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ODP Corp, RealReal, Boeing, Lowe's and NVIDIA highlighted as Zacks Bull and Bear of the Day

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Zacks Equity Research
·9 min read
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For Immediate Release

Chicago, IL – November 19, 2020 – Zacks Equity Research Shares of The ODP Corporation ODP as the Bull of the Day, The RealReal, Inc. REAL as the Bear of the Day. In addition, Zacks Equity Research provides analysis on The Boeing Company BA, Lowe's Companies, Inc. LOW and NVIDIA Corporation NVDA.

Here is a synopsis of all five stocks:

Bull of the Day:

Office Depot, now known as The ODP Corporation, is one of the leading providers of business services, products and digital workplace technology solutions around the globe. On July 1, the company went through a reorganization, and created a holding company to help organize all of its various businesses.

Q3 Earnings Impress

Earlier this month, ODP soared after the company reported better-than-expected third quarter earnings results.

Revenue of $2.5 billion fell 9% year-over-year but improved 18% quarter-over-quarter, while sales in its retail segment down only 3%, showing how consumer spending is continuing to rebound.

This top-line performance helped ODP generate bottom-line profits. GAAP net income hit $57 million, surpassing analyst expectations.

The company’s e-commerce channel performed strongly as well, up 20% and approaching over $1.2 billion in sales on an annual run-rate basis.

Investors were also impressed by ODP’s liquidity. Free cash flow soared 64% over the prior-year period to $295 million.

“Our improved results reflect the continued focus on our low cost model and the positive dynamics of our ecosystem, which combines our diverse routes to market with an expanded product portfolio and flexible supply chain capabilities, meeting the needs of businesses and consumers alike,” said CEO Gerry Smith.

ODP Breaks Out

Since March 23, shares of Office Depot have climbed over 70%. Estimates have been rising too, and ODP is a Zacks Rank #1 (Strong Buy) right now.

For the current fiscal year, one analyst has revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from $3.47 per share to $4.55 per share. Earnings are expected to grow about 11% compared to the prior year, and in 2021, ODP’s bottom line should continue double-digit year-over-year growth.

Beyond the near-term setback that’s Covid-19, ODP and its management team are determined to build on recent momentum. And while the company did not provide guidance for the fourth quarter at the time of the Q3 earnings release, ODP is planning on giving an outlook update at its upcoming Investor Day event.

ODP has also resumed its share buyback program now that its retail business is stabilizing and profitability has returned; it still has $130 million in authorization before 2021’s end.

If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep ODP on your shortlist.

Bear of the Day:

Based in San Francisco, The RealReal Inc. is an online marketplace for consigned luxury goods. It offers many kinds of resale product categories, like women’s, men’s, and kid’s clothing and accessories; jewelry and watches; and home and art goods.

Shares Sink After Q3 Earnings

REAL lost as much as 13.5% after the high-end consignment retailer reported third quarter earnings results.

Total revenue fell 4% year-over-year to $78.1 million but did improve 16% sequentially, while consignment and service revenue fell 7% year-over-year.

GAAP loss per share was $0.49 compared to a loss of $0.30 in the prior-year quarter.

Gross merchandise volume (GMV) dropped 3% compared to Q3 2019, and GMV from repeat buyers was 82.9%. Average order value grew 2% to $446.

The company ended the quarter with $395.2 million in cash, cash equivalents, and short-term investments.

“We are laser focused on making the operational changes and strategic investments that will position us to emerge from COVID a stronger, more agile company prepared to capitalize on the significant luxury resale market opportunity in front of us,” said CEO Julie Wainwright.

Bottom Line

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

Six analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 15 cents to a loss of $1.59 per share; earnings, however, are still expected to grow over 12% for the current fiscal year.

Shares are actually up since the March lows, rising about 75%, which is more than the S&P 500’s rebound during the same time frame.

Even though shares have run up over the past few months, The RealReal will still have a hard road ahead of it, especially as coronavirus cases are on the rise once again and the company is one of the few online retailers that hasn’t experienced a sales boost related to the pandemic.

It’s hard to say exactly what’s the key issue with The RealReal’s business, but it could be as simple as consumers just aren’t interested in buying resale luxury products right now.

The good news for the company is that there will likely be broad immunization available next year against the coronavirus. Once things get back to “normal,” the desire for luxury consignment may return.

Additional content:

Market Nosedive into Wednesday Close; NVDA Beats Easily

Market indexes nosedived into Wednesday’s close after spending all morning trading in the green. The good news had to do with Boeing’s 737 MAX returning to the air; the downturn came on New York City’s announcement that its public schools will temporarily close on a rise in Covid-19 infections. Both the Dow and S&P 500 came in 1.16% lower on the day, with the Nasdaq down 0.82% and the Russell 2000 pulling up the rear, -1.26%, after achieving yet another record high intra-day.

The major thrust of the pandemic in the U.S. came when New York City and the tri-state area blossomed back in March and April of this year, with a higher percentage of fatalities from the coronavirus as healthcare professionals found out on the fly which treatments and methods worked best. This was before Covid-19 had reached most regions in the U.S.; the West Coast saw the coronavirus imported from China while New York saw its cases come in from Europe. With a 7-day positivity rate of 3%, this has mandated Big Apple schools shutting down, which will likely hamper the local economy in and around the country’s largest school system.

As markets had returned to all-time highs in the past few trading sessions, there looks to be a ceiling in place currently. There is still lots of resistance in the transfer of presidential power from President Trump to President-Elect Biden, with a lack of stimulus from Congress adding challenges for households and small businesses once again hurt by lack of business during this second- (third?-) wave of Covid-19. Meanwhile, the pandemic rages onward, with 170K new cases in the U.S. last Saturday alone. More than a quarter of a million Americans have now perished from the disease.

All 11 sectors of the S&P 500 finished in the red, led by stocks either hit hard by new pandemic realities or from recent earnings reports investors find problematic. Lowe’s falls into this latter category, down 8% on the day following an earnings and sales beat in its Q3 report, but with disappointing guidance on earnings and comps for Q4.

One company suffering no such hindrances is NVIDIA, which reported Q3 results after the bell Wednesday: earnings of $2.91 per share easily toppled the $2.57 in the Zacks consensus, with $4.73 billion in revenues up 57% year over year, blasting past the estimated $4.42 billion. The chipmaker put up record sales in its Gaming sector, $2.3 billion, while Data Center’s $1.9 billion was up a whopping 162% from the year-ago quarter. Shares were up modestly on the news, but NVIDIA has already gained 200% since its March lows, +128% year to date.

Questions or comments about this article and/or its author? Click here>>

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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
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