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Chipotle Mexican Grill, Gap, Intevac, Adesto Technologies and Digital Turbine highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research

For Immediate Release

Chicago, IL – July 5, 2019 – Zacks Equity Research Chipotle Mexican Grill CMG as the Bull of the Day, Gap Inc. GPS asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Intevac, Inc. IVAC, Adesto Technologies Corp. IOTS and Digital Turbine, Inc. APPS.

Here is a synopsis of all five stocks:

Bull of the Day:

Chipotle Mexican Grill is a fast-casual restaurant chain known for their burritos, burrito bowls, and other Mexican-inspired menu options like tacos and quesadillas. The company is also known for their focus on fresh and organic ingredients. For instance, it sources its meat from producers that don’t give their animals antibiotics or growth hormones, and its beans and vegetables are organically grown.

Great Q1 Results

Chipotle’s great first quarter results helped cement that its big turnaround plan was working.

Earnings of $3.40 per share easily beat the Zacks Consensus Estimate, while revenues of $1.3 billion also beat our consensus estimate and jumped 13.9% year-over-year. Operating income also rose sharply, growing 19% from the prior-year period

Plus, comparable transactions were up 5.8%, which helped Chipotle report 9.9% comparable restaurant sales growth; this comps growth is the best Chipotle has seen in about four years.

The fast-casual chain expects more solid growth to continue in 2019, and management guided for a mid to high single-digit percentage rate increase in full year comparable sales.

CMG is On the Rise

Year-to-date, shares of Chipotle are up over 70% compared to the S&P 500’s gain of 20%.

Estimates have been rising lately too, pushing the stocks towards a Zacks Rank #1 (Strong Buy).

For the current fiscal year, the fast-casual giant’s earnings are expected to grow over 43% year-over-year. Two analysts have revised their estimates upwards in the past 60 days, and the Zacks Consensus Estimate has moved two cents higher from $12.99 to $13.01 during the same time frame.

2020 looks pretty strong too, and earnings could see year-over-year growth of nearly 30%; next year’s consensus estimate sits at $16.80 per share, with two upward revisions in the last 60 days.

What’s Next for Chipotle

Looking ahead, Chipotle is building on a few key strategies that will likely help their growth and performance down the line.

Just in Q1 alone, digital sales totaled $206 million and represented 15.7% of sales. And, digital sales soared 101% year-over-year. By relaunching a new website and capitalizing on online deliveries and third-party delivery platforms like Postmates, Chipotle is able to offset any waning store traffic.

The company recently added a new menu option, carne asada; the last protein addition was sofritas, which the company added back in 2013 (Chipotle removed chorizo from its menu in 2017 after just one year as a protein choice).

Chipotle is also expanding its beverage options and introducing new ovens that will help improve the quality of some of its other menu items, like its quesadilla and nachos.

Chipotle does report its Q2 earnings at the end of July, so earnings estimates and the Rank could be impacted by those results. But if you’re an investor looking for a food or restaurant stock to add to your portfolio, make sure to keep CMG on your shortlist.

Bear of the Day:

Gap Inc. is a global retailer that sells casual apparel, accessories, and shoes for men, women, and kids under three core brands: Gap, Old Navy and Banana Republic. The company also owns successful athleisure brands Athleta and Hill City, as well as Intermix, its luxe designer boutique chain.

Weak Q1 Earnings Hurt Shares

Earnings of 24 cents per share missed the Zacks Consensus Estimate of 31 cents per share and decreased 43% year-over-year. Total revenues of $3.7 billion also lagged behind our consensus estimate.

Comparable sales declined 4% from the prior-year period. Even Old Navy, which is the company’s strongest brand, posted a comps decline, while the Gap brand reported a 10% decrease.

There will likely be more struggles ahead. Management expects a low single-digit decline in full-year comparable sales, which is down from the previous outlook of flat to up slightly. The forecast for adjusted EPS was also reduced to between $2.05 and $2.15, down from $2.40 to $2.55.

"This quarter was extremely challenging, and we are not at all satisfied with our results," CEO Art Peck said in a press release. 

Gap shares were already under pressure before releasing its first quarter results; apparel stocks across the board got hit hard in May—as did the rest of the market—due to ongoing trade tensions; China and the U.S. implemented new tariffs that month that threatened retailers.

Falling Estimates

Analysts have since turned bearish on Gap, with 11 cutting estimates in the last 60 days for the current fiscal year. The Zacks Consensus Estimate has dropped 39 cents during that same time period from $2.46 to $2.07 per share; earnings could now see a roughly 20% year-over-year decline for fiscal 2020.

This sentiment has stretched into 2021, and our consensus estimate has dropped 39 cents in the past two months as well.

GPS is now a Zacks Rank #5 (Strong Sell).

Bottom Line

Going forward, Peck said that he is still confident in the company’s plan to make Old Navy and the other brands into two separate publicly traded companies next year. However, the popularity of online shopping and the slow decline away from mall-based retailers will likely still impact Gap and its brands down the line.

Additional content:

3 Tech Stocks Under $10 to Buy for July

At Zacks, we try to avoid labeling stocks as “cheap” or “expensive.” Instead, we opt to look beyond a stock’s face value, and our system puts an emphasis on earnings estimate revisions to find stocks that will hopefully be winners for investors.

With that said, low-priced stocks can still be attractive to investors as they present the chance to take a larger position in a company, which they might not be able to in higher-priced stocks. 

When searching for these low-priced stocks, we still look for similar trends in growth, value, and momentum. Then we apply the Zacks Rank to properly analyze the potential that these companies have. We are also aware of the latest sector trends and make sure to cover all of the hottest industries.

Today we’ve highlighted three stocks that fall into the broad “technology” sector that investors might want to consider as we start the second half of 2019. Each of these three stocks is currently trading for less than $10 a share and holds a Zacks Rank #1 (Strong Buy) or #2 (Buy) at the moment.

1. Intevac, Inc.

Prior Close: $4.56 USD

Intevac designs and develops high productivity, thin film processing systems. The Santa Clara, California-headquartered company also develops high-sensitivity digital sensors, cameras, and systems with a focus on the the defense industry. Investors should note that Intevac is the “sole source provider” of integrated digital imaging systems for most U.S. military night vision programs. IVAC is currently a Zacks Rank #2 (Buy), with a price/sales ratio of 1, which marks a discount compared to its industry’s 1.3 average.

Intevac also sports “A” grades for both Growth and Momentum in our Style Scores system. Looking ahead, our current Zacks Consensus Estimate calls for the company’s full year revenue to jump over 20% to $114.5 million. In a sign of continued top-line growth, IVAC’s is projected to see its revenue climb 16% higher than our current year estimate to reach $132.8 million in the following year. At the bottom end of the income statement, Intevac is projected to swing from a loss of $0.19 a share last year to +$0.03. Better still, IVAC’s adjusted EPS figure is expected to come in at $0.27 in the following year.

2. Adesto Technologies Corp.

Prior Close: $8.24 USD

Adesto provides application-specific semiconductors and embedded systems that help drive Internet of Things edge devices. Shares of IOTS have soared roughly 80% so far this year from $4.66 in early January to Wednesday’s opening price of $8.24 per share. This helps the firm outpace its industry’s 22% average climb. Adesto's price to sales ratio of 2.5 represents a significant discount against its industry’s 4.2 average. Like, Intevac, Adesto is also currently a Zacks Rank #2 (Buy), based, in large part, on its positive longer-term earnings estimate revision activity.

IOTS, which also sports a “B” grade for Momentum in our Style Scores system, is projected to see its quarterly revenue surge 65% to help lift its adjusted earnings from a loss of -$0.08 to -$0.04 per share. The company full-year revenue is expected to climb over 48% to $123.9 million, with adjusted EPS projected to jump 87%. Adesto has also crushed its quarterly earnings estimates in the trailing three periods by a 27% average.

3. Digital Turbine, Inc.

Prior Close: $5.11 USD

Digital Turbine operates in our Internet – Software industry and its business tries to connect OEMs, mobile operators, and publishers with advertisers and app developers. APPS stock has skyrocketed nearly 200% this year and 25% in the last month. The company posted better-than-projected fourth quarter fiscal 2019 earnings and revenue in early June, with Q4 revenue up roughly 29%. Digital Turbine is a Zacks Rank #2 (Buy) at the moment that rocks “A” grades for both Growth and Momentum. Despite its growth-focused profile, APPS’ price/sales ratio marks a discount compared to its industry at 4.03.

The Austin, Texas-based company is projected to see its Q1 fiscal 2020 revenue surge 28.4% to $28.39 million. Meanwhile, Digital Turbine’s adjusted first-quarter earnings are projected to swing from a loss of -$0.01 per share in the year-ago period to +$0.02. Peeking further down the road Digital Turbine’s fiscal 2020 EPS figure is projected to soar 62.5% to $0.13 a share on the back of 22% revenue growth.

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Intevac, Inc. (IVAC) : Free Stock Analysis Report
 
Digital Turbine, Inc. (APPS) : Free Stock Analysis Report
 
Adesto Technologies Corporation (IOTS) : Free Stock Analysis Report
 
The Gap, Inc. (GPS) : Free Stock Analysis Report
 
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
 
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