For Immediate Release
Chicago, IL – October 5, 2018 – Zacks Equity Research highlights Roche Holding RHHBY as the Bull of the Day, YY Inc. YY as the Bear of the Day. In addition, Zacks Equity Research provides analysis on eBay EBAY and PayPal PYPL.
Here is a synopsis of all four stocks:
Bull of the Day:
Roche Holding(RHHBY), the $200 billion Swiss pharma giant, became a Zacks #1 Rank recently after analysts raised EPS estimates to 15% growth following the company's July first-half 2018 report.
Roche delivered first-half sales of CHF 28.11 billion, representing 7% growth in constant-currency (the USD/CHF exchange rate is currently close to par). Projected full-year 2018 sales of USD 57.63 billion represents 16.2% growth.
The Pharma segment raked in CHF 21.85 billion, while Diagnostics contributed CHF 6.26B.
While US analyst coverage is sparse for Roche, and the half-year reporting periods probably don't make it any easier, I wanted to write about Roche for 3 reasons...
1. The company has 3 of the top-ten selling pharmaceuticals in the world, all cancer drugs.
2. This week, the Nobel prize in medicine was awarded to scientists who made key discoveries about how cancer tricks our immune systems and how researchers could fight back. Immuno-therapy, as the emerging field is called, is an area that Roche is aggressively moving into as their top legacy drugs see sales growth declines due to biosimilar competition.
3. Roche made two unique acquisitions this year that caught my eye and show their commitment to advance genomic R&D.
Bear of the Day:
It's not news to most investors that Chinese stocks are caught in a nasty downtrend, and today's Bear of the Day is another great example why.
YY Inc.is a $5 billion Internet communications and content company specializing in social media, gaming, user-generated video and entertainment. They recently completed a spin-off and IPO of their very successful e-sports franchise Huya, of which they still own a significant stake.
But the growth outlook is another story and the stock is off 48% from its all time high near $142. Despite projections for 31.7% revenue growth this year and 24% next year to top $2.8 billion, YY has seen its EPS estimates drop sharply in the past few months.
Current full-year estimates for the bottom line fell from $8.22 to $7.53. And next year slid from $9.58 to $8.89.
I watched this deterioration in the growth outlook as it occurred because I actually held YY shares and had to let them go when the stock became a Zacks #4 Rank (Sell) in early August and broke its April lows near $88.
The Zacks Rank saved me a lot more pain, as you can see the shares are over 15% lower since then.
YY seems like an Internet value trading under 10X forward EPS estimates and growing sales 25-30%, with hundreds of millions of active users. But in addition to the bear market for most Chinese stocks and indexes, new Internet regulations from the Chinese government continue to hamper expansion and investment.
So YY becomes another great lesson in being careful to avoid what looks like a bargain when an entire country's stock market is under siege.
Many Chinese stocks will indeed be valuable bargains some day as they serve and capitalize on the largest middle class on the planet.
But the time is not yet here to sift through the wreckage. The Zacks Rank will let you know.
Which Is Better: eBay or PayPal Stock?
Shares of eBay and PayPal have underperformed the market over the last six months, with PYPL stock down marginally and eBay slumped over 12%. Yet both firms look like they could be headed in the right direction based on strong growth projections.
Overview & Recent News
PayPal officially spun off from eBay in 2015. Today, the fintech company boasts 244 million active account holders from 200 markets. Meanwhile, eBay’s active buyer base jumped by 4% last quarter to 175 million. Investors should also note that PayPal is no longer eBay’s go-to payment processor. The e-commerce firm announced the move earlier this year, saying it makes eBay more competitive with Amazon.
PayPal, like rival Square has expanded to become much more than a payment processor. The firm’s peer-to-peer payment app Venmo is widely popular. The company has also made a series of acquisitions to help it become a more complete fintech platform. This includes its June purchase of Hyperwallet for roughly $400 million to help it expand its global payout capabilities.
PayPal also acquired fraud prevention and risk management firm Simility and its $2.2 billion purchase of small business commerce platform iZettle was completed last month. Looking ahead, PayPal wants to become more of a one-stop shop for merchants, while it also fights off the likes of Apple and Google Pay.
Meanwhile, eBay has tried to rebrand itself in the age of Amazon—which it just sent a cease-and-desist letter to citing alleged recruiting practice violations—away from what some thought of as online garage sale. The firm has pushed to stand out as a place to buy on-trend items from fashion to toys.
Stock Performance & Valuation
Moving on, investors will see that shares of PYPL have soared while EBAY has sputtered. With that said, PayPal has cooled down recently, up roughly 27% over the last 12 months. This still outpaces the S&P 500’s 15% climb. eBay, on the other hand, has plummeted 17% during this stretch.
eBay is currently trading at 16.2X forward 12-month Zacks Consensus EPS, which marks a massive discount compared to PayPal’s 42.2X. Plus, eBay is trading well below its year-long high of 25.4X and rests at its one-year low. PYPL is trading above its 12-month low of 38.6X.
Outlook & Earnings Trends
Looking ahead, PayPal’s Q3 revenues are projected to jump by 13.3% to hit $3.67 billion, based on our current Zacks Consensus Estimate. PYPL’s fiscal year revenues are expected to reach $15.44 billion, which would mark a roughly 18% climb.
PayPal has also earned eight upward earnings estimate revisions for fiscal 2019 over the last 60 days, against just zero downward changes.
eBay’s Q3 revenues are expected to reach $2.66 billion, which would represent a 10.5% jump from the year-ago period. The e-commerce firm’s full-year revenues are projected to climb by over 13% to $10.82 billion.
At the other end of the income statement, eBay’s adjusted quarterly earnings are projected to pop by 14.6% to $0.55 per share, while its fiscal year EPS figure is projected to expand by 15%. The company has also seen some positive upward earnings estimate revisions for its current quarter, current year, and the following fiscal year over the last seven days.
PayPal and eBay are both currently Zacks Rank #2 (Buy) stocks based on their recent upward earnings revision trends. Both companies also currently look poised to grow both their top and bottom lines at similar rates. However, PayPal seems like it might be a better long-term buy as the fintech industry looks poised to become much more important, while eBay’s platform is more easily replicated.
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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