Skechers and On Holding have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 18, 2023 – Zacks Equity Research shares Skechers SKX as the Bull of the Day and On Holding ONON as the Bear of the Day. In addition, Zacks Equity Research provides analysis on SPDER Gold Shares ETF GLD and Invesco USD ETF UUP.
Here is a synopsis of all four stocks.
Bull of the Day:
The remarkable expansion of footwear and apparel provider Skechers shouldn’t be overlooked at the moment with its stock sporting a Zacks Rank #1 (Strong Buy) and landing the Bull of the Day.
Skechers stock also stands out in terms of value and the company is well-positioned to continue expaniding as its products are now available in over 170 countries with more than 4,000 stores and distribution centers worldwide.
Performance Overview
While Nike and Adidas usually come to mind when most think of dominant shoe and apparel companies, Skechers has created quite a niche centered around the comfortability and affordability of its footwear.
This has also transcended to Skechers stock with SKX shares up +21% this year to trail Adidas’+39% but easily top Nike and the broader Zacks Shoes and Retail Apparel Markets' -11% while outperforming the S&P 500’s +17%.
More impressive, over the last three years, Skechers stock has now risen +47% to largely outperform its Zacks Subindustry including Nike and Adidas shares while topping the benchmark as well.
Undervalued Growth & Expansion
As indicated in the recent performance of its stock, demand for Skechers' products has been impressive over the last few years which has helped the company avoid much of the inflationary headwinds that led to slower spending on consumer discretionary items.
Skechers stock currently has an “A” Zacks Style Scores grade for Growth with annual earnings now forecasted to soar 42% in fiscal 2023 at $3.39 per share compared to EPS of $2.38 last year. Plus, FY24 earnings are projected to climb another 17%. More importantly, earnings estimate revisions have continued to trend higher over the last 60 days.
Attractive Valuation
Notably, Skechers stock currently has a “B” Style Scores grade for Value. Making Skechers expansion look more attractive is that SKX trades at a 14.5X forward earnings multiple which is a nice discount to the industry average of 25.9X and the S&P 500’s 20.5X.
Furthermore, this is nicely below the historical industry leader in Nike’s 27.2X. It’s also notable that despite outperforming Nike’s stock and many other industry peers, SKX still trades 82% below its decade-long high of 85.4X forward earnings and at a slight discount to the median of 16.8X.
Takeaway
Investors that missed out or overlooked Skechers' growth and expansion in recent years may have the opportunity again with now looking like a great time to buy SKX shares. Those who are contemplating adding positions may continue to be rewarded by doing so as Skechers' impressive stock performance looks set to continue.
To that point, in addition to its Zacks Rank #1 (Strong Buy), Skechers stock also has an overall “A” VGM Zacks Styles Scores grade for the combination of Value, Growth, and Momentum.
Bear of the Day:
On Holding is one stock that investors may want to avoid at the moment landing a Zacks Rank #5 (Strong Sell) and the Bear of the Day.
The concern is industry-based with On Holding’s Zacks Leisure and Recreation Products Industry currently in the bottom 5% of over 250 Zacks industries as there is still a cautionary tale surrounding consumer shopping behavior for many discretionary items.
Time to Cut Losses or Take Profits
ON Holding went public on U.S. stock exchanges in 2021 and through its subsidiaries, the Switzerland-based company provides footwear and sports apparel products. Although sound growth is anticipated on the company’s top and bottom lines, investors may want to monitor the premium they are paying for ON Holding stock amid a weakening outlook.
To that point, it may be time to cut losses or take profits as ON Holding’s stock has rebounded and soared +50% this year but is still down -27% since its IPO. Notably, ONON shares popped +45% on the first day of trading to $35 a share but currently trade near its IPO price of $24 per share.
Premium Fears Amid a Weakening Outlook
Despite EPS forecasted to climb 79% in fiscal 2023 and soar another 54% in FY24 at $0.80 per share, earnings estimates are slightly down over the last 60 days with ONON shares trading at 48.2X forward earnings.
Any further decline in earnings estimates would be very worrisome as ON Holding's stock trades at a stretched premium to the industry average of 22.7X and well above the S&P 500’s 20.5X..
Furthermore, while On Holding’s top-line expansion has been intriguing as well its price-to-sales ratio of 7.8X is uncomfortably above the optimum level of less than 2X and the benchmark’s 3.7X.
Bottom Line
This year’s sharp rally in ON Holding’s stock is starting to look overdone, investors who have been intrigued about the possibilities of more upside may want to stay on the sideline as short-term risks start to mount again.
Additional content:
A Golden Opportunity: 5 Reasons to Be Long on Gold
Gold has been among the most frustrating and underperforming assets over the past decade. However, below are five reasons that may change soon:
“When in Doubt, Zoom Out”
Investors often get caught up in small price movements when focusing on short-term charts, such as daily or hourly charts. While looking at charts has its positives like “feel for the tape” and timing, the negatives often far outweigh the positives. Short-term charts show frequent and random price fluctuations that do not always represent the underlying trend and tend to be “noisy.” The short-term noise can trigger emotional responses such as fear and greed, over-trading, and limited perspective. In contrast, long-term charts smooth the price action, reduce noise and emotions, and provide long-term perspective.
The SPDER Gold Shares ETF is on the precipice of breaking out of a 12-year cup-with-handle base structure on the monthly chart. Should gold break out, the saying “The longer the base, the higher in space” should apply.
Geopolitical Turmoil
Gold is a safe haven asset during times of geopolitical turmoil due to its enduring value and universal acceptance. When political tensions escalate, or international crises occur, investors often seek refuge in gold because it is not tied to any specific government or country, thus shielding it from political instability.
Moreover, gold is a hedge against currency devaluation and inflation, preserving wealth when traditional assets falter. With the ongoing war in Ukraine and the rapidly escalating war in the Gaza Strip (Israel is rumored to go on a ground offensive any day now), gold should act as a refuge in a sea of uncertainty.
Steady Price Action Despite Dollar Gains
Gold and the US Dollar often exhibit an inverse correlation, meaning they tend to move in opposite directions. The inverse relationship is primarily due to how investors perceive these assets during times of economic uncertainty. When investors have confidence in the US economy, they are more likely to invest in the dollar and other financial assets, leading to a decrease in demand for gold and subsequently causing its price to fall.
However, the inverse correlation is not sticking in the current market and should be telling for prospective gold investors. Though the Invesco USD ETF is shooting for its 14th straight week of gains, gold is up more than 10% this month. When the dollar inevitably corrects, gold will likely be the main beneficiary.
Seasonality Tailwinds
Historically, gold is somewhat choppy to slightly positive into year-end. However, its strongest seasonal period kicks in at the beginning of the new year. Could these seasonal tailwinds finally induce a breakout out of the more than decade-long base?
BRICS Gold Standard
The countries that comprise BRICS (Brazil, Russia, India, China, and South Africa) plan to introduce a gold-backed currency as an alternative to the US Dollar. Should the plan come to fruition, gold demand would immediately soar.
Conclusion
Despite a decade of underperformance, gold is poised for a bull run. Five factors collectively suggest a promising outlook for gold, with the potential for a significant breakout in the near future.
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Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
SPDR Gold Shares (GLD): ETF Research Reports
Invesco DB US Dollar Index Bullish ETF (UUP): ETF Research Reports
On Holding AG (ONON) : Free Stock Analysis Report
