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Rocket Companies, Carter's, DICKS Sporting Goods, Hibbett Sports and Tapestry highlighted as Zacks Bull and Bear of the Day

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Zacks Equity Research
·12 min read
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For Immediate Release

Chicago, IL – March 8, 2021 – Zacks Equity Research Shares of Rocket Companies, Inc. RKT as the Bull of the Day, Carter’s, Inc. CRI as the Bear of the Day. In addition, Zacks Equity Research provides analysis on DICKS Sporting Goods, Inc. DKS, Hibbett Sports, Inc. HIBB and Tapestry, Inc. TPR.

Here is a synopsis of all five stocks:

Bull of the Day:

Rocket Companies is a Zacks #1 (Strong Buy) that consists of personal finance and consumer service brands. Some popular segments include Rocket Mortgage, Rocket Homes, Rocket Auto and Rocket Loans.  

The company recently saw a solid Q4 earnings report that led to an uptick in the stock. Then the Wall Street Bets crew noticed the short interest, which caused a massive spike in the stock. Since the move higher, the stock has come down to previous levels, which is giving new investors a buying opportunity.

About the Company

Rocket is headquartered in Detroit, Michigan and was founded in 1985. The company has a team of 22,000 employees and its flagship company, Rocket Mortgage has consistently been named one of the "100 Best Companies to Work For" by Fortune magazine.  

Rocket has a market cap of about $53 billion and has Zacks Style Scores of "B" in Growth and "A" in Momentum. The Forward PE is 12 and the company typically offers no dividend.

Q4 Earnings

Rocket reported earnings in late February, seeing a 37% EPS beat to the upside. The company reported Q4 EPS at $1.14 v the $0.83 expected, while revenue came in at $4.8B v $3.84B expected. Adjusted EBITDA came in at 330% y/y, while closed loan originations volume was up 111% y/y.

The company also guided net rate lock volume, closed loan volume, gain on sale margins substantially higher than last year's numbers.

Moreover, the board declared a special dividend of $1.11 per share, payable to shareholders at the close of business on March 9th.

While the company has been around for a while, this was only the second earnings report as Rocket had its IPO back in August.

Estimates

Analysts are very excited about Rocket's potential to capture the $3.5T mortgage market.

Over the last 7 days, earnings estimates have jumped higher. For the next quarter, we have seen estimates raised by 19%, from $0.53 to $0.63. For the current year, we have seen a 13% move higher in that same time frame.

Wall Street Bets and Short Interest

On March 2nd, a Wall Street Bets post started some buying in the stock that got out of hand. The stock was already moving higher, but the stigma of WSB coming in forced a surge on new buys to follow the trade, which forced a short squeeze.

The stock went from $25 to $43 that day, but quickly fell back to the $25 level on the recent market sell off. According to S3 partners, the short interest has actually grown to almost $1B as some shorts decided to double down.

The Technicals

Since the post-IPO sell off, the stock was stuck around the $20 level. The recent earnings report changed all that and we got the break out and short squeeze above $40. The stock fell all the way back to $23.50, which is just above the 21-day moving average.  The 50-day, which is slightly above $21.50, has been the magnet all year for the stock.

If we do get another squeeze to the upside, watch out for the $35 level for resistance.

Bottom Line

Rocket is in a good position to gain market share in the mortgage market. Recent turbulence in the treasury markets stopped the short squeeze in its tracks. But investors should watch for another attempt in the coming months, as the bulls aren't done yet.

Longer-term, the company needs to continue the growth it saw over the last year to maintain a higher stock price. A special dividend brings investors in, but more importantly will be the company's ability to shake up the traditional mortgage world.

Bear of the Day:

Carters is a Zacks Rank #5 (Strong Sell) that is the largest marketer of branded apparel and related products for babies and young children. With the exception of a few outliers, the stock had traded sideways since 2015. So, after a disappointing quarter, investors are questioning if they should stick with the stock.

More About Carters

If you have a child, you know the brands in Carter's stores. Oshkosh B'gosh, Just One You, Child of Mine, Skip Hope and Simple Joys are some of the names the stores sell.

The company is headquartered in Atlanta, GA and was founded in 1865. Carters is valued around $3.5 Billion and has Zacks Style Scores of "A" in Value and "A" in Growth, and "B" in Value.

While fundamentally the company typically does well, the most recent quarter was concerning and forced the stock lower by over 10%.

Q4 Earnings

On February 26th Carter's reported Q4 EPS, seeing a 16% miss. Revenues also came in below expectations and the company guided Q1 at $0.25 v the $0.72 expected. Carter's also sees FY21 below expectations and sees revenues up only 5% on the year.

Some bad numbers came on the report, which was attributed to low foot traffic and supply chain disruptions. Retail sales were off 10%, US Wholesale sales off 17% and international sales were off 13%.

Estimates

Analyst dropped estimates after the earnings report, which likely caused the drop in the Zacks Rank. For the current quarter, the last 7 days have seen a fall in estimates from $0.72 to $0.26. For the current year, estimates have dropped from $6.67 to $4.68 over the same time period.

While these fall in estimates might spell disaster for a tech company, it's out of the ordinary for Carters. Despite the miss, most analysts maintained their buy on the stock. But while investors aren't giving up on the name, is likely isn't worthy of your portfolio until there is a positive move in the charts.  

The Technicals

CRI has been stuck in a 20-point range for six years. There was a move to all-time highs at $129 back in 2018, but outside that and the March 2020 sell off, the stock has chopped between $80 and $100 since 2015.

Some investors might want to buy the bottom of this range, but until the stock gets back above the 200-day at $87.50 the bears have control. Even if the stock did manage higher, the 21-day is falling and the 50-day is at $94.

When you look at this sideways action, there really isn't any motivation to put money to work here. The stock needs a catalyst and after the recent earnings report, it might be a while.

In Summary

Investors should give the stock and the company some time to turn the momentum. While the company has a great niche that makes it stand out vs other retailers, COVID and some underlying issues are disrupting Carter's consistency.

Additional content:

E-Commerce Continues to Boost Retail Sales: Stocks to Buy

An increasing number of Americans have been shopping online, thanks to the pandemic that has changed the way people have shopped and transacted so long. This has also seen manufacturers increasingly shifting their focus to e-commerce. According to MastercardSpending Pulse, retail sales increased year over year in February, driven significantly by e-commerce.

In fact, e-commerce has been saving the retail sector all throughthe pandemic and will continue to play a major role in the long term, as people have finally realized the convenience of shopping online. So much so that e-commerce is generating maximum revenues for most retail manufacturers, as people are still skeptical about visiting physical stores.

Online Boosts Retail Sales

According to MastercardSpending Pulse, U.S. retail sales jumped a solid 4.6% on a year-over-year basis in February. Online sales grew 54.7% year over year. The grocery sector grew 12.4% year over year. Moreover, shopping surged during Valentine's Day week. Spending on jewelry increased 5.9% year over year during the month and online spending on jewelry saw a jump of 63%.

Although apparel sales were still 5.3% down year over year in February, shopping continued to shift online. Online apparel sales grew 47.3% year over year in February. Of all the apparel purchased in February, 73.9% were done online. Furniture and furnishings sales surged 8.6%.

E-Commerce Proving Its Dominance

Last year marked yet another landmark for e-commerce which has been giving stiff competition to the brick-and-mortar stores. The pandemic has made people stay at home and shop online. This has also seen retailers going for a digital transition.

Another big change has been the growing popularity of curbside pickup, thanks again to the pandemic. The concept of BOPIS (Buy Online Pick-Up in Store) gained popularity and is likely to be a preferred choice for millions given the convenience and safety it offers.

Interestingly, February's gains came despite inclement weather, which saw massive power outages. Although this somewhat hampered online shopping, sales soared.

Our Choices

New cases of COVID-19 have somewhat been on the decline and three vaccines are already in the markets. Nonetheless, online shopping will continue to be a safe bet for millions given its safety and convenience. This is thus the right opportunity to invest in retail stocks that have a strong online presence.

DICKS Sporting Goods operates as a major omni-channel sporting goods retailer, offering athletic shoes, apparel, accessories, and a broad selection of outdoor and athletic equipment such as for team sports, fitness, camping, fishing, tennis, golf and water sports.

The company's expected earnings growth rate for the current year is 58%. The Zacks Consensus Estimate for current-year earnings improved 0.3% over the past 60 days. DICKS Sporting carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Hibbett Sports typically caters to small counties with a population ranging from 25,000-75,000 with a merchandise assortment focused on footwear, athletic equipment and apparel.

The company's expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 5.4% over the past 60 days. Hibbett Sports has a Zacks Rank #1.

Tapestry is the designer and marketer of fine accessories and gifts for women and men in the United States and internationally. The company offers lifestyle products, which include handbags, women's and men's accessories, footwear, jewelry, seasonal apparel collections, sunwear, travel bags, fragrance and watches.

The company's expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 13.3% over the past 60 days. Tapestry carries a Zacks Rank #2.

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DICKS Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
 
Hibbett Sports, Inc. (HIBB) : Free Stock Analysis Report
 
Carters, Inc. (CRI) : Free Stock Analysis Report
 
Rocket Companies, Inc. (RKT) : Free Stock Analysis Report
 
Tapestry, Inc. (TPR) : Free Stock Analysis Report
 
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