For Immediate Release
Chicago, IL – April 26, 2019 – Zacks Equity Research Stitch Fix, Inc. SFIX as the Bull of the Day, YY Inc. YY as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Facebook FB, Netflix NFLX and Apple AAPL.
Here is a synopsis of all five stocks:
Bull of the Day:
Stitch Fix, Inc.is expanding its innovative online retail experience to the U.K. later this year. This Zacks Rank #1 (Strong Buy) is expected to grow revenue by the double digits for both fiscal 2019 and fiscal 2020.
Stitch Fix operates an online personal styling service. It uses the science of algorithms with expert personal styling to deliver apparel and accessories to clients. The service is designed for both men and women and is highly personalized to their taste.
Another Beat in the Fiscal Second Quarter
On Mar 11, Stitch Fix reported its fiscal second quarter results and beat the Zacks Consensus Estimate by 7 cents. Earnings were $0.12 versus the consensus of $0.05.
It was the fifth straight beat.
Stitch Fix hasn't missed on earnings since it went public in 2017.
Revenue jumped 25.1% to $370.3 million from $295.9 million in the second quarter of 2018 due to strong growth in Women's, continued scaling of Men's and ramping of the nascent Kids category.
It has now posted six consecutive quarters of over 20% sales growth.
Active clients rose 18.1% to 3 million. An active client is defined as one who checked out a Fix in the preceding 12-month period. A client checks out a Fix when he or she indicates which items they are keeping through the mobile app or website.
Each Men's, Women's or Kids account is a client, however, even if they share the same household.
Expansion to the U.K. on Track
Stitch Fix expects to launch in the U.K. in the fiscal fourth quarter of 2019. It has hired a local U.K. team and is investing in on-the-ground operations.
It has gotten strong interest from U.K. brands in partnering on the assortment for both men and women.
The company also launched its first integrated campaign in February, after the close of the fiscal second quarter and, so far, it likes the results. More will be coming on this in the next earnings report.
Analysts Are Bullish
The analysts liked what they heard as 7 estimates were revised higher for fiscal 2019 since the report.
This pushed the Zacks Consensus Estimate up to $0.22 from the previous consensus of $0.16.
Estimates were also revised higher for fiscal 2020 which pushed the Zacks Consensus up to $0.25 from $0.21. That's earnings growth of 14.9%.
Analysts are also bullish about sales as fiscal 2019 sales are expected to rise 26.5% and another 19.6% in fiscal 2020.
Shares Up Big in 2019
After the shares sold off in the December 2018 correction, they have come roaring back in 2019, adding 48%.
However, they're not cheap. Stitch Fix is trading with a forward P/E of 118.
Investors obviously are paying for the revenue growth and not the earnings.
But for those investors looking for a unique way to tap into the spending power of the consumer, then Stitch Fix should be on your short list.
Bear of the Day:
YY Inc. is finding it expensive to acquire content for its live streaming business. This Zacks Rank #5 (Strong Sell) has seen its earnings estimates cut for both 2019 and 2020.
YY is a leading live streaming social media platform in China.
YY Beat in the Fourth Quarter of 2018
On Mar 4, YY reported its fourth quarter results and beat the Zacks Consensus Estimate by 9 cents. Earnings were $1.87 versus the consensus of $1.78.
Revenue jumped 28% to $675 million year over year.
Mobile live streaming monthly active users were up by 18.1% to 90.4 million. The number of live streaming paying users jumped 36.6% to 8.9 million from the prior year.
However, gross margins fell to 35.1% from 39.4% in the fourth quarter of 2017 due to an increase in revenue-sharing fees and content costs.
Estimates for 2019 and 2020 Cut
Zacks has only one estimate for both 2019 and 2020 and it has been cut in the last 60 days on both years.
The Zacks Consensus for 2019 has fallen to $6.27 from $7.46 over the last 2 months, which is a decline of 12% from 2017 because the company made $7.13 that year.
2020 is also looking a bit weak, as the Zacks Consensus fell to $6.74 from $7.90. That's earnings growth of just 7.5%.
Shares Soar in 2019
But despite the decline in the estimates the last 2 months, the shares have roared back in 2019, and are up 39% year-to-date.
Shares were dirt cheap after the December 2018 correction.
They're still attractively valued, with a forward P/E of just 13.4.
But the growth that many investors were used to may be slowing. Sales are expected to grow only 18% in 2019 and 19% in 2020 versus its two prior years, 2017 and 2018, which saw sales jump 50.8% and 32.4%, respectively.
With declining earnings year-over-year, slowing growth, and a big rally in the shares, investors should be cautious of a possible value trap scenario.
Should You Buy Facebook (FB) Stock After Solid Q1 Earnings?
Facebook shares soared through morning trading Thursday after the company reported stronger-than-expected revenue results and helped prove to Wall Street that privacy worries are overblown. Not only was Facebook’s user growth impressive, its Instagram platform continues to expand and helps provide a glimpse into what could be a more robust e-commerce future for Facebook.
Facebook’s Q1 revenue climbed 26% to reach $15.08 billion and top our $14.97 billion Zacks Consensus Estimate. At the bottom end of the income statement, FB’s earnings sunk from the year-ago period, driven by a one-time charge of $3 billion it set aside for the possibility of a Federal Trade Commission fine. Without the charge, the social media company’s adjusted earnings came in at $1.89 per share, which topped our $1.66 per share estimate.
Meanwhile, Facebook’s daily active user total popped 8% from the year-ago quarter to reach 1.56 billion, matching Wall Street estimates. The firm’s monthly active users jumped by the same 8% to close at 2.38 billion and beat expectations. More importantly, Facebook executives estimate that over 2.1 billion people use at least one of its “family” of services—which includes Facebook, Instagram, WhatsApp, and Messenger—every day on average. On top of that, Facebook’s family of platforms hit 2.7 monthly users.
The user total growth slowed slightly from Q4 2018’s 9% expansion. But when you are reaching roughly 35% of the world’s population every month the law of large numbers makes year over year growth harder to come by. With that said, shares of FB soared as high as around 9% in morning trading. The climb is part of much more impressive 2019 comeback for Facebook, which has seen it stock soar nearly 50% to crush FAANG peers such as Netflix and Apple.
Still, shares of Facebook rested roughly 12% below their 52-week high at $193 per share through morning trading, to possibly help give FB stock some more room to run.
Facebook stock tumbled in 2018 on the back of privacy-based concerns and worries about possible government intervention. Yet, until the users really move on, advertisers will continue to spend billions across the company’s array of platforms, including its increasingly popular photo and video sharing app. Mark Zuckerberg’s firm simply reaches too many people in an age where traditional ad-supported platforms such as TV are being taken over by subscription services.
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