strong liquidity position, with a liquidity coverage ratio of 126% as of the first-quarter 2024, which is well above the regulatory minimum of 100%.
Relative Strength & Base Breakout
Despite turmoil in the financial sector, WFC is dramatically outperforming the S&P 500 Index over the past year, gaining 53.6% compared to the S&P’s 25.5%. As I always like to teach, strength begets strength on Wall Street.
WFC shares are breaking out of a two-year-long base structure on the weekly timeframe. As the old Wall Street adage goes, “The longer the base, the higher in space.” If the saying is true, WFC shares have a lot of meat left on the bone.
Bottom Line
Despite the turmoil in the financial sector, Wells Fargo has been a rock. The company’s stability, robust balance sheet, and relative strength foreshadow an attractive investment over the next 6-12 months.
Bear of the Day:
Zacks Rank #5 (Strong Sell) stock Hertz Global Holdings is one of the largest and most well-known global car rental brands. Hertz predominantly offers short-term vehicle rental services to individuals and businesses through the Hertz brand and other brands under the Hertz “umbrella” such as Dollar Rent-A-Car, Firefly Car Rental, and Thrifty Car Rental.
Competition is Heating Up in the Short-Term
With the advent of smartphones and other modern luxuries, it is becoming increasingly more apparent that the modern consumer is looking for speed and convenience in all aspects of life. For example, when a traveler lands at an airport in a city that isn’t their own, they are more often opting for ride-sharing services than waiting in long lines and paying sky-high prices for short-term rental services like Hertz.
Investors don’t have to look far for evidence of this momentous trend. While HTZ is in the process of printing its third consecutive year of slower annual earnings-per-share (EPS) growth, ride-sharing providers are experiencing higher earnings growth.
Meanwhile, new, innovative entrants such as Turo are upending the short-term vehicle rental market. Turo is becoming the Airbnb (ABNB) of vehicle rentals. The company allows clients to “skip the car rental counter and rent anything from daily drivers to pick up trucks, from trusted, local hosts on the Turo car rental marketplace.”
Robotaxis are a Long-Term Threat
Imagine a world where a driverless car can be summoned within minutes, allowing passengers to get from point A to point B safer than ever before. Investors may not have to imagine this world for much longer. Alphabet (GOOGL) subsidiary Waymo and Tesla (TSLA) are going “all in” on the idea. In fact, in Tesla’s recent earnings call, CEO Elon Musk underscored the importance of autonomy and robotaxis for the company by stating, “If somebody doesn’t believe Tesla’s going to solve autonomy, I think they should not be an investor in the company. We will, and we are.”
Though robotaxis may seem like a pipe dream, they are closer than most investors probably anticipate. In fact, robotaxis are live in several U.S. cities already. Also, TSLA is jumping today on news that the company’s FSD will go live in China in the near future as well.
Relative Weakness + Opportunity Cost
Hertz has underperformed the general market dramatically over the past year, dropping 70.9% versus the S&P 500’s 25.5% gain. Studies show that 75% of stocks follow the market’s direction. Because HTZ is one of the few stocks dropping precipitously and underperforming, it raises a red flag for investors.
Beyond the problematic price action, options traders seem to believe there is much further to drop. Over the past few weeks, options traders have plunked down millions in bearish bets against the troubled company.
Bottom Line
Hertz faces several bearish headwinds, such as an antiquated service, more competition, slowing growth, and relative weakness. For these reasons, HTZ is to be avoided for the foreseeable future.
Additional content:
Should You Buy Apple (AAPL) Stocks Ahead of Q2 Earnings?
Apple is set to report its second-quarter fiscal 2024 results on May 2.
The Zacks Consensus Estimate for fiscal second-quarter revenues is currently pegged at $89.99 billion, indicating a decline of 5.11% year over year. The consensus mark for earnings is currently pegged at $1.51 per share, up by a penny over the past 30 days. However, the figure indicates a 0.66% decrease from the figure reported in the year-ago quarter.
Apple has been one of the top performers in the past 12 months with consistent earnings performance. Its earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 5.20% on average.
However, Apple has been suffering from lower demand for the iPhone, a weak China market, stiff competition in the smartphone market and a worsening regulatory environment. These factors have hurt share price movement, which has declined 12.1% year to date, underperforming the Zacks Computer & Technology sector’s return of 10.2%.
Apple Inc. price-eps-surprise | Apple Inc. Quote
iPhone Sales Likely to Decline in Fiscal Q2
Apple’s fortunes are heavily reliant on the iPhone, which is by far its biggest revenue contributor. The device accounted for 58.3% of net sales in the last reported quarter, wherein sales increased 6% year over year to $69.7 billion.
The company expects the March quarter’s (second-quarter fiscal 2024) iPhone revenues to be like that of the year-ago quarter’s figure after removing the additional $5 billion it generated due to pent-up demand for iPhone 14 and iPhone 14 Pro Max in the year-ago quarter.
Our model estimates for fiscal second-quarter iPhone net sales are pegged at $46.99 billion, suggesting an 8.5% decline year over year. Apple is expected to have shipped roughly 53.3 million iPhones in the second quarter of fiscal 2024, per our model.
Per the latest Canalys report on worldwide smartphone shipments, Apple’s market share was 16% in the first quarter of calendar 2024, trailing Samsung’s 20%.
However, Apple’s reported plan to integrate Gemini, Google’s generative AI service, into iOS can be a gamechanger for iPhone shipments.
Services Growth to Remain Steady in Fiscal Q2
The weakness in iPhone sales is expected to be partially negated by the steady growth of the Services segment. An expanding paid subscriber base has been a key catalyst for the Services business, which is riding on the increasing popularity of the App Store and an expanding installed base of devices, albeit a worsening regulatory environment.
Apple has more than 1 billion paid subscribers across its Services portfolio. App Store continues to grab the attention of prominent developers from around the world, helping the company to offer exciting new apps that drive traffic.
Services like Apple TV+, Apple Arcade, Apple News+, Apple Card, Apple Fitness+ and Apple One bundle are expected to have contributed to overall growth.
Our estimate for fiscal second-quarter Services net sales is pegged at $23.07 billion, indicating 10.3% year-over-year growth.
Mac Sales Expected to Fall
The PC segment witnessed growth in the first quarter of calendar 2024 after two years of decline. Per IDC’s latest report, 59.8 million PCs were shipped, up 1.5% from the year-ago period. Lenovo topped the shipment list, trailed by HP in terms of market share.
Lenovo, HP and Apple had 23%, 20.1%, 15.5% and 8.1%, respectively. Moreover, in terms of shipment, Lenovo and HP witnessed growth of 7.8% and 0.2%, respectively, while Dell Technologies lost 2.2%. Apple witnessed 14.6% growth, the strongest on the list.
Nevertheless, Mac sales are expected to have declined in the to-be-reported quarter. Our estimate for fiscal second-quarter Mac net sales is pegged at $6.03 billion, indicating a 15.9% year-over-year decline.
Conclusion
Apple’s near-term results are expected to bear the brunt of the weak iPhone and Mac sales as well as weakness in China. Regulatory headwind, including the Department of Justice’s antitrust lawsuit, is expected to remain an overhang on the shares.
However, we believe the dip in Apple’s share price presents a buying opportunity, and it would be wise to buy ahead of the second-quarter fiscal earnings. Integration of AI into iPhone, solid Apple TV+ content, expanding installed base and strong Services business are key catalysts.
Currently, Apple carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
https://www.zacks.com
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/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Wells Fargo & Company (WFC) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
HP Inc. (HPQ) : Free Stock Analysis Report
Hertz Global Holdings, Inc. (HTZ) : Free Stock Analysis Report
Lenovo Group Ltd. (LNVGY) : Free Stock Analysis Report
