Trade Desk and Piedmont Office have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 26, 2023 – Zacks Equity Research shares The Trade Desk TTD as the Bull of the Day and Piedmont Office Realty Trust PDM as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Carnival Corporation & plc CCL, MGM Resorts International MGM and LiveOne, Inc. LVO.
Here is a synopsis of all five stocks.
Bull of the Day:
The Trade Desk is an advertising technology company that has experienced explosive growth over the last several years, and thanks to emerging trends in digital advertising is expected to continue to grow at a compelling rate. Not only is TTD projecting strong sales and earnings growth in the coming years, but has also received earnings estimate upgrades recently, giving it a Zacks Rank #1 (Strong Buy) rating, and improving near-term expected returns.
The Trade Desk specializes in advertising technology solutions. It provides a self-service platform that enables advertisers and agencies to buy digital advertising campaigns across various channels and formats. The Trade Desk's platform utilizes data-driven insights, real-time bidding, and advanced targeting capabilities, empowering advertisers to reach their target audiences more effectively and optimize their advertising campaigns for better results.
Similar to how most stock trades today are executed by machines, advertising transactions are moving towards this algorithmic process as well. Because of the shifting trends in ways people consume content online, and the fragmented nature of it, marketers have had to find innovative new ways to communicate with customers. The Trade Desk and its platform has become a mission critical tool for savvy new marketers to take advantage of the opportunities across the spectrum of digital platforms.
Because of its advantageous position in the industry, at the crossroads of the digital revolution, and online marketing, TTD has grown at a preposterous pace. Since it’s IPO in 2016, TTD stock has compounded at an annual rate of 65%, returning 2,900% over that period. Fortunately for investors, it probably isn’t too late to get involved, as The Trade Desk and algorithmic marketing industry are still in their early innings.
Elite Sales and Earnings Growth
Along with its top Zacks Rank, The Trade Desk boasts enviable sales and earnings growth estimates. Current quarter earnings are projected to climb 30% YoY, while sales are expected to grow 20% YoY during the same period. Over the next 3-5 years EPS are forecast to grow 24% annually, a phenomenal figure by any measure and demonstrating the incredible potential for the industry.
TTD has also made it a priority to increase its Free Cash Flow over the last couple of years, which reached $500 million in the trailing twelve months. This abundance of cash allows management considerable flexibility, allowing them financial breathing room while also enabling them to reinvest in the highest leverage areas of the business.
Huge Tailwinds in Connected TV
At The Trade Desk, Connected TV (CTV) is currently the largest and fastest growing business segment and will be for the foreseeable future. Connected TV is rapidly becoming one of the most critical channels for advertisers to reach customers as time spent watching tv and streaming continues to grow.
When you consider that 87% of US households have a CTV and 46% watch video via a connected TV daily, you can begin to understand the scope of TTD’s opportunity. Additionally, The Trade Desk platform has been used to reach 90 million households on 120 million devices.
While the streaming wars have made the competition for eyeballs fierce, TTD sits in an exceptional position to benefit. As a sort of ‘pick and shovel’ resource, TTD’s platform is set to benefit from the continued growth of streaming applications and usage.
The Trade Desk has long anticipated this exponential rise in CTV usage and advertising, and has positioned itself accordingly. By utilizing complex computing and AI, TTD can connect advertisers with their target market through highly targeted campaigns.
Bottom Line
The Trade Desk is an extremely well positioned company, with numerous secular tailwinds at its back. In addition to the points addressed above, TTD has also only just begun to branch out into international business opportunities, which will truly take it to the next level.
TTD currently has a premium valuation, trading at 22x one year forward sales, which is above the industry average of 5.1x and above its five-year median of 17.3x. However, because of its special business positioning and immense growth, investors will rarely get an opportunity to buy TTD at a traditionally deep discount.
Bear of the Day:
There is a storm brewing in the commercial real estate industry, and it is looking especially bad in the office building sector.
Commercial real estate loans are facing an increase in new delinquencies, primarily driven by offices, which account for 80% of these defaults. Major cities are witnessing a continuous struggle with occupancy rates, languishing at approximately 50% of capacity.
Piedmont Office Realty Trust, an office REIT focused on class A buildings in major US markets, has been on a steady decline since the onset of the Covid-19 outbreak. Marked by falling building occupancy, declining earnings, and analyst downgrades, PDM stock now has a Zacks Rank #5 (Strong Sell) rating and should thus be avoided.
Steep Earnings Downgrades
Analysts have unanimously revised earnings estimates lower across timeframes for Piedmont Office Realty Trust. Current quarter earnings estimates have been lowered by -4.4% to $0.44 per share and are projected to fall -12% YoY.
FY23 earnings estimates have been downgraded by -3.3% and are expected to fall -11% YoY. Additionally, sales growth is expected to stagnate across forecast timeframes. It seems analysts are still expecting the commercial real estate market to continue its ride lower.
Valuation
The only semi-bright spot for Piedmont Office Realty Trust is its historically cheap valuation and high dividend yield. PDM is trading at a one-year forward earnings multiple of 4.2x, which is below the industry average of 15.4x, and below its five-year median of 9.1x. Additionally, it currently has a hefty 11.4% dividend yield.
However, because of the uncertainty surrounding the commercial real estate market, the future of office work, and the mountain of debt within the industry, a cheap valuation alone is not enough to justify buying the stock.
Bottom Line
It should be noted that PDM does indeed have a premium portfolio of assets across important US markets and a fairly stable balance sheet, so should be able to ride out this trying time in the industry. The problem is that there is so much uncertainty surrounding the sector that it is still too risky to try and start fishing for the bottom. Investors would be better off focusing on stocks that are leading the market and have high Zacks Ranks.
Additional content:
3 Top Consumer Discretionary Stocks to Gain as Inflation Eases
Recent reports on inflation suggest that the spike in the prices of indispensable goods and services over the past two years is finally coming down as fuel prices fall.
This means consumers are now in a better position to open up their wallets, eventually benefiting consumer discretionary stocks such as Carnival Corporation & plc, MGM Resorts International and LiveOne, Inc.
Retail Inflation Cools Down
After a painful increase in retail inflation, price pressures cooled down to its slowest pace in more than two years in June. The Bureau of Labor Statistics stated that the consumer price index (CPI) increased 3% year over year last month, less than analysts’ estimate of a rise of 3.1%.
The yearly rate of inflation decelerated from May’s increase of 4%, and was also the lowest rate since March 2021. Notably, retail inflation slowed down for 12 successive months. The decline in the cost of airfare and prices of used vehicles were primarily responsible for the slowdown in broader price pressures.
Retail inflation more than halved after a sharp rise in energy prices pushed it to a 40-year high of 9.1% in 2022.
Wholesale Price Data Indicates Easing Inflationary Pressure
Last month, the annual increase in producer prices was also the smallest in almost three years, indicating that the economy is now in a disinflation period. The Labor Department added that the producer price index (PPI) increased a meager 0.1% year over year, the smallest annual rise since August 2020.
What’s more encouraging, in May, the headline PPI number, in reality, dropped by 0.4%, in contrast to the earlier reported 0.3%. Producer prices are declining as supply-chain bottlenecks fade, and demand for goods takes a beating due to a series of interest rate hikes.
Fed’s Favored Inflation Index Moderate
The chosen inflation index of the Federal Reserve too cooled down in May. Per the Bureau of Economic Analysis, compared to the same period last year, the personal consumption expenditures (PCE) price index increased by 3.8% in May, its lowest annual rate in two years, again an indication that inflation is slowing.
The decline in energy prices dragged the PCE Index lower in May. Energy prices fell 13.4% in May from a year ago and were down 3.9% from the prior month.
Consumer Discretionary Stocks to Benefit
With price pressures weakening, the purchasing power of consumers increases. In other words, consumers are now in a much better position to splurge on nonobligatory items. Therefore, it's prudent for investors to cash on this trend and bet on solid consumer discretionary stocks.
We have, thus, selected three consumer discretionary stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). Such stocks also boast a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
Carnival operates as a cruise and vacation company. Carnival has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for CCL’s current-year earnings has moved up 51.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 97% (read more: 2 Cruise Stocks Boosting the S&P 500 Rally in 1H 2023).
MGM Resorts International is a holding company and primarily owns and operates casino resorts through wholly owned subsidiaries. MGM Resorts has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for MGM’s current-year earnings has moved up 2.7% over the past 60 days. The company’s expected earnings growth rate for the next year is 19.6%.
LiveOne provides a platform for live streaming and on-demand audio, video, and podcast/vodcast content in music, comedy, and pop culture. LiveOne has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for LVO’s current-year earnings has moved up 200% over the past 60 days. The company’s expected earnings growth rate for the current year is 154.6%.
Shares of Carnival, MGM Resorts and LiveOne have gained 121.5%, 46.1% and 150.2%, respectively, so far this year.
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Carnival Corporation (CCL) : Free Stock Analysis Report
MGM Resorts International (MGM) : Free Stock Analysis Report
Piedmont Office Realty Trust, Inc. (PDM) : Free Stock Analysis Report
The Trade Desk (TTD) : Free Stock Analysis Report
LiveOne, Inc. (LVO) : Free Stock Analysis Report
