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Churchill Downs, Lumber Liquidators, Affirm Holdings, Opendoor Technologies and SoFi Technologies highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research
·9-min read

For Immediate Release

Chicago, IL – November 9, 2021 – Zacks Equity Research Shares of Churchill Downs Inc. CHDN as the Bull of the Day, Lumber Liquidators Holdings, Inc. LL as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Affirm Holdings, Inc. AFRM, Opendoor Technologies Inc. OPEN and SoFi Technologies, Inc. SOFI.

Here is a synopsis of all five stocks:

Bull of the Day:

Churchill Downs stock has destroyed the broader market and its gaming industry peers over the last five years. The historic horse racing icon is poised to post strong growth as the in-person economy returns and the broader sports gambling world grows in popularity after the key 2018 Supreme Court ruling.

Beyond the Track

Churchill Downs is a top racing, online wagering, and gaming entertainment firm most famous for the Kentucky Derby horse race. The company owns and operates three pari-mutuel gaming entertainment venues in Kentucky and it continues to grow its portfolio.

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The firm’s TwinSpires segment is one of the largest and most profitable online horse race wagering, online sportsbook, and iGaming platforms in the U.S. On top of that, Churchill Downs has a significant presence in the brick-and-mortar casino world across eight states. This includes roughly 11,000 slot machines and video lottery terminals, alongside 200 table games.

Churchill Downs and the entire sports-focused betting industry have benefited from the U.S. Supreme Court’s 2018 decision that cleared the way for states to legalize sports gambling outside of Nevada. Sports betting is now legal in more than two dozen states, though many are still limited to in-person betting—around a dozen states currently have legalized online sports gambling.

Recent Growth and Outlook

CHDN revenue did fall 21% last year amid a covid-hurt stretch that forced the firm to run races without fans, including the 146th Kentucky Derby. The fall came after it posted 32% sales growth in 2019 and 14% in 2018. Luckily, the company has flexed its muscles amid the economic reopening.

The firm’s Q2 revenue skyrocketed 178% against an easy-to-compare period last year. Most recently, Churchill Downs topped our third quarter revenue and adjusted earnings estimates on October 27. CHDN has beaten our EPS estimates by an average of 28% in the trailing three quarters and analysts have upped their bottom-line outlooks since its report.

Zacks estimates call for the firm’s revenue to soar 52% from $1.05 billion last year to $1.60 billion in 2021. The climb would see it blow by its pre-covid total of $1.33 billion. And its 2022 sales are then projected to climb another 16% higher to reach $1.86 billion.

At the bottom end of the income statement, Churchill Downs earnings are expected to skyrocket 675% to $6.42 a share, before jumping an additional 38% in 2022.

Other Fundamentals

Churchill Downs at the end of September signed a $197 million agreement to sell its 326-acre property in Arlington Heights, Illinois to the Chicago Bears. Last quarter, it also announced plans for a new 43,000-square-foot entertainment venue called Derby City Gaming Downtown in Louisville, Kentucky.

Wall Street was also pleased to hear that the firm’s board authorized a new $500 million stock repurchase plan. And it announced its $0.667 per share annual dividend will be payable on January 7, 2022 to shareholders of record on December 3.

Churchill Downs shares have climbed 420% in the last five years to crush the S&P 500’s 130%. CHDN’s run appears even better compared to its Zacks Gaming industry’s 9% climb.

CHDN stock has cooled off over the past year, though it’s still up 32% to roughly match the S&P 500. This run includes a huge downturn that began in early March as Wall Street dumped big pandemic winners. Its subsequent resurgence saw it post new records in mid-October.

Churchill Downs stock reached overbought RSI levels (70 or higher) around then and its recent downturn has pushed it below neutral at 47—even as the SPDR S&P 500 ETF Trust climbs further into overbought territory.

In terms of valuation, the stock is trading below its year-long median and at a 40% discount to its highs over this stretch at 28.4X forward 12-month earnings. This also represents a massive discount against its industry’s whopping 139X average.

Bottom Line

Churchill Downs currently lands a Zacks Rank #1 (Strong Buy) based on its solid upward earnings revision activity that’s particularly strong for FY22. The company also grabs a “B” grade for Growth in our Style Scores system. Plus, all five of the brokerage recommendations Zacks has for CHDN are “Strong Buys.”

The stock closed regular hours Monday roughly 9% below its records at $238.10 a share. And its current Zacks consensus price target of $276.17 per share represents 16% upside to its current levels. With all of this in mind, investors might want to consider Churchill Downs as a play on the quickly expanding sports gaming market.

Bear of the Day:

Lumber Liquidators is a leading U.S. specialty retailer of hard-surface flooring. LL shares have tumbled over 40% this year even as its industry climbed 36%.

The company did top our Zacks Q3 earnings estimates on November 3. But the flooring company’s adjusted earnings outlook has turned worse since then and LL stock fell again on Monday.

The Quick LL Lowdown

Lumber Liquidators is a top hard-surface flooring retailer, with over 400 stores around the U.S. The company sells more than 500 varieties of hard-surface flooring, ranging from vinyl plank and solid hardwood to bamboo and cork and beyond.

The coronavirus turned 2020 into a banner year for the housing market and that strength continued in 2021. The backdrop helped home builders and home-based spending retailers like Home Depot and many others thrive. Despite the accommodating setting, LL’s revenue popped only 0.5% last year, after it took a big hit during the second quarter amid the height of lockdowns.

Lumber Liquidators Q3 FY21 revenue then fell 4.6%, as DIY (do it yourself) shopping slipped. Luckily, its fiscal 2021 sales are still projected to climb 6% to $1.16 billion, based on our current Zacks consensus estimates. Peeking further ahead, its FY22 revenue is expected to come in another 2% higher.

Despite its projected top-line expansion, LL’s adjusted FY21 earnings are expected to tumble 45% from a year ago to $1.26 per share and then fall another 13% in 2022. And, of course, the company is being negatively impacted by the “challenging supply chain and inflationary environment.”

Bottom Line

Analysts have lowered their earnings outlooks for Lumber Liquidators since its early November financial release. The downward revisions trend helps LL land a Zacks Rank #5 (Strong Sell) at the moment. On top of that, the nearby chart shows how rough things have been for the stock over the last several years, if you exclude the covid rally.

Lumber Liquidators is currently trading below both its 50 and 200-day moving averages and it has been unable to regain any momentum, even as the market climbs to new records. Therefore, investors might want to consider turning their attention to other stocks within the broader home-improvement/building materials space.

Additional content:

Is a Beat in the Cards for Affirm (AFRM) on Q1 Earnings?

Affirm Holdings is scheduled to release first-quarter fiscal 2022 results on Nov 10, after market close.

Let’s check out the expectations in detail.

Q1 Expectations

The Zacks Consensus Estimate for revenues is pegged at $250.75 million, indicating 4.2% decline sequentially. The downside is likely to get partially offset by increases in network revenues and interest income related to growth in gross merchandise volume, loans held for investment and gains on loan sales.

Rising expenses are likely to have weighed on the company’ bottom line. The Zacks Consensus Estimate for loss per share is projected at 30 cents, indicating sequential growth of 37.5%.

What Our Model Says

Our proven model predicts an earnings beat for Affirm this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Affirm has an Earnings ESP of +39.50% and a Zacks Rank #3.

Other Stocks to Consider

Here are a few other stocks from the broader Zacks Business Services sector that investors may consider, as our model shows that these too have the right combination of elements to beat on third-quarter 2021 earnings:

Opendoor Technologies has an Earnings ESP of +38.89% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

SoFi Technologies has an Earnings ESP of +64.71% and a Zacks Rank #3.

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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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Opendoor Technologies Inc. (OPEN) : Free Stock Analysis Report
 
Lumber Liquidators Holdings, Inc (LL) : Free Stock Analysis Report
 
Churchill Downs, Incorporated (CHDN) : Free Stock Analysis Report
 
Affirm Holdings, Inc. (AFRM) : Free Stock Analysis Report
 
SoFi Technologies, Inc. (SOFI) : Free Stock Analysis Report
 
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