Airbnb and Flower Foods have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 20, 2023 – Zacks Equity Research shares Airbnb ABNB as the Bull of the Day and Flower Foods FLO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on GIII Apparel GIII, Carnival CCL, and MGM Resorts International MGM.
Here is a synopsis of all five stocks.
Bull of the Day:
The time to strongly consider buying Airbnb stock again is upon us. Higher travel demand continues to boost the online vacation rental company with Airbnb stock landing a Zacks Rank #1 (Strong Buy) and the Bull of the Day.
Many travel-related companies are seeing their stocks move higher this earnings season with Delta Air Lines' second-quarter results leading the way so far. Delta was able to showcase robust quarterly growth on its way to beating top and bottom-line expectations.
The same scenario could be in the cards for Airbnb, whose stock recently touched a new 52-week high of $147.67 a share on Wednesday and has now soared +70% this year.
Strong Quarterly Growth
Higher highs could be around the corner for Airbnb stock leading up to its second-quarter report on Tuesday, August 1. Notably, Airbnb had a very strong first quarter that was highlighted by revenue growing 20% year over year to $1.81 billion with net income at $117 million, the company’s first profitable Q1 on a GAAP basis.
Before non-recurring items and to the delight of investors, Airbnb’s Q1 earnings soared to $0.18 per share compared to an adjusted EPS loss of -$0.03 in the prior-year quarter. This also blasted Q1 earnings expectations of $0.10 per share by 80% with ABNB shares continuing to move higher as the company’s outlook has strengthened.
It’s noteworthy that Airbnb has beaten earnings expectations for eight consecutive quarters with strong quarterly growth expected to continue. To that point, second-quarter sales are expected at $2.41 billion, up 14% from a year ago. Even better, Q2 earnings are projected to climb 39% to $0.78 per share compared to EPS of $0.56 in Q2 2022.
Growth & Outlook
Airbnb’s road to profitability has been exceptional since the company went public in 2020 and posted an adjusted loss of -$15.53 a share that year. At the moment Airbnb stock has an “A” Zacks Style Scores grade for Growth in addition to its Zacks Rank #1 (Strong Buy).
Intriguingly, Airbnb’s annual earnings are now forecasted to climb 26% in fiscal 2023 at $3.53 per share with 2022 EPS at $2.70. Plus, fiscal 2024 earnings are anticipated to jump another 16% to $4.10 per share.
On the top line, total sales are projected to rise 13% in FY23 and jump another 13% in FY24 to $10.75 billion. Fiscal 2024 sales projections would represent a very stellar 126% growth over the last five years with 2020 sales at $3.37 billion.
Bottom Line
Simply put, Airbnb’s growth trajectory is too impressive to overlook at the moment. Now appears to be an ideal time to buy Airbnb stock as we progress through the summer months and peak travel season. It would be no surprise if ABNB shares keep soaring with Q2 earnings approaching and strong quarterly growth expected to reconfirm the company’s attractive outlook.
Bear of the Day:
One stock investors may want to be cautious of at the moment isFlower Foods, which has a Zacks Rank #5 (Strong Sell) and lands the Bear of the Day.
There is a cautionary tale building for companies that produce or market higher-quality foods as margins are starting to drop on lower demand. Despite broader inflation beginning to ease, the inflationary environment is still challenging for these retailers and consumers continue to scale back on premium or specialty food consumption.
This leaves more downside risk ahead for Flower Foods stock as the company is a provider of high-quality baked items with brands that include Nature’s Own, Dave’s Killer Bread, and Tastykake.
United Natural Foods Warning
Investors may want to take heed of United Natural Foods' warning and its stocks' steep decline over the last few months.
United Natural Foods' stock has dropped -22% since June after the company stated its profitability was being impacted by a greater-than-expected decline in gross margins. This was attributed to a challenging operating and macroeconomic backdrop which contributed to lower inflationary benefits primarily related to reduced procurement gains, as well as higher shrinkage.
As a leading distributor of natural organic and specialty food products, United Natural Foods' earnings estimates have largely declined over the last quarter.
Flower Foods has also warned of inflationary pressures with CEO Ryals McMullian stating this led to a slow start to the year and lower-than-expected branded retail sales due to softer category demand.
Flower Foods' earnings are now expected to be down -5% this year but rebound and rise 7% in fiscal 2024 at $1.28 per share. However, earnings estimate revisions have also trended down for Flower Foods which could be a sign of more short-term pain ahead.
Performance Warning
Flower Foods stock hasn’t seen quite the decline as United Natural Foods stock this year but the downward trend in earnings estimate revisions is still worrisome considering the broader struggles for higher-quality food retailers.
It may not be wise to overlook Flower Foods stocks’ -14% drop this year with United Natural Foods stock dropping -48% which serves as a further warning as to where these stocks could be headed if their earnings pictures continue to weaken.
Bottom Line
For now, investors may want to stay on the sidelines in regards to investing in Flower Foods stock. The case for selling the stock has gained steam with the notion that shares of FLO may keep falling when looking at United Natural Foods' troubling performance this year.
Additional content:
3 Stocks to Gain as Consumers are Opening Up Their Wallets
Sales at U.S. retailers increased for the third successive month in June. Per the Commerce Department, spending at retail outlets rose 0.2% last month from May, way better than March and February’s negative readings.
Retail sales, excluding sales of cars and sales at gas stations, inched up 0.3% in June from May. Overall retail sales rose 1.5% year over year in June.
Retail sales were broad-based, with car dealers, furniture and electric stores, and clothing stores, to name a few, witnessing gains in June. In reality, retail sales inched forward last month as Americans opened up their wallets despite higher interest rates and concerns about an impending economic slump.
Consumers’ willingness to spend improved largely due to a healthy labor market, a rise in wages, and savings that they had amassed during the coronavirus pandemic. Price pressures have also eased at the moment, which bolstered consumer outlays.
Nonfarm payroll jobs have been added to the economy at a steady clip for quite some time now. Now, job additions in June may have been less than in May, but it’s still more than analysts’ estimate. The jobless rate, in the meantime, continues to hover below the 4%-mark, while average hourly earnings improved last month.
In June, the annual rate of inflation declined to its lowest level in more than two years. Prices of indispensable goods and services dropped for the 12th month in a row in June. In this day and age, price pressures have more than halved from the 40-year high it hit last year (read more: 5 Solid Stocks to Gain on Signs of Inflation Cooling Down).
What’s more, consumers are pretty confident about their welfare and are financially secure. For July, the preliminary reading of the University of Michigan’s consumer sentiment index came in at 72.6, way more than June’s reading of 64.4. The sentiment index has now touched its highest level since September 2021.
Consumers’ views on the present economic situation and future expectations also improved, a tell-tale sign that they are poised to spend further soon. Now, with consumer spending remaining resilient and household outlays set to improve, consumer discretionary stocks stand to gain. Needless to say, consumer spending plays a pivotal role in determining their revenues.
Stocks to Gain
We have, thus, selected three consumer discretionary stocks such as GIII Apparel Group, Carnival, and MGM Resorts International that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Such stocks also boast a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
GIII Apparel Group is a manufacturer, designer and distributor of apparel and accessories. GIII Apparel has a Zacks Rank #1 and a VGM Score of A.
The Zacks Consensus Estimate for GIII’s current-year earnings has moved up 9.6% over the past 60 days. The company’s expected earnings growth rate for the next year is 7%.
Carnival operates as a cruise and vacation company. Carnival has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for CCL’s current-year earnings has moved up 44.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 96.6% (read more: 2 Cruise Stocks Boosting the S&P 500 Rally in 1H 2023).
MGM Resorts International is a holding company and primarily owns and operates casino resorts through wholly owned subsidiaries. MGM Resorts has a Zacks Rank #1 and a VGM Score of B.
The Zacks Consensus Estimate for MGM’s current-year earnings has moved up 1.6% over the past 60 days. The company’s expected earnings growth rate for the next year is 20.8%.
Shares of GIII Apparel, Carnival and MGM Resorts International have gained 49.2%, 126.4%, and 48.8%, respectively, so far this year.
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Carnival Corporation (CCL) : Free Stock Analysis Report
MGM Resorts International (MGM) : Free Stock Analysis Report
Flowers Foods, Inc. (FLO) : Free Stock Analysis Report
G-III Apparel Group, LTD. (GIII) : Free Stock Analysis Report
Airbnb, Inc. (ABNB) : Free Stock Analysis Report
