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Everi, Franklin Electric, Tesla, General Motors and Fiat Chrysler highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research

For Immediate Release

Chicago, IL – February 21, 2020 – Zacks Equity Research Shares of Everi Holdings EVRI as the Bull of the Day, Franklin Electric FELE asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Tesla TSLA, General Motors GM and Fiat Chrysler FCAU.

Here is a synopsis of all five stocks:

Bull of the Day:

When the market is in beast mode, like it has been over the last couple weeks, everyone looks like a rock star. Fundamentals don’t really matter when a huge surge is taking stocks up to all-time highs every day. Speaking from experience, this too shall pass. That means, eventually, the cream will rise to the top while garbage stocks will feel the pain. One way to make sure you’re not hurting when the music stops is to lean on the strength of the Zacks Rank. It helps uncover stocks with strong earnings trends, not likely to run out of steam when the market gives back a few bucks. 

Today’s Bull of the Day is Zacks Rank #1 (Strong Buy) Everi Holdings. 

Everi Holdings Inc. provides technology solutions for the casino gaming industry in the United States, Europe, Canada, the Caribbean, Central America, and Asia. The company operates in two segments, Games and FinTech. It offers gaming products, such as classic mechanical reel games, video reel games, core HDX, Empire MPX and the Texan HDX, wide area progressive games, and slot tournament systems; and sells player terminals, licenses, back office systems, and other related equipment. The company also provides Cash access services; Casino Cash Plus 3-in-1 ATM, a cash-dispensing machine that enables ATM cash withdrawals, POS debit card cash access transactions, and credit card cash access transactions; check verification and warranty services; CashClub that provides gaming establishments with a single dashboard interface to streamline credit and debit card cash access transaction processing and check warranty transactions; fully integrated kiosks that provide multiple functions to the casino floor; and other integrated kiosk solutions

The reason for the favorable Zacks Rank lies in the series of earnings estimate revisions coming in to the upside. Over the last sixty days, analysts have increased their earnings estimates for both the current quarter and the current year. The bullish sentiment has pushed up our Zacks Consensus Estimate for the current quarter from 7 cents to 8 cents, while the current year number is up from 34 cent to 35 cents. At the same time, next year’s number is up from 53 cents to 58 cents.

Bear of the Day:

The market is red hot. That may trap some investors into buying anything and everything. That is probably the worst thing to do now. The fact is, with the market at all-time highs, the risk is the highest for long-term investors. The reason being, when the whole market rallies, most stocks go up to. It can lead you into a false sense of security. Now is the time when investors should be the most cautious, relying on solid earnings trends to lead them to long-term profits. 

Today’s Bear of the Day is a stock with a negative earnings trend that should make long-term investors a bit nervous. I’m talking about Zacks Rank #5 (Strong Sell) Franklin Electric. 

Franklin Electric Co., Inc., together with its subsidiaries, designs, manufactures, and distributes water and fuel pumping systems worldwide. It operates in three segments: Water Systems, Fueling Systems, and Distribution.

The reason for the negative Zacks Rank is the series of negative earnings estimates coming from analysts. Over the last thirty days, four analysts have cut their earnings estimates for the current year. That bearish sentiment has dropped our Zacks Consensus Estimate for the current year from $2.39 to $2.29. It has also helped underpin a negative trend for the stock price, upsetting many long-term investors. 

Investors looking for other stocks in the Manufacturing – Electronics industry have a few other stocks to research despite the industry being in the Bottom 42% of our Zacks Industry Rank.

Additional content:

Is There More Spark in Tesla?

Tesla shares have surged 66% over the past month taking its valuation above that of General Motors, Volkswagen and Fiat Chrysler combined. Shorts are also at a one-year low of 15% (according to S3 data) as easy liquidity increased momentum in a stock that has seen a steady flow of positive news, including several upgrades and price target increases from sell-side analysts.

And despite the soaring prices, the eccentric CEO Elon Musk (and foremost Tesla bull out there) increased his stake to 34.1 million shares or an 18.5% share of the company. And not one to pass up an opportunity, especially given the investments the company has scheduled to bring new models and factories online, he initiated another public share issue. Despite the resultant dilution, 2.65 million shares were lapped up and the deal's underwriters exercised in full the option to buy another 397,500 shares, netting $2.31 billion for the company.

So the big question on everyone’s minds is this: how much higher can it go?

Bernstein’s Toni Sacconaghi, seemed compelled to raise his price target to $730 from $325. While this is below current levels, the earlier target just doesn’t make sense any more. Especially given that the analyst believes Tesla’s addressable market will grow 30X over the next 20 years, so even if it loses half its market share, it will still grow 15X. He also sees additional opportunity in trucks, self-driving, battery technology and solar markets.

Speaking of trucks, the Cybertrucks Owners Club is saying that the Tesla vehicle has received 522,764 preorders, which seems unlikely given its strange-looking design and demo faux pas that left it with a cracked window. Neither Tesla nor Musk has confirmed these numbers. The last time Musk said anything about it was in November, when he said 250,000 preorders had been received.

“Investors feel much better about Tesla’s ability to be sustainably profitable; Model 3 demand remains healthy; [gross margins and operating expenditures] are both poised to materially improve... competition is sputtering; and product and production pipelines are robust,” says Sacconaghi. “We are skeptical that upside possibilities are likely to be expunged any time soon — suggesting no imminent negative catalysts for the stock.”

 “Notably, Tesla is the single fastest-growing large-cap tech stock today, and the scarcity of such a profile inevitably commands a premium, especially in this market,” he explains.

Piper Sandler’s Alexander Potter and Winnie Dong are even more optimistic, raising their one-year price target from $729 to $928 a share. They seemed impressed with their own experiment of installing a solar-based system to charge a Model X.

“It’s easy to forget that TSLA sells batteries and solar power products; after all, the segment was only 6% of sales in 2019,” they wrote in their note. “But management says that the solar+storage business will one day rival the automotive segment, and if this is true, then investors will eventually need to pay attention.”

Morgan Stanley analyst Adam Jonas raised his one-year price target to $1,200 on Tuesday, from the previous level of $650 a share as analyst calculations aren’t making sense anymore and the opportunity appears immense.

And that isn’t all. Seems some enthusiasts remembered Musk’s statement at the 2019 shareholder’s meeting that “It will not be long before we have a 400-mile range car.” Tesla has greater range than the competition anyway, but it’s been tweaking that with software improvements. Jason Hughes, a Tesla parts reseller while reverse engineering Tesla’s new battery management system (BMS) firmware has discovered that the new battery pack would bring a 400-mile range to some of its cars. Of course this means even more demand and so, more orders for the EV maker.

Conclusion

The sky seems to be the limit for Tesla now. But there’s obviously a risk to the shares given the almost bubble-like rally. That’s why we have a Zacks Rank #3 (Hold) rating on the shares now.

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General Motors Company (GM) : Free Stock Analysis Report
 
Franklin Electric Co., Inc. (FELE) : Free Stock Analysis Report
 
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Everi Holdings Inc. (EVRI) : Free Stock Analysis Report
 
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