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Steel Dynamics, Intuit, Amazon, Walmart and Target as Zacks Bull and Bear of the Day

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·11 min read
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For Immediate Release             

Chicago, IL – December 22, 2020 – Zacks Equity Research highlights Steel Dynamics STLD as the Bull of the Day and Intuit INTU as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon AMZN, Walmart WMT and Target TGT.

Here is a synopsis of all five stocks:

Bull of the Day:                                                 

Steel Dynamics is a Zacks Rank #1 (Strong Buy) that is a leading American steel producer and metal recycler. The company has a diversified range of products and the stock has been grinding higher on improvements across the industry in pricing.

However, a recent pullback after some earnings guidance from a handful of steel companies caused the sector to sell off. Investors that missed the big rally should be looking to buy these pullbacks as a longer bull trend should continue in 2021.

About the Company

Steel Dynamics was founded in 1993, is headquartered in Fort Wayne, IN and has over 8,300 full time employees. The company operates in three segments: Steel Operations, Metals Recycling, and Steel Fabrication Operations. The Steel Operations segment, which produces steel form ferrous scrap and scrap substitutes, represents a majority of the business at 76% of revenues.

Rising Steel Prices to Stabilize

Outside of energy, most steel-consuming sectors have come back to pre-pandemic levels. Auto production and residential construction has come back strong.

While demand is strong, the supply side has been tight as well, which has caused steel prices to shoot higher. Steelmaking capacity has been offline for various reasons, but mainly due to pandemic. Prices should stabilize as post-pandemic demand increases and supply comes back online.

Q4 Guidance from STLD and others

Last week we saw mixed guidance from a handful of steel names including U.S. Steel, Nucor and Steel Dynamics.

U.S. Steel issued Q4 guidance below estimates, while Nucor guided slightly above consensus.

Steel Dynamics sees Q4 at $0.80-$0.84 v the $0.83 expected, so about right in line. However, the company said that earnings from the company’s steel operations are expected to be meaningful higher than sequential third quarter results. The company sees strong demand and low inventories supporting higher steel selling values.

Earnings and Estimates

The company has beat on EPS four quarters in a row and will officially report Q4 earnings in late January. Over the last 90 days, estimates for the current quarter have gone from $0.49 to $0.78, or 36% higher. Estimates look to be trending higher for 2021, going from $2.09 to $2.77 over the same time frame, a jump of 32%.

The Tesla Rumors

Earlier this month, Electrek reported that Steel Dynamics will supply steel for its Tesla’s Cybertruck from its Texas factory. The rumor has yet to be confirmed, but if it eventually is, this would be a major lift for shares of STLD. Additionally, the steel sector as a whole would benefit as it shows commitment to using steel to build EVs.

The Technical Take

On the technical front, the stock failed at the 21-day moving average and sellers came in. The next level will be the 50-day MA at $35, which aligns with the 61.8% Fibonacci retracement drawn from October lows to recent highs at $41.55.

All-time highs were hit back in 2018 at $52.10. If support can hold at $35, we should see a rally back to recent highs. If the strong fundamentals remain in the steel industry, that all-time high level should be surpassed in 2021.

Investors looking for a bigger pullback would have to hope for a large market sell off, as the 200-day is all the way down at $28.50.

 In Summary

Commodities have had a nice run and they are likely due for some selling. However, the overall trend is still very bullish and if investors see technical support holding, they should jump in quickly.

Bear of the Day:

Intuit is a Zacks Rank #5 (Strong Sell) that is a business and financial software company. Intuit develops and sells financial, accounting and tax preparation software for both small businesses and individuals. Some popular Intuit products include QuickBooks, Mint and Turbo Tax.

The stock has had a good year, but investors might want to get cautious after analysts have started to lower estimates.

About the Company

Intuit employs over 10,000, was founded in 1983 and is headquartered in Mountain View, CA. The company has locations in the US, UK, Singapore, Canada, India, Australia and more.

Intuit is valued at $100 billion and pays a dividend of 0.62%. The stock has Zacks Style Scores of “A” in Growth, but “D” in both Value and Momentum.

Stock Run and Q2 Earnings

The stock has been on a 45-degree angle upwards ever since 2017, up over 300% since the begging of that year. In 2020, the stock has added another 43% to date. The fuel behind the move has been a stretch of earnings beats that started the breakout.

The company hasn’t missed during this run higher. Last quarter, the company reported a 147% EPS surprised to the upside, which recently brought the stock to all-time highs. The run has been great, but investors might have reason to worry going forward as the valuation is getting lofty into a guidance that disappointed.

Guidance and Estimates  

Early in December, the company guided FY21 EPS below expectations, seeing $8.20-8.40 vs the $8.54 expected. This guide includes the recent Credit Karma acquisition and investors didn’t seem to be phased by the lower numbers.

The guide forced analysts to take estimates down. While the current quarter looks fine, next quarter has seen estimates fall 11%. Over the last month, estimates went from $6.71 to $5.97, and for the current year they have dropped from $8.48 to $8.68

The question for investors is can this short-term hiccup derail the amazing run the stock has had.

Technical Take

It has been a great run, but the stock looks overextended. If the 21-day MA were to break the 50-day at $350 would likely offer some support. However, if that level fails the next stop is all the way down at $304, where the 200-day MA resides. The stock hasn’t seen this level since May and would be a better entry than current prices.

In Summary

This is not a stock I would look to short, but buying at current levels seems to have a high-risk, low reward scenario. Investors should be patient and wait for a better entry to jump into Intuits long-term growth story.

Additional content:

Amazon (AMZN) Return Policy to Boost Holiday Shopping Season

Amazonis making every effort to bolster its online retail services in a bid to deliver strong holiday performance this year.

This is evident from its recently announced return and refund flexibilities in order to provide a hassle-free and seamless return experience to customers for their holiday shopping.

The company has extended the return window for purchases made within Oct 1 to Dec 31 of this year til Jan 31 of next year.

Further, the extended window is applicable for several items under categories like apparel, shoes, electronics, household items and pet supplies.

Customers seeking to return their ordered items just need to select items from the "Returns & Orders" page on Amazon.com or in the "Your Orders" section of the Amazon app.

Further, the company has kept the option of making label-free and box-free returns.

We note that the latest move remains a major positive as such an easy and flexible return policy enhances the shopping experience of customers.

Hence, the move is likely to drive Amazon’s customer momentum further, which in turn will aid its holiday performance.

More Into the Headlines

In regard to the above-mentioned efforts toward hassle-free returns, the company is providing customers with an option of dropping off the items to be returned at a nearby location. This is a step toward making the returns contactless.

The company has made this return flexibility available at several locations, including more than 500 Whole Foods Market and 75 Amazon physical retail stores such as Amazon Books, Amazon 4-star, Amazon Fresh grocery stores and Amazon Go stores.

Further, it is available in more than 1,100 Kohl’s locations and 20,000 UPS Access Point locations across the United States.

Also, customers are allowed to drop off their returns at Amazon Hub Locker and Amazon Hub Locker+ locations.

Solid Holiday Initiatives

We note that the latest move bodes well for the company’s solid efforts this holiday season.

It has recently come up with an option of getting orders delivered at alternative locations to customers who want to keep their gift a surprise from other house members.

Further, the company has made advances in Alexa skills, which will enable customers to sustain their gifts’ surprise.

Additionally, Amazon is providing better safety of the delivered orders with the option of Key In-Garage Delivery, which has now reached more than 4,000 U.S. cities. Prime shoppers are allowed to get their items delivered inside their garages with myQ smart garage door opener.

We believe that these endeavors of Amazon hold promise for a stellar performance in this holiday season.

Moreover, these will continue to strengthen its competitive position against retailers like Walmart and Target, which are making strong efforts to deliver strong holiday performance.

Nevertheless, Amazon’s vast seller base, ultrafast delivery services, expanding product availability and the latest move will help it morein reaching out to customers during the peak hours of the holiday season.

Currently, Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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