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Tesla, Eldorado Resorts, Dick's Sporting Goods, Gaming and Leisure Properties and Target highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research

For Immediate Release

Chicago, IL – December 10, 2019 – Zacks Equity Research Shares of Tesla TSLA as the Bull of the Day, Eldorado Resorts Inc ERI asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Dick’s Sporting Goods DKS, Gaming and Leisure Properties GLPI and Target TGT.

Here is a synopsis of all five stocks:

Bull of the Day:

A lot of things seem to be going Elon Musk’s way lately. His recent victory in a defamation lawsuit filed against him by a rescue diver that he insulted on Twitter was a personal matter and really had nothing to do with his role as CEO of today’s Bull of the Day – Tesla, but he was able to seamlessly blend his personal and public personas recently when he drove a prototype of Tesla’s upcoming CyberTruck out to dinner at a hip LA restaurant.

As the old adage goes: "Any press is good press."

For a company that spends exactly zero on advertising, Tesla gets a great deal of free publicity, largely from the exploits of its charismatic leader. Getting extensive paparazzi coverage while celebrities fawn over your latest innovation is the kind of free advertising that ordinary companies can only dream of.

Even when the attention has a negative aspect – like the infamous broken windows on the CyberTruck at its unveiling in November – it splashes Tesla’s name and product images all over the news. The window issue will certainly be remedied (probably to an extreme degree, knowing Musk), but the extensive media coverage was simply more free advertising.

Isolated – and some would argue, inevitable – accidents involving Tesla vehicles being operated in auto-pilot mode even end up bolstering the company’s reputation. It’s all in the spin. Those news stories make the public aware just how close Tesla is getting to true autonomous driving.

It’s more than free advertising that’s going right for Tesla lately, however. Impressive sales of existing products, aggressive expansion efforts that will allow the company to manufacture and sell its autos and batteries in Europe and Asia and a stable of exciting future products have made Tesla one of the hottest stocks of 2019, with the shares nearly doubling in price since the beginning of June.

The rally was already developing when Tesla turned in a blowout Q3 earnings report in October. Expected to post a modest loss of ($0.15)/share for the quarter, Tesla instead posted a positive net of $1.86/share on $6.3B in revenue.

The company reported capital expenditures of $385 million during the quarter, down from $510M in the third quarter of 2018. Free cash flow was $371 million and cash and equivalents on the balance sheet grew to $5.3 billion, largely extinguishing fears that the company would have to tap the debt markets at unfavorable rates or engage in a dilutive equity offering to raise the cash to fund near-term operations.

There was a lot more to like in the investor presentation following the earnings release. Tesla sold 97,000 cars in the Q3, displaying still-strong demand for its most affordable variant – the Model 3. That car now starts at a retail price of just $39,500, which is a bit higher than the $35K selling price that the company targeted when the project was unveiled in 2016, but still well within the reach of the average new car customer.

Musk reiterated that Tesla is on track to deliver close to 400,000 vehicles in 2019, which is still far fewer than huge manufacturers like Ford – which sold 2.5M cars in 2018 – but still signifies that Tesla has evolved from a niche automaker to a true mass-market brand.

That Tesla sales number also promises to keep growing. Only 600,000 of Ford’s sales were passenger cars, while 867K were SUVs and 1.12M were pickup trucks – two categories at which Tesla is taking dead aim. Musk reported that the company would begin selling the affordable Model Y SUV in the summer of 2020 – 6 months sooner than previously expected, and at better gross margins than existing models.

The recent debut of the CyberTruck prototype promises an all-electric full size competitor to the best-selling Ford F-150 that will be in production by late 2021. Tesla received 250,000 pre-orders for the truck during the first weekend after the unveiling event, 41% of which were for the high end tri-motor variant that’s expected to sell for almost $70K. The more basic single-motor rear-wheel drive truck will start at $39K.

The Bull of the Day is generally a Zacks #1 Rank (Strong Buy) stock and Tesla is currently a Zacks Rank #2 (Buy). That rank has recently come up after a slew of analyst upgrades and positive earnings revisions. Since the Q3 report, the consensus estimate for Q4 rose from ($0.28) to $0.90/share, full-year 2019 rose from ($3.00) to ($0.50)/share and 2020 estimates went from $4.86 to $5.73/share.

It’s considered a foregone conclusion that fully electric vehicles will some day supplant gasoline powered cars, but it was far from clear that Tesla would survive to lead that revolution to fruition.

Make no mistake about it, recent results suggest that other aspirants in the electric auto market are going to have to keep chasing Tesla for the foreseeable future.

Bear of the Day:

Gaming stocks have had a rough of late with occupancies and gambler visits sliding. Anyone who has visited the US gambling mecca of Las Vegas recently can attest that pure gambling activity has taken a backseat to other entertainment options there. There are more shopping, dining and live entertainment options than ever and the casino is no longer the focus of the multi-billion dollar resorts that are being built.

It’s actually an incredible success story for Las Vegas casino operators. Gambling was once legal only in the state of Nevada (and a small part of New Jersey) and Las Vegas had a monopoly as the go-to destination for serious gamblers. Profits soared.

Over the past 20 years however, many states have made various forms of wagering legal and the average American can drive to a casino to bet their money much more easily than they can book a flight to “sin city.”

While overall commercial gaming revenues in the US hit an all-time high of $41.7 billion in 2018, the proliferation of gambling venues all over the country means the pie is being split more ways than ever and smaller operators are seeing a reduction in gambling profits, often after having made expensive investments.

The slowdown is evident in a string of mostly poor results from Eldorado Resorts Inc, the operator of 26 unique properties in 12 US states. Gambling revenues are the main source of revenues at the properties, while accommodations, restaurants, entertainment and other amenities are utilized to attract gaming customers.

(That same heavy focus on gambling used to be the dominant model in Las Vegas as well, but resorts there now make significant profits on lodging, food and beverage and other attractions rather than basically giving them away.)

Eldorado’s casinos are primarily in smaller markets adjacent to urban centers and nine of its casinos were acquired during an M&A binge in 2018. The total cost was just a hair over $1.2B. In fact, all but 7 of Eldorado’s properties were acquired in the past two years. That also means that total debt at the company increased from $800M at the end of 2016 to $3.26B at the end of 2018.

In 2019, Eldorado announced a deal in which they will purchase Caesars Entertainment in a bid to compete with larger Las Vegas operations like Wynn Resort (WYNN) and Las Vegas Sands (LVS). Caesars emerged from Chapter 11 bankruptcy just two years ago after its own struggles in the new era of gambling.

The cash and stock deal is worth approximately $17B including Eldorado’s assumption of Caesar’s $8.8B in debt.

The deal is expected to close early in 2020.

Eldorado also has a long history of missing the Zacks Consensus Earnings Estimate, shown in the Price, Consensus and Surprise chart below as red arrows. ERI shares took a big hit in the second half of 2018, shedding half their value. They recovered in 2019 despite several earnings misses, but the recent rally looks to be in jeopardy.

Recent downward earnings revisions for full-year 2019 and 2020 earn Eldorado Resorts a Zacks Rank #5 (Strong Sell). The Caesar’s deal adds so much debt to the ERI balance sheet that their ability to compete in the competitive gaming space is being seriously questioned by analysts.

Additional content:

3 Income Stocks to Consider as Jobs Data Bolsters Stock Market

The stock market rallied Friday as the strong jobs data sent the Dow up over 330 points and the S&P 500 climbed 0.91%.

The S&P 500 came into the session down 0.7% for the week, but Friday’s strong gains helped the index recover those losses. The Dow entered Friday down about 1% on the week and ended down only about 1% after Friday’s session.

The better-than-expected jobs growth illustrates a strong economic picture for the US and equities. The current health of the market adds to the value of owning dividend-paying stocks that can bolster the already strong returns stocks have put out this year.

Dick’s Sporting Goodsis a stock that is coming off a hot third quarter performance where it saw its net sales grow 5.6% and its earnings jump over 33% Y/Y. In addition to its stellar top and bottom-line performance, Dick’s comp sales rose an impressive 6% and e-commerce sales surged 13%.

The company has launched initiatives to improve its consumer experience such as the HitTrax Batting Cages, which allows Dick’s customers to try out a specific bat in the batting cage and see their performance metrics on the screen.

Dick’s pays out a quarterly dividend with a solid yield of 2.4%, which can add to the stock’s 48% YTD return. Its solid dividend payout is also paired with a 0.62 beta ratio that can help anchor a portfolio in turbulent times. Our estimates for the current fiscal year call for sales to grow 3.21% to $8.71 billion and for earnings to climb 10.8% to $3.59 per share. DKS stock is listed as a Zacks Rank #1 (Strong Buy) right now.

Gaming and Leisure Propertiesis a REIT that can be a safer addition than betting on traditional casinos, which are more dependent on the health of the broader economy. The company started as an offshoot of Penn National Gaming, but it has become a favorite REIT for regional casino companies to tap when they need financing.

The strength of the current economy makes this REIT an even more enticing addition. As casinos cash in on the heath of the current economy, so does this REIT as it sells more real estate to the buoyant casinos.

Gaming and Leisure Properties pays out a dividend with a robust 6.44% yield. GLPI stock has climbed over 31% in 2019 and outperformed the broader real estate market’s 22% run. The company is also coming off a solid third quarter, with its shares up over 5% since its report. Our fiscal 2019 estimates project earnings to rally 8.2% to $3.44 per share and for sales to gain 9.2% to $1.15 billion. GLPI stock has seen its earnings estimates revised higher helping the stock hold a Zacks Rank #1 (Strong Buy).

Targetis a solid move to consider as the holiday season ramps up. The retailer has had a tremendous year with its shares soaring over 89%. The company captivated Wall Street again with its third quarter performance, where its digital sales continued their robust gains.

This year has fewer days between Black Friday and Christmas, which makes Target’s services like one hour in-store pickup perfect for rushing consumers. This particular feature also yields higher margins for Target as it leverages existing stores rather than utilizing a capital-intensive logistics network. Target’s Shipt acquisition should also drive Target’s digital sales this quarter as it provides consumers same day delivery for $9.99 per order.

The Shipt acquisition has proved fruitful as sales volume fulfilled by Shipt saw 100% growth in the third quarter. In addition to all the things Target currently has going for it, the company pays a dividend with a healthy 2.12% yield. Our estimates for the vital Q4 forecast sales to jump 4.2% to $23.95 billion and for earnings to climb 11.1% to $1.70 per share. Target’s earnings estimates have been revised higher, earning TGT stock a Zacks Rank #1 (Strong Buy).

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Eldorado Resorts, Inc. (ERI) : Free Stock Analysis Report
 
Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
Target Corporation (TGT) : Free Stock Analysis Report
 
DICK'S Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
 
Gaming and Leisure Properties, Inc. (GLPI) : Free Stock Analysis Report
 
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