Michael Kors, Sally Beauty and Tesla highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – August 15, 2018 – Zacks Equity Research highlights Michael Kors Holdings KORS as the Bull of the Day, Sally Beauty Holdings SBH asthe Bear of the Day. In addition, Zacks Equity Research provides analysis onTesla TSLA.
Here is a synopsis of all three stocks:
Bull of the Day:
One positive symptom of a strong consumer economy—which we should have, given the nature of the labor market and recent tax cuts—is growing interest in luxury brands, and when investors can spot such a trend, opportunity becomes evident. I believe that is exactly what we have right now with Michael Kors Holdings.
Michael Kors is a global accessories, footwear, and apparel company. It offers two primary collections: the Michael Kors luxury collection and the MICHAEL by Michael Kors line, an affordably luxury brand. Michael Kors also acquired Jimmy Choo, a luxury shoes and handbags maker, last year.
Last week, Michael Kors reported its 13th consecutive earnings beat, notching quarterly profits of $1.32 per share which crushed the Zacks Consensus Estimate of 94 cents and improved 65% from the prior-year period. Meanwhile, the luxury brand reported revenue of $1.20 billion, beating our consensus estimate of $1.14 billion and surging more than 26% year over year.
The company cited robust performance in its Michael Kors and Jimmy Choo brands as key catalysts for its great quarter. Adjusted gross margin expanded 230 basis points due to higher MK Wholesale gross margins, while Jimmy Choo contributed 40 basis points to overall gross margin.
These strong results led Michael Kors to raise its earnings and revenue guidance for the remainder of its fiscal 2019, although management predicted some headwinds for the current quarter.
Bear of the Day:
There are plenty of interesting investing opportunities in the world of specialty retail as traditional brick-and-mortar stores continue to adapt to changing consumer habits. However, not all specialty retail plays are made the same, and it looks like Sally Beauty Holdings (SBH) is a stock to avoid right now.
Sally Beauty is a specialty retailer and distributor of professional beauty products. It operates over 4,000 stores worldwide and distributes recognizable brands like Clairol, L’Oreal, Well, and Conair.
Shares of Sally Beauty have declined over the past three months, underperforming the broader industry in that time. This is at least partially due to the company’s most recent earnings report, which included weak performance and guidance.
Earnings estimate revisions make up the foundation of the Zacks Rank, so this negative trend explains why Sally Beauty is sporting a Zacks Rank #5 (Strong Sell).
But there are likely at least a few other reasons to stay away from SBH right now. Notably, the stock has been seemingly allergic to long periods of positive momentum over the past five years, with most short-lived surges looking more like dead cat bounces than sustained rebounds. This implies that even the most bullish investors have been unable to pull this stock off its lows.
Moreover, Sally Beauty’s extended woes speak to a larger and potentially disastrous situation in the retail business: consumer dissonance. Consumer-driven industries like cosmetics and apparel are dependent on cyclical trends, and companies need leadership that can identify and cash in on those trends. The fact that Sally Beauty has been trending downward for many years says that the company does not have this type of leadership.
Additional content:
So, What the Heck Is Happening at Tesla?
On today’s episode of the Tech Talk Tuesday podcast, Ryan McQueeney attempts to recap a busy last week of news for electric car giant Tesla (TSLA), providing a full timeline and some forward-looking speculation on Elon Musk’s shocking proposal to take the company private.
One week ago, Elon Musk stunned investors by tweeting out his considerations related to taking Tesla private at $420 per share. Among other things, Musk’s tweet implied that funding to execute such a deal had already been secured and that current Tesla investors would have choices to continue participating in the ownership of the private entity.
Musk was quickly forced to follow up his tweets with an official blog post providing more details about the plan, which raised even more questions about his motivation to seek out a go-private deal—especially as reports that the Saudi sovereign wealth fund had built a sizeable stake in Tesla were breaking at the same time.
A day later, the Tesla board said that Musk had pitched the deal to them about a week prior, confirming—at the very least—that the polarizing chief executive was not making things up entirely on the spot.
This week, the plot got thicker as Musk confirmed his implication that go-private funding had been secured was, in fact, based on continued conversations with the Saudis. We also learned this week that Tesla has put together a three-person committee to study Musk’s plan.
Simply put, this has the potential to be Wall Street’s biggest story of the year, with a go-private deal of this magnitude being almost unprecedented and Musk’s chosen means of revealing the proposal being rather unconventional.
On today’s Tech Talk Tuesday, the host recaps this timeline and touches on why Musk’s unconventional methods of informing the public have landed him a fresh SEC probe. Ryan also speculates as to whether or not this deal can actually get done and debates the chances that this is all an intentional distraction by Musk.
Make sure to check out the show to hear more!
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