Yahoo Finance Spotify Technology and Camping World have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 3, 2024 – Zacks Equity Research shares Spotify Technology SPOT as the Bull of the Day and Camping World Holdings CWH as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Alphabet's GOOGL, Amazon AMZN and Disney DIS.
Here is a synopsis of all five stocks:
Bull of the Day:
Spotify Technology is a Zacks Rank #1 (Strong Buy) that provides audio streaming services worldwide. The Company offers commercial-free music and ad-supported services to subscribers.
The stock had a big year for investors in 2023, up over 130% on the year. The gains came despite missing earnings in three out of the last four quarters.
The optimism recently gained momentum after an earnings beat that was followed by a cut to the workforce. This combination was applauded by both investors and analysts as the stock rallied to levels not seen since early 2022.
About the Company
Spotify was incorporated in 2006 and is headquartered in Stockholm, Sweden. The company employs over 9,000 people and has a market cap of $36 billion.
Spotify operates through two segments, Premium and Ad-Supported. The Premium segment offers unlimited online and offline streaming access to its catalog of music and podcasts without commercial breaks to its subscribers. The Ad-Supported segment provides on-demand online access to its catalog of music and unlimited online access to the catalog of podcasts to its subscribers on their computers, tablets, and compatible mobile devices.
The stock has a Zacks Style Score of "A" in Growth and "C" in Momentum. The company has a Forward PE of 77 and has a score of "C" in Value.
Q3 Earnings Beat and Job Cuts
In late October, SPOT reported Q3 EPS at €0.33 v -€0.20e, along with a revenue miss at €3.36B v €3.42Be. While the top line did not impress, the bottom line was a big surprise as lower marketing spend and personnel costs dropped.
The combination of raising subscription plan pricing and lower costs was a tailwind for the quarter. Premium subs were 226M v the 220M last year and Total Monthly Active Users (MAU) came in at 574M v the 566M expected.
Spotify guided Q4 revenues and Total MAU higher. They see premium subscribers coming in at 235M.
Investors responded positively to the quarter, taking the stock up by almost 10%.
About a month after the earnings report, the stock was trading at 2023 highs when the company announced another round of job cuts. This time the layoffs were very aggressive, with 17% of the workforce being cut.
The stock jumped another 10% as investors were pleased with the restructuring efforts to make the company more profitable. The stock moved over the $200 level, a mark it had not seen since January of 2022.
Analyst Estimates
After earnings, analysts started taking earnings estimates higher, and price targets were lifted as well. But as of late, we have seen a big shift in the short-term outlook due to the charges incurred by the workforce reductions.
Looking at the current quarter, estimates have gone from $0.35 to -0.08 over the last month. This accounts for the €130-145M in expected charges in Q4 due to the job cuts.
For next quarter, we get a better idea of how the numbers will move positively for Spotify. Over the last 30 days, estimates have gone from $0.23 to $0.52, a jump of 126%.
The current year's estimates show a dip as well, but looking at the longer term, analysts are lifting estimates aggressively.
Over the last 90 days, analysts have taken next year's numbers from $0.64 to $2.42, or 278% higher.
While these numbers might be reflected in last year's move in Spotify stock price, analysts see room to go higher.
Since the job cut announcement, KeyBanc reiterated its Overweight and raised its price target to $255 from $210. Morgan Stanely has an Overweight as well, with targets being lifted to $230 from $200. Pivotal Research raised to a Buy and has a $265 target on the name.
The Technicals
SPOT is well off its all-time high at $387. The stock fell to a low of $69 back in late 2022, so the bulls have made some progress with the stock recently printing $200.
For those looking for an entry, the 50-day MA is $180 and the 200-day MA is $156. However, the stock might not retrace given Wall Street's bullish tone. A move back over the $200 level likely brings an upside move near the $220 area.
Bottom Line
Spotify has taken investors on a roller coaster ride over the last couple of years. However, the fundamental story has finally taken shape and there is a vision for a more profitable company.
Investors should be looking for entry points on any dip lower and can expect 2024 to be a solid year with less volatility in the name.
Bear of the Day:
Camping World Holdings is a Zacks Rank #5 (Strong Sell) that is a provider of services, protection plans, products, and resources for recreational vehicle enthusiasts. It offers new and used RVs for sale, vehicle service, and maintenance through retail locations and membership clubs.
The stock has rallied nicely over the last couple of months, but investors might want to consider taking profits as earnings estimates drift lower.
About the Company
Camping World was founded in 1966 and is headquartered in Lincolnshire, Illinois. The company employs about 13,000 people and serves customers through dealerships, and online and e-commerce platforms.
The company operates in two segments, Good Sam Services and Plans; and RV and Outdoor Retail.
CWH is valued at $2.2 billion and has a Forward PE of 20. The stock holds Zacks Style Scores of “A” in Momentum and Value. The stock pays a dividend of 2%.
Q3 Earnings
Camping World reported earnings in November, seeing $0.39 v the $0.15 expected. Revenue also came in slightly above expectations and same-store revenue was up 10.9% y/y.
Management was excited about being in “The final stages of clearing our inventory going into 2024”. While this caused margin compression, management is optimistic revenue and earnings to increase year over year.
However, analysts do not seem to be convinced yet as estimates continue to trend lower
Earnings Estimates
Over the last 90 days, earnings estimates have fallen from -$0.31 to -$0.49. For the next quarter, they have fallen from $0.24 to $0.02 over that same time frame.
For the current year, estimates have dropped from $0.77 to $0.69, or 10% over the last 90 days.
Next year does not look any better, despite management's optimistic view. Over the last 60 days, earnings estimates have dropped from $1.61 to $1.29, a move lower of 20%.
While earnings looked good, the forward-looking view from analysts is not aligned with this view. Considering the 60% move higher in the stock since EPS, investors might want to take advantage of the rally.
Technical Take
The move higher in the stock over the last two months has been very impressive, with CWH moving off the 2023 lows at $16 to $28 in late December.
While there has been a small pullback, the stock is still above all its major moving averages and looks strong from the technical perspective.
Investors should be cautious if the 21-day MA at $25.50. A break below that spot should bring the price to the 200-day moving average at $24. A further pullback to the $22 halfway back level could be justified on a broad market sell-off.
In Summary
While Camping World is starting to fix some of the inventory issues, analysts are still doubting the company’s ability to improve earnings growth. Considering the big move higher in the stock, investors should be in profit-taking mode.
Additional content:
Alphabet (GOOGL) Boosts Sports Streaming with NFL Price Cut
Alphabet's Google is making solid initiatives to strengthen YouTube TV offerings. Its deepening focus on boosting its sports content on YouTube is a plus.
Its continuous efforts to discount the NFL Sunday Ticket on YouTube TV remain noteworthy. NFL Sunday Ticket is a package that provides access to out-of-market NFL games to YouTube TV subscribers and general YouTube users.
Recently, the company slashed the NFL Sunday Ticket price to $39 for the rest of the 23/24 NFL regular season. It excludes anything beyond the regular season, such as playoffs.
Along with the NFL RedZone postgame coverage, the price is $44.
The latest price cut follows the first such incident, which happened in November 2023 when Google discounted the NFL Sunday Ticket to $174.
These price cuts are pretty steep compared with the original price of $349, which came on top of the subscription price of YouTube TV.
Alphabet's Prospects
With the discounting strategy, Google will be able to attract more subscribers to YouTube TV, which will boost its viewer base.
This, in turn, will contribute well to GOOGL's Other revenues, consisting of Google Play and YouTube non-advertising revenues, which will ultimately drive growth in Alphabet's Google services' revenues in the upcoming period.
Strengthening the Google Services segment is expected to benefit GOOGL's overall performance in the days ahead.
Google Services contributes the most to total revenues and has been Alphabet's primary growth driver. Shares of the company have gained 56.7% over a year, outperforming the S&P 500 index's rally of 25.2%.
The Zacks Consensus Estimate for 2024 revenues is pegged at $283.39 billion, indicating growth of 11.3% year over year. The figure excludes the effect of Google's traffic acquisition costs.
The consensus mark for 2024 earnings is pinned at $6.74 per share, indicating growth of 15.6% year over year. The figure moved north by 0.7% in the past 30 days.
Alphabet presently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Competitive Scenario
With the NFL Sunday Ticket, Google remains well-poised to penetrate the booming sports streaming space.
Per data from GROWTH Market Reports, the global online live video sports streaming market is expected to reach $101.2 billion by 2031, witnessing a CAGR of 24.8% between 2023 and 2031.
Given the upbeat scenario, Alphabet and other companies, including Amazon and Disney, are some noteworthy players in this promising market.
Amazon recently revealed leveraging artificial intelligence and machine learning techniques to improve the streaming of Thursday Night Football (TNF) of NFL on Prime Video.
In this regard, the company came up with TNF's weekly alternate stream called Prime Vision, which shows various graphics on the screen during the game to allow viewers to see real-time stats and analysis.
The e-commerce giant introduced new features like defensive alerts, Prime Targets, Fourth Down Territory, Field Goal Target Zones and Key Plays, designed to enable fans to dive deeper into the game analytics.
On the other hand, Disney's focus on sports streaming, particularly Live Sports, remains noteworthy. For instance, ESPN+ streams tournaments like the UFC Lightweight Championship, Major League Baseball, the National Hockey League, Major League Soccer, Grand Slam tennis, Italy's Serie A soccer and live sporting events, original shows, series and documentaries.
Meanwhile, Peacock, owned by NBCUniversal, a subsidiary of Comcast, streams games under the Sunday Night Football package and Premier League Soccer.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
The Walt Disney Company (DIS) : Free Stock Analysis Report
Camping World (CWH) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
Spotify Technology (SPOT) : Free Stock Analysis Report
