Shopify and Malibu Boats have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – December 27, 2023 – Zacks Equity Research shares Shopify SHOP as the Bull of the Day and Malibu Boats MBUU as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Baker Hughes Company BKR, EOG Resources EOG and Matador Resources Co. MTDR.
Here is a synopsis of all five stocks:
Bull of the Day:
As market participants price in interest rate cuts in 2024, growth stocks like Shopify, are likely to benefit, as investors move further out on the risk curve again.
Furthermore, Shopify continues to grow at an impressive pace, with earnings expanding, analysts raising estimates, and a convincing technical setup forms on the chart. For investors looking to add exposure to a high-growth, leading e-commerce platform, Shopify is a worthwhile consideration.
Huge Earnings Estimate Upgrades
As the e-commerce megatrend continues, and consumers steadily buy at a healthy pace, top line growth at Shopify is expected to increase nicely over the coming years. FY23 sales are projected to grow 25% YoY to $7 billion, while FY25 is forecast to see growth of 19% YoY to $8.3 billion.
Reflecting a strong earnings revisions trend, Shopify boasts a Zacks Rank #1 (Strong Buy) rating. Analysts have unanimously, and significantly increased earnings estimates for SHOP. Current quarter earnings estimates have jumped 35% over the last two months and are expected to climb 342% YoY. FY24 estates have been boosted by 33% and are expected to grow 48% YoY to $1.04 per share.
Now that Shopify has divested ownership in its logistics business, which it sold to Flexport, margins should see expansion. The business was outside of the company's core competencies and thus a drag on profits.
Bullish Technicals
After a painful performance in 2022, where many growth-oriented stocks were hammered lower, Shopify has made a major comeback this year. Since the start of 2023, SHOP stock has rallied an impressive 122%.
Over the last week, SHOP price action has also been forming a bullish technical momentum pattern, which may send the stock higher to start next year.
If Shopify stock can breakout above the $78 level, it would set off a powerful technical buy signal. However, if it can't hold above the $76 level, the setup would be invalidated and investors may want to wait for another opportunity.
High but Historically Fair Valuation
There is no way around the fact that SHOP trades at a premium valuation, with a forward sales multiple of 14x. However, because of its strong growth trends, and industry positioning, it has always maintained a very high relative valuation.
Today, at 14x sales, it is below its five-year median of 22.7x, but is well above the industry average of 5.5x.
Bottom Line
Shopify stands as a compelling investment opportunity driven by its robust e-commerce platform, continuous innovation, and adaptability to the evolving digital landscape. In addition to its strong growth rates, the company also maintains a large cash position of $5 billion, giving it considerable flexibility in the coming years.
Finally, as Shopify sits in the top 13% (34 out of 251) of the Zacks Industry Rank, broader industry tailwinds adds a market-wide bullish catalyst for the e-commerce juggernaut.
Bear of the Day:
Malibu Boats, a leading designer and manufacturer of sport boats, is bumping into some considerable slowdowns in top and bottom-line expectations, giving it a Zacks Rank #5 (Strong Sell) rating.
The bout of consumer exuberance which followed the Covid-19 lockdown pulled forward considerable buying of large-ticket items like boats. Because of this, sales at Malibu Boats jumped well above trend and while it was welcome at the time, is limiting sales over the next year or two.
As buying a boat is not something that is done regularly, the company is likely to see a slowdown in growth moving forward and should be avoided for now.
Earnings Estimates
The dynamic troubling Malibu Boats has not been missed by analysts, as they have unanimously lowered earnings estimates for the company. Current quarter sales have been revised lower by -55% over the last two months and are projected to fall -73% YoY to just $0.51 per share. FY24 earnings estimates have been lowered by -13% and are expected to fall -42% YoY.
Top-line growth is expected to tank in the coming year. Current quarter sales are expected to decline -35% YoY to $220 million and FY24 by -21% to $1.1 billion.
Technicals
Although MBUU stock has rallied off its recent lows, I think it is setting up for another leg lower.
MBUU stock traded into a level of resistance which has held the stock down all year. Unless the stock can move meaningfully above the $56 level, I think sellers will step up again. Alternatively, if the MBUU stock can move above this downtrend, it may signal that expectations have bottomed and so too has the stock.
Bottom Line
While Malibu Boats is experiencing near-term challenges, the stock is by no means a zero. However, based on the current setup, I think investors should seek out other opportunities in the market.
Additional content:
Permian Oil Drilling Falls for Third Straight Week
In its weekly release, Baker Hughes Company stated that the U.S. rig count was lower than the prior week's figure. The rotary rig count, issued by BKR, is usually published in major newspapers and trade publications.
Baker Hughes' data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the week-ago figure indicates the demand trajectory for the company's oilfield services from exploration and production companies.
Rig Count Data in Detail
Total U.S. Rig Count Falls: The number of rigs engaged in the exploration and production of oil and natural gas in the United States was 620 in the week ended Dec 21. The figure is lower than the week-ago count of 623. The figure decreased for two straight weeks. Many analysts believe that there has been a slowdown in drilling activities since shale producers are getting more efficient, requiring fewer rigs, while some doubt whether certain producers have enough prospective land to drill. The current national rig count is also lower than the year-ago level of 779.
Onshore rigs in the week that ended on Dec 21 totaled 601, lower than the prior week's count of 604. In offshore resources, 19 rigs were operating, in line with the week-ago count.
U.S. Oil Rig Count Declines: The oil rig count was 498 in the week ended Dec 21, lower than the week-ago figure of 501. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — is also down from the year-ago figure of 622.
U.S. Natural Gas Rig Count Rises: The natural gas rig count of 120 is higher than the week-ago figure of 119. The count of rigs exploring the commodity is, however, below the year-ago week's 155. Per the latest report, the number of natural gas-directed rigs is almost 93% lower than the all-time high of 1,606 recorded in 2008.
Rig Count by Type: The number of vertical drilling rigs totaled 11 units, lower than the week-ago count of 14. The horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations, also known as shale formations) of 609 is in line with the prior-week level.
Rig Count in the Most Prolific Basin
Permian — the most prolific basin in the United States — recorded a weekly oil rig count of 303, lower than a week-ago figure of 306. The number decreased for three straight weeks.
Outlook
The West Texas Intermediate crude price is trading at more than the $70-per-barrel mark. Although the commodity pricing scenario is favorable for exploration and production operations, there has been a slowdown in drilling activities, which may continue as upstream players are prioritizing stockholder returns rather than boosting output.
Despite anticipating higher daily crude production in the oil-rich Permian next month than in December, the combined production from all prolific resources, including Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara and Permian, is expected to be slightly lower in January than this month, per the U.S. Energy Information Administration. This further confirms a slowdown in drilling activities.
In light of short-term uncertainties, investors seeking medium to long-term gains may keep an eye on energy stocks such as EOG Resources and Matador Resources Co..
EOG Resources, currently carrying a Zacks Rank #3 (Hold), is a leading oil and natural gas exploration and production company. It is well-placed to capitalize on the promising business scenario. It has many undrilled premium locations, resulting in a brightened production outlook. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
EOG Resources is strongly committed to returning capital to shareholders. Since transitioning to premium drilling, the company has returned a handsome amount of cash to stockholders. With the employment of premium drilling, EOG can reduce its cash operating costs per barrel of oil equivalent, aiding its bottom line.
Matador Resources has a strong presence in the oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. Promising oil prices are likely to aid it in increasing production volumes. Matador acquired Advance Energy Partners Holdings, LLC, which comprises several oil and natural gas-producing properties and undeveloped acreage. Zacks #3 Ranked MTDR expects the buyout to be accretive to important valuation and financial metrics.
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EOG Resources, Inc. (EOG) : Free Stock Analysis Report
Baker Hughes Company (BKR) : Free Stock Analysis Report
Matador Resources Company (MTDR) : Free Stock Analysis Report
Malibu Boats, Inc. (MBUU) : Free Stock Analysis Report
Shopify Inc. (SHOP) : Free Stock Analysis Report
