For Immediate Release
Chicago, IL – July 12, 2019 – Zacks Equity Research Penumbra PEN as the Bull of the Day, Lovesac LOVE as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Netflix NFLX, NBCUniversal CMCSA and Amazon AMZN.
Here is a synopsis of all five stocks:
Bull of the Day:
Avis Budget Group, a leading global car rental company, has positioned itself as a buy. It’s Penumbra is a $5.9 billion medical device company focused on minimally-invasive instruments for neurovascular and peripheral vascular diseases.
The company leverages its expertise in catheter-based technology to develop access devices for treating strokes, aneurysms, deep vein thrombosis, pulmonary embolism, and other patient events caused by blood clots.
Penumbra takes its name from the shadow-like effect in pathology and anatomy where the area surrounding an ischemic event such as thrombotic or embolic stroke can become dark. Immediately following the event, blood flow and therefore oxygen transport is reduced locally, leading to hypoxia of the cells near the location of the original insult.
Penumbra technologies use proprietary aspiration catheters, tubes and other instruments to essentially vacuum blood clots out of the brain, in the case of stroke.
Based in Alameda, CA, Penumbra sells its products to hospitals and clinics primarily through its direct sales organization in the United States, most of Europe, Canada and Australia, and through distributors in select international markets.
I last wrote about PEN as the Bull of the Day in May after another stellar earnings report launched shares out of the April-May doldrums near $125. Making new all-time highs this week above $170, I thought it would be good to revisit the story ahead of their second-quarter report in early August.
Strong Q1 Results Affirm the Growth Story
On May 7, Penumbra delivered a 77% earnings beat for Q1 2019 with non-GAAP EPS of $0.23 per share vs. the Zacks Consensus Estimate of $0.13 per share. This compares to earnings of $0.06 per share a year ago.
The company also beat on the topline with Q1 revenue of $128.4 million vs. the consensus of $123 million. This represented a year-over-year increase of 25.1%, or 27.2% on a constant currency basis.
Revenues were split 64% for the US and 36% international for the quarter. Neuro products sales grew to $81.5 million, an increase of 14.1%, or 16.5% on a constant currency basis from the year ago quarter.
Vascular products sales grew to $47.0 million, an increase of 50.2%, or 51.8% on a constant currency basis.
Gross profit was $83.9 million, or 65.3% of total revenue, compared to $66.6 million, or 64.8% of total revenue, for Q1 2018.
Total operating expenses were $72.8 million, or 56.6% of total revenue. This compares to total operating expenses of $62.5 million, or 60.9% of total revenue, for Q1 2018.
PEN management also guided to the high end of their revenue range of $525 to $535 million for 2019.
Bear of the Day:
Lovesacis a $400 million furniture company that IPO'd a year ago in June in the $20s, soared to $45 this May, and then dropped after a 40% Q1 FY20 earnings miss and disappointing outlook.
Offering a unique modular system for couches and sectionals that they call "Sactionals," the company claims their brand of furniture "can give you that first day feeling, every day."
Here's how they describe their trademark product, The World's Most Adaptable Couch™...
"Sactionals provide all-around comfort and peace of mind that other couches can’t. Because they can adapt to most spaces and styles, and can forever look like new, Sactionals are a smart investment."
Sounds great. But the stock may not be such a great investment right now despite strong projected sales growth of 46% to $242 million this year.
After the quarterly report, consensus among 3 covering analysts contributing EPS estimates to the Zacks Rank dropped from a loss of 16 cents for this year to -$0.63. This large swing in estimates is what put LOVE back into the cellar of the Zacks Rank.
Based in Stamford, Connecticut, The Lovesac Company is a direct-to-consumer specialty furniture brand with 68 retail showrooms supporting its ecommerce delivery model and whose name comes from its original Durafoam filled beanbags called Sacs.
The company derives a majority of its current sales from its proprietary platform called Sactionals, a washable, changeable, reconfigurable, and FedEx-shippable solution for large upholstered seating.
Founder and CEO, Shawn Nelson’s, “Designed for Life” philosophy emphasizes sustainable products that are built to last a lifetime and designed to evolve with the customer’s needs, providing long-term utility and ultimately reducing the amount of furniture discarded into landfills.
While the growth opportunity here may be visible to many analysts, with next year's sales expected to cross $300 million, the profit outlook is very volatile right now.
There may be a time to make a seat for Lovesac in a retail-focused portfolio but it's better to wait for the estimates to stabilize and start heading back up. The Zacks Rank will let you know.
Buy Netflix (NFLX) Stock Before Q2 Earnings, Ahead of Streaming Fight?
Shares of Netflix have tracked the S&P 500 over the last six months after they skyrocketed to start 2019. Now, with the streaming giant set to face a market full of entertainment heavyweights, let’s look at what to expect from its upcoming Q2 financial results to see investors should buy NFLX or stay away.
Just a few weeks after news broke that NBCUniversal grabbed the domestic streaming rights for The Office from Netflix for its yet-to-be-launched streaming service, WarnerMedia announced Tuesday that Friends will leave the streaming platform in 2020. Both hit sitcoms are set to play key roles for their respective platforms just as they did for Netflix, which could be part of a much more worrisome problem.
The Office is currently Netflix’s No. 1 show, according to Nielsen data. In fact, eight of the 10 shows that U.S. subscribers spent the most time watching last year were reruns, including Friends. Overall, library programming, which includes TV reruns licensed from other studios, accounted for 72% of total viewing minutes.
Netflix clearly knew that companies would pull their content and start their own services. This is why Reed Hastings’firm has spent billions of dollars on its own original content in recent years.
Netflix’s head start helped it amass 148.86 million paid streaming memberships. This staggering figure marked 25% growth—for the fifth straight quarter—from Q1 2018. It is also worth noting that some of Netflix’s original programming has been well received and critically acclaimed. But the company’s ability to create its own The Office-style shows, which keep users hooked for hours, seems paramount going forward.
Netflix’s standard plan currently costs $12.99 per month, with its four-screen premium offering at $15.99. Amazon Prime ($12.99/month) is currently said to claim roughly 100 million subscribers, even though it’s not clear how many people utilize the Prime Video service, and not just the shipping deals. Hulu (ad-free version $11.99)—now controlled by Disney—has also grown recently and last posted 28 million users.
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