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Ralph Lauren and Avis Budget Group have been highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – February 20, 2024 – Zacks Equity Research shares Ralph Lauren RL as the Bull of the Day and Avis Budget Group CAR as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Uber Technologies UBER, Shopify SHOP and Zscaler ZS.

Here is a synopsis of all five stocks.

Bull of the Day:

Ralph Lauren is a Zacks Rank #1 (Strong Buy) that is a major designer, marketer, and distributor of premium lifestyle products. The company offers apparel, including a range of men's, women's, and children's clothing

The stock has rallied after an impressive earnings beat and a positive outlook.

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After struggling for more than a decade, the stock is close to all-time highs. The question for investors is if they should get in now or wait for a better entry point.

About the Company

Ralph Lauren was founded in 1967 and is headquartered in New York, NY. The company has about 15,000 full-time employees and has a market cap of $12 billion.

The company possesses a strong portfolio of globally recognized brand names such as Polo Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren Collection, Double RL, Lauren Ralph Lauren, Polo Golf Ralph Lauren, Ralph Lauren Golf, RLX Ralph Lauren, Polo Ralph Lauren Children, Chaps, Club Monaco and American Living.

The stock has a Zacks Style Score of “A” in Growth and “A” in Momentum. It sports a Style Score of “C in Value, with a Forward PE of 17. The company also pays a small dividend of 1.6%.

Q3 Earnings Beat

Earlier In February, Ralph Lauren reported Q3 EPS at $4.17 v $3.53 expected, or an 18% surprise to the upside. Revenues came in at $1.93B v the $1.86B expected.

The company affirmed FY24 guidance but raised gross margins to +140-180bps v the +120-170bps prior. Management credited margin improvement to reduced freight costs, favorable channel and geographic mix, and continued growth in AUR more than offsetting product cost inflation.

Analyst Estimates

Since earnings, analysts have been aggressively hiking their numbers. Over the last 30 days earnings estimates for RL have been going higher for all time frames.

For the current quarter, analysts have lifted estimates from $1.50 to $1.62, or 8%.

Looking at the current year, estimates have gone from $9.43 to $10.11 or 7%

Analysts expect the momentum next year to continue. Over the last 30 days, estimates have been hiked by 6%.

Price targets are also going higher with UBS recently lifting its price target from $190 to $240.

The Technicals

The stock is up 25% since reporting EPS, so investors might hesitate to chase RL higher.

If the stock pulls back, watch the 21-day MA, which is currently at $155. The 200-day MA is at $125 and the 50-day is $147.

Looking at the chart back to 2013, the stock was seeing resistance at $150, which is the 61.8% Fibonacci retracement drawn from 2013 highs to COVID lows. Since that level has broken, investors can target the 161.8% extension, which is $275. This would imply a move of 50% higher.

Bottom Line

Retail seems to be back and with Ralph Lauren finding success in managing costs, the company is more profitable. This is great news for investors and the technical break of the $150 level signals the bull run has just begun.

Bear of the Day:

Avis Budget Group is a Zacks Rank #5 (Strong Sell) that provides car and truck rentals, car sharing, and ancillary products and services to businesses and consumers.

The company is a leading global provider of mobility solutions through its three most recognized brands — Avis, Budget, and Zipcar.

The stock took a tumble after an earnings report and took out 2023 lows. Investors should avoid buying this dip until the earnings momentum turns.

About the Company

Avis Budget was founded in 1946 and is headquartered in Parsippany, NJ. The company has approximately 24,500 employees working across 10,250 rental locations in over 180 countries.

CAR is valued at $4.4 billion and has a Forward PE of 6. The stock holds Zacks Style Scores of “A” in Value, and “B” in both Momentum and Growth. The company pays no dividend.

Q4 Earnings

Adjusted earnings of $7.1 per share beat the consensus estimate by 62.8% but this was down 32.1% year over year. Total revenues of $2.76 billion missed the consensus estimate by 1.3%, which was slightly below last year's figures.

The stock was sold on the Q1 EBITDA miss and the company’s bearish expectations for higher depreciation expense in 2024.

The company is looking to aggressively de-fleet to improve utilization levels, but used vehicle values have dropped. This is going to make for a tough 2024 for investors.

Since earnings, the stock has fallen from the $170 mark to $115, a drop of 30%.

Earnings Estimates

Earnings estimates have plunged since earnings as analysts try to factor in the depreciation factor.

Over the last 7 days, the current quarter estimates have fallen from $0.90 to a negative $0.67. For the current year, estimates have dropped from $24.74 to $21.67, a drop of 12%.

Next year things do get better, with estimates dropping from $22.88 to $21.95.

Technical Take

Avis went wild during the “Meme Stock” days, but fell off a cliff like the rest of the hot names from 2021. Since then, the stock has traded sideways in a 100-point range.

The recent move lower takes out the lows of that range. So anybody that bought over the last two years is out of the money. This likely takes some time to digest and investors that are interested in this name should wait for lower prices.

In Summary

The one thing CAR has working for it is a very low PE at 6. This will bring in some buyers, but there is no rush to get into this name as it is a 2025 business due to the depreciation factor.

Additional content:

Uber Stock Skyrockets on Inaugural Buyback Announcement

Shares of Uber Technologies performed exceedingly well on Feb 14, ending the trading session at $79.15 per share, up 14.73% from Feb 13’s closing price. The uptick followed management’s announcement that it would be buying back stock for the first time in its history, thereby rewarding its shareholders.

The board of directors of the ride hailing company authorized up to $7 billion in share repurchases. The decision to buyback its own stock suggests that the board believes shares are currently undervalued. Per chief financial officer, Prashanth Mahendra-Rajah, UBER will first use the buyback plan to offset its stock-based compensation.

When a company buys back its own stock, it retires those shares, thereby causing a reduction in total number of shares outstanding. This implies that the denominator of earnings per share is decreased, thereby boosting the bottom line.

Price Performance

Shares of UBER, which was recently added to the S&P500 index, have risen 47.2% in the past three months, outperforming S&P 500’s 10.6% growth.

The company recently reported strong fourth-quarter 2023 results as the ride share market improves from pandemic lows.

Zacks Rank & Other Key Picks

UBER currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the same industry may also consider some other top-ranked stocks like Shopify and Zscaler.

Shopify has outshined the Zacks Consensus Estimate in each of the past four quarters, the average beat being 82%. Shopify’s focus on developing merchant base, international expansion, addition of fulfillment network functionalities, rich partner ecosystem and mobile focus are key growth drivers. The growth in e-commerce spending bodes well for Shopify.

Zscaler has also outpaced the Zacks Consensus Estimate in each of the past four quarters, the average beat being 27.3%. Zscaler is benefiting from the rising demand for cyber-security solutions due to the slew of data breaches. The increasing demand for privileged access security on digital transformation and cloud-migration strategies is a key growth driver.

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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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Avis Budget Group, Inc. (CAR) : Free Stock Analysis Report

Ralph Lauren Corporation (RL) : Free Stock Analysis Report

Shopify Inc. (SHOP) : Free Stock Analysis Report

Zscaler, Inc. (ZS) : Free Stock Analysis Report

Uber Technologies, Inc. (UBER) : Free Stock Analysis Report

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