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Shopify, Columbia Sportswear, PayPal, Square and Visa highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – January 4, 2021 – Zacks Equity Research Shares of Shopify Inc. SHOP as the Bull of the Day, Columbia Sportswear Company COLM as the Bear of the Day. In addition, Zacks Equity Research provides analysis on PayPal Holdings, Inc. PYPL, Square, Inc. SQ and Visa Inc. V.

Here is a synopsis of all five stocks:

Bull of the Day:

Shopify was one of the big winners in 2020, as businesses raced to boost their online sales during the coronavirus to grow and, in many cases, survive. Investors who missed out on the ride last year shouldn’t be discouraged because the e-commerce age is just getting started.

Simple, Yet Powerful…

Shopify, which was founded over a decade ago, helps businesses build, maintain, and grow their e-commerce presence. SHOP makes money from recurring subscription fees and add-ons. The firm currently offers different tiers: one that is aimed at entrepreneurs, as well as small and medium businesses, with another geared to high volume merchants and big businesses.

The Ottawa, Canada-based company’s most basic package starts with a monthly fee of $29 for sellers and a 2.9% transaction fee. SHOP has also continued to partner with influential players within tech and retail from Facebook to Walmart.

Shopify’s revenue growth has been impressive, with 2019’s nearly 50% sales expansion its slowest since it went public in 2015. This helps showcase SHOP’s proven track record that had nothing to do with the pandemic shopping environment.

Shopify boasts that it helps power more than one million businesses around the world. Perhaps most importantly, the e-commerce market has miles of runway left. For instance, it accounted for roughly 14% of total U.S. retail sales in the third quarter of 2020, down from a record 16% in Q2. This is up from 11% in the year-ago period, but some might have expected the figure to be higher considering the near-perfect conditions to outperform during the coronavirus.

What’s Next?

SHOP has skyrocketed from around $30 in its early trading to its current price of roughly $1,140 a share. The nearby chart showcases that the e-commerce firm has blown by Amazon, Etsy, Target and its industry over the past three years. Shopify stock also surged 185% in 2020. This run might make some investors nervous that it has come too far too fast.

Yet, its 2020 climb was been less hyperbolic than Esty, Zoom Video (ZM), and other pandemic high-flyers. And the stock fell over 11% to end the year after it hit a new record high before Christmas. SHOP also trades at a 20% discount to its own year-long highs at 38X forward 12-months sales. That said, its valuation still screams growth stock, which it certainly is.

Wall Street is high on the stock because it’s coming off back-to-back quarters of 97% revenue expansion. Shopify’s Q3 gross payment volume also jumped 106%, with monthly recurring revenue up 47%. More recently, SHOP said that Black Friday/Cyber Monday weekend sales grew by 76%.

Peeking ahead, Zacks estimates call for SHOP’s adjusted Q4 earnings to soar 188% on 78% stronger sales. Overall, its fiscal 2020 revenue is projected to jump 80% to reach $2.85 billion, with its EPS expected to skyrocket from $0.30 all the way to $3.71 a share. This top-line growth would easily beat the 73%, 59%, and 47% sales expansion SHOP posted in the last three years, respectively.

As many might expect, 2020 will likely, and hopefully be a hard year to replicate, given the dramatic overnight shift and deeper push into e-commerce that many businesses already made. Still, Shopify’s growth is hardly over and even with the successful rollout of various coronavirus vaccines, people will still be shopping online, and many might have discovered the convenience for the first time. 

Shopify’s 2021 revenue is projected to climb over 30% or $860 million above our FY20 estimate to reach $3.71 billion. Meanwhile, its adjusted earnings are expected to slip slightly (-5%) from our FY20 estimate. SHOP’s earnings outlook has also continued to improve recently and it has destroyed our bottom-line estimates over the trailing four quarters.

Bottom Line

Shopify’s positive earnings revisions help it grab a Zacks Rank #1 (Strong Buy) right now, alongside its “B” grade for Momentum in our Style Scores system. Plus, 13 of the 27 brokerage recommendations Zacks has for SHOP come in at “Strong Buy” right now, which is more than at any point over the last three months, with 14 at a “Hold.”

Clearly, there could be more near-term selling as investors take home profits after Shopify’s stellar run. Nonetheless, those with a long-term investment horizon might consider SHOP as a bet on a surefire growth industry that is still in its early days. Simply put, most businesses, big and small, must move online in order to expand their reach and thrive. 

Bear of the Day:

Columbia Sportswear is an outdoor apparel firm that’s seen its sales fall over the last three quarters, including a 23% decline in Q3. The company’s near-term outlook also remains subdued and its earnings revisions continue to slide in the wrong direction.

COLM's Pitch

Columbia was founded in the late 1930s and has remained at the forefront of outdoor clothing, apparel, and footwear. Today, the Portland, Oregon-headquarter firm owns four total brands: Mountain Hardwear, Sorel, prAna, and, its namesake brand. Columbia is still by far the largest brand, having pulled in roughly 80% of total sales during the first three quarters of the year.

The outdoor gear company has been hit hard by temporary coronavirus-based store closures and a pullback on some consumer spending related to travel. For example, COLM’s Q1 sales fell 13%, with Q2 down 40%, and Q3 down 23%. Meanwhile, its adjusted earnings fell by 46% in the third quarter to fall short of our estimate by over 20%.

Columbia has also been forced to close some stores for good due to weak brick-and-mortar traffic. “We continue to evaluate our own store fleet and have made the decision to permanently close a small number of locations,” CEO Tim Boyle said on the company’s Q3 earnings call at the end of October.

“Year to date, we've permanently closed eight stores in the U.S. and one in Europe. We continue to evaluate our portfolio and anticipate closing additional underperforming stores.”

Better Days Ahead?

Columbia shares fell roughly 12% in 2020 and have lagged its industry over the past several years. The 2020 performance includes a substantial post Q3-release downturn. Luckily, things appear to be heading in the right direction, with Zacks estimates projecting COLM’s adjusted Q4 earnings to fall 27% on 9% lower sales, which would mark a solid improvement from last quarter.

Overall, its fiscal 2020 revenue is projected to sink 19% to $2.45 billion, with its adjusted earnings projected to fall 71%. The outdoor apparel firm’s sales and earnings are then expected to bounce back in a big way in 2021, although both figures are still projected to come in below 2019’s totals. And the company’s overall earnings picture is heading downhill.  

All that said, things haven’t been all bad for Columbia, especially considering the conditions. As some might expect, its e-commerce business has been a highlight, with its third-quarter e-commerce sales up 55%. And it continues to roll out new offerings that help it compete in a tough market.

Bottom Line

Columbia’s earnings revisions help it land a Zacks Rank #5 (Strong Sell) at the moment. COLM also holds “F” grades for Growth and Momentum and a “D” for Value in our Style Scores system. Therefore, it might be best to stay away from COLM stock for now.

Additional content: 

3 FinTech Stocks Looking Gain Big from Bitcoin's Rebound 

 

For cryptocurrencies, 2020 has been a banner year with blockchain technology-backed bitcoin seeing an astounding rally.  In fact, the world’s most popular cryptocurrency, bitcoin has roughly quadrupled in value in 2020 and has surged about 460% from the coronavirus low below $5,000 witnessed in March. The digital currency touched another all-time high of $28,599.99 on Dec 30.

It is worth mentioning here that the price of bitcoin crossed the $20,000-mark for the first time on Dec 16. It seems like the cryptocurrency is on track for its biggest monthly gain since May 2019 after adding around 47% since the start of this month. Moreover, according to industry website CoinMarketCap, bitcoin’s market capitalization has exceeded $518 billion (per a CNBC article). Considering the frenzy among investors, let’s look at the factors fueling the bitcoin rally.

Institutional Investors Showing Increasing Interest

Millions of funds coming from the institutional investors like big corporations and hedge fund managers are piling into bitcoins. The foray of these large players into the crypto market has created a belief that these currencies might soon become the primary payment method, per The Guardian article. PayPal has reportedly purchased about 70% of new bitcoins in circulation after recently introducing a crypto trading service on its platform that allows customers to trade up to $20,000 a week, as per a Cointelegraph article. According to Pantera Capital, a crypto investment firm, PayPal’s entry has resulted in the shortage in bitcoin supplies and hence, the price surge (as mentioned in the same Cointelegraph article).  

Square has also bought $50 million in bitcoin in October as part of larger investment in cryptocurrency. In fact, according to Pantera all of the newly-issued bitcoin are being purchased by PayPal and Cash App (per the Cointelegraph article). MicroStrategy, another public company, recently revealed that it has invested the entire $650 million of its debt issuance into 29,646 more bitcoin, per the sources. It now has 70,470 bitcoins worth more than $1.596 billion in its treasury reserve, per a YahooFinance article.

Guggenheim Investments has filed to reserve the right to invest as much as 10% of its $5.3 billion Macro Opportunities Fund in the Grayscale Bitcoin Trust, which invests only in bitcoin, per a Bloomberg article.

Weak U.S. Dollar

The coronavirus pandemic has caused weakness in world’s largest reserve currency, U.S. dollar and other major currencies. This weakness has resulted in a quest for alternative currency among investors for protection against inflation, per The Guardian article. Considering the current situation, when the U.S. economy is expected to recover on pillars like the Fed’s support, another round of fiscal stimulus and coronavirus vaccine rollout, the dollar is expected to remain weak and cryptocurrencies are predicted to take the spotlight.

Growing Popularity as ‘Digital Gold’

According to The Guardian report, bitcoin is generally seen as an alternative to the traditional safe-haven investment — gold. Some analysts are also expecting to see a tough competition between both assets in 2021. Commenting on it, Paolo Ardoino, the chief technology officer of the crypto exchange Bitfinex has said that “while a growing institutional presence has been part of the narrative of the current bull run, we may see increased retail interest in bitcoin as a form of digital gold,” per The Guardian article.

Fintech Stocks to Ride the Wave

Although the cryptocurrency market is highly volatile it seems that the prices are likely to remain high. In this regard, Scott Minerd of Guggenheim Investments has said that “our fundamental work shows that Bitcoin should be worth about $400,000. It’s based on the scarcity and relative valuation such as things like gold as a percentage of GDP. So you know, Bitcoin actually has a lot of the attributes of gold and at the same time has an unusual value in terms of transactions,” per a Bloomberg article.

The growing participation of traditional investment banks and fintech firms with an aim to add cryptocurrency to their products is creating investment opportunities.  Thus, we are highlighting three fintech stocks that are likely to gain from the impressive bitcoin resurgence.

As mentioned above, PayPal is a major bitcoin-related stock that deserves our attention. This leader in digital payment processes assists merchants to accept crypto payments via partnerships with three major bitcoin payment processors — BitPay, GoCoin and Coinbase. Further, the company recently launched a platform that enables its customers to buy, hold and sell cryptocurrency directly from their PayPal account.

Notably, this Zacks Rank #3 (Hold) company announced its intentions to enable cryptocurrency as a funding source across its 26 million merchants worldwide. Its crypto trading platform is expected to be introduced globally in early 2021. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Square announced its plan to foray into the cryptocurrency market at the end of 2017. It ventured into it in 2018 by facilitating the buying and selling of bitcoins via its Cash App. Since then, bitcoin trading has been boosting the company’s user base.

Notably, bitcoin revenues have stood out as the major driving factor behind Square’s top-line growth. The company generated revenues of $1.63 billion from bitcoins, up significantly from $148.3 million in the third quarter of 2020. Square continued to benefit from the bitcoin space, driven by the increasing uptake of Cash App.

Going on, the company’s latest investment of $50 million to purchase 4,709 bitcoins deserves a special mention. This Zacks Rank #3 stock is expected to keep gaining from solid demand and growth in bitcoin activities.

Visa is expected to gain from growing presence in the cryptocurrency space, largely on the back of constant partnerships and technological upgrades. To bolster its presence in the cryptocurrency market, Visa has been collaborating with cryptocurrency firms for allowing increased usage of digital currencies in day-to-day life by customers in its existing global network along with paving the way for hassle-free conversion of crypto into fiat currency.

Case in point, Simplex has been made the principal member of Visa recently. Per the partnership, Simplex, which boasts a partner network comprising leading crypto exchanges and wallets, is allowed to offer Visa debit cards across Europe.

Other prominent partnerships of Visa include those with Coinbase, BlockFi, Wirex, Fold and many others. This Zacks Rank #3 company, with more than 25 digital currency wallets linked to its systems along with a blockchain-based system, holds immense potential to strengthen its position in the digital currency space.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>

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Columbia Sportswear Company (COLM) : Free Stock Analysis Report
 
Visa Inc. (V) : Free Stock Analysis Report
 
PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
 
Square, Inc. (SQ) : Free Stock Analysis Report
 
Shopify Inc. (SHOP) : Free Stock Analysis Report
 
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