For Immediate Release
Chicago, IL – June 18, 2020 – Zacks Equity Research Shares of eBay Inc. EBAY as the Bull of the Day, Tyson Foods Inc. TSN as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tesla TSLA, Toyota TM and General Motors GM.
Here is a synopsis of all five stocks:
Bull of the Day:
eBay Inc. is an online shopping platform that is well-positioned in the digital marketplace space. Over the years, the company has evolved from a relatively small community user-based auction site to an e-commerce giant. eBay also uses structured data initiatives to better understand, organize, and leverage the inventory on its site, as well as to deliver more personal user experiences.
Orders Surge During Pandemic
Like many online retail shops, eBay saw—and is still seeing—major strength during the pandemic.
The company said in a press release earlier this month that business is performing “significantly” better than they anticipated. For April and May, eBay added 6 million new and reactivated buyers.
Categories like Home & Garden, Electronics, Fashion, Auto Parts, and Collectibles all experienced a surge in demand.
Looking ahead, the company anticipates an even better second quarter than originally expected.
Revenue is now projected to fall in the range of $2.75 billion and $2.8 billion (compared to the prior forecast of $2.38 billion to $2.48 billion), representing 13% to 16% year-over-year growth. Non-GAAP EPS should fall between $1.02 to $1.06 per share, well above the previous range of $1.73 to $0.80 per share.
Gross merchandise volume (GMV) is also expected to continue to be strong in the second quarter, up between 23% to 26%.
If eBay hits the high end of the updated earnings guidance, its bottom line would grow 60% year-over-year.
EBAY Is Rallying
Year-to-date, shares of EBAY are up over 35% compared to the S&P 500’s 3.3% decline. Earnings estimates have been rising too, and eBay is a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, 12 analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 44 cents to $3.45 per share; earnings are expected to increase almost 22% compared to the prior year period. 2021 looks strong as well, with nine analysts boosting their estimate for the year.
eBay believes it has a really good chance that it will exceed its full-year outlook, but like many other companies, it has yet to update its full-year forecast. Investors can expect a more detailed 2020 outlook when the company reports Q2 results next month.
If you’re an investor searching for a tech stock to add to your portfolio, make sure to keep EBAY on your shortlist.
Bear of the Day:
Headquartered in Arkansas, Tyson Foods Inc. is the biggest U.S. chicken company, producing and distributing chicken, beef, and pork products. Its meat products are sold primarily to grocery retailers, wholesalers, distributors, chain restaurants, and industrial food processing companies.
Coronavirus Pandemic Impacts Profits
Covid-19 has hurt Tyson across the board. For its fiscal second quarter, earnings and revenue missed our consensus estimate, and its bottom line slumped 36% to $0.77 per share.
While beef and pork volumes were up 2.7% and 2%, respectively, for the period, chicken volumes fell 1.5% and prepared foods volume slumped 0.1%.
Operating margin tumbled by 1.5 percentage points to 4.6% despite average pricing gains for everything but beef; gross margin was down as well, falling two percentage points to 9.5%.
Additionally, per-unit production costs rose due to lower productivity.
The second half of 2020 looks just as grim for Tyson, and the company didn’t provide any firm numbers because of continued uncertainty related to the pandemic. It still expects high production costs, as well as issues stemming from a slowdown in demand, plant shutdowns, and employee shortages.
Even as the U.S. begins to reopen for business, Tyson must also deal with a resurgence of coronavirus cases at its processing facilities, like the one in North Carolina; 28.5% of its workforce there tested positive.
This, on top of the weak outlook for 2020, shows that Tyson has a long road ahead of them.
TSN is now a Zacks Rank #5 (Strong Sell). Four analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen $1.50 from $5.94 to $4.40 a share; earnings are expected to decline well over 19% for the fiscal year.
Tyson has had the advantage of offering essential consume products during the pandemic, but the real damage from the coronavirus outbreak is still unclear.
Food supply chains will likely be strained for a while now, and Tyson will face an uphill climb until the situation returns to some degree of normalcy. Unfortunately, that is out of the meat producer’s control, and investors should probably stay clear until then.
Will Tesla Take Over the Automotive World?
The electric vehicle (EV) king, Tesla, ripped past $1,000 per share last week and pushed its valuation to only about 15% short of the largest automotive company in the world, Toyota. Elon Musk and his fleet of world-changing EVs has taken the world by storm, but can its relentless stock rally sustain?
There is a divide in analyst opinions about what TSLA shares should be worth. The uncertainty in this company is enormous, but optimism has swelled TSLA over the past 52-weeks with shares appreciating an extraordinary 336%. The investor bum-rush into TSLA was catalyzed by the company finally keeping its promises.
Promises Finally Kept
Tesla and its eccentric CEO, Elon Musk, have been making overzealous promises that were seemingly unreachable. The stock had traded effectively sideways for 5 years because the company had a penchant for overpromising and underdelivering, but everything changed in the fall of 2019.
2019 was the year that Tesla finally and unexpectedly met and even exceeded expectations. The electric vehicle giant reported record delivery figures in the last three-quarters of 2019, meeting Elon’s ostentatious promise of 350,000 to 400,000. The good news just kept flooding in with the Shanghai Gigafactory finished ahead of schedule, a Berlin Gigafactory expected to start production by next year, the Model Y being commercially produced ahead of schedule, and on top of all this, Tesla is finally turning a consistent profit (blowing its past 3 quarterly earnings estimates out of the water).
In March, Tesla sold its millionth car, which took the company a little over 12 years to accomplish. Granted, a significant portion of those were sold in 2019, it is still only producing a small percentage of its US automotive cohorts’ volume. General Motors sells millions of cars per year, yet these automotive manufacturers are being valued at only a fraction of Tesla.
The reason is the immense growth opportunity of Tesla, with EVs only making up 3% of US car sales and only 5% of China vehicle sales (the largest EV market in the world). There is no question that global society is headed towards these more sustainable vehicles. The question is whether Tesla will be the driver of this nascent vehicle revolution?
Right now, Tesla has a 67% market share of US EV sales, and their new Model-3 “economy class” vehicles substantially broaden the firm’s consumer base. The latest Shanghai Gigafactory (and its continued product extensions) combined with the upcoming Berlin Gigafactory will provide Tesla with the global foothold it needs to take over the automotive world.
Every automotive business in the world has an electric or hybrid vehicle on the market or at least in development. The competition in this segment is beyond compare. The world’s automotive leaders do not want to lose their long-held grip of the vehicle market to this young Silicon Valley tech company.
Even within the tech segment, there is emerging competition. EV start-up, Nikola, is already being valued at the same market cap as Ford, without selling a single yet. Despite Nikola shanghaiing Tesla’s name, investors seemingly have an enormous amount of optimism about the future of the business.
Should We Be Buyers?
I believe that Tesla’s shares are overvalued, considering the level of growing competition and market uncertainty. I would love to own more TSLA, but I am not purchasing the stock at its current unsustainable price level. I am looking for these shares to fall closer to the $500-$600 range before I would consider buying more.
I think that TSLA stock is hanging by a thread. Investors have priced in what appears to be the enterprise’s absolute best-case scenario. I don’t think it will take much for the overdrawn hype around this stock to die down and realism to be priced back into these shares.
If I had substantial exposure to TSLA, I might think about pulling some profits off the table. I am still bullish about this revolutionary tech company’s long-term potential, but uncertainty remains high.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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