Weibo and Viasat have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 27, 2023 – Zacks Equity Research shares Weibo WB as the Bull of the Day and Viasat VSAT as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Novo Nordisk A/S NVO, Sanofi SNY and Novartis NVS.
Here is a synopsis of all five stocks:
Bull of the Day:
Weibo, a Zacks Rank #1 (Strong Buy), has been a substantial beneficiary of the recent renewed strength in emerging market stocks. After succumbing to the bear market last year, Weibo has reversed course, more than doubling in price since bottoming in October. The stock has staged a new uptrend amid increased buying pressure, and the bullish move may be just getting underway.
Weibo is part of the Zacks Internet – Content industry group, which ranks in the top 39% out of more than 250 Zacks Ranked Industries. Historical research studies suggest that approximately half of a stock's price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
Because this group is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months. It's no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market.
By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success. This group has widely outperformed the market to kick off the new year.
Weibo operates as a social media platform for people to create, distribute, and discover content in the People's Republic of China. The company also offers advertising and marketing solutions, video/live streaming, copyright content development, and traffic support. The company was founded in 2009 and is headquartered in Beijing.
Over the past few years, there have been talks that Chinese firms would be delisted from U.S. stock exchanges due to a lack of transparency regarding Chinese accounting practices. But last year, American and Chinese regulators reached an agreement to allow accounting firms in China to share more information about the companies listed on U.S. exchanges. The agreement marked a turning point in resolving a major conflict that had originally pointed to a departure of China's largest companies from domestic exchanges.
Emerging market valuations are very attractive. In particular, many Chinese companies (and their stocks) were hit hard due to extensive COVID-19 related measures, along with regulatory and technology crackdowns in recent years. This has created great value propositions, with many emerging market stocks becoming appealing once again. As China continues to lift lockdown restrictions and eases up on some of the more assertive regulations, Chinese equities should continue to perform well.
Earnings Trends and Future Estimates
WB has built up an impressive earnings history, surpassing earnings estimates in each of the past four quarters. The company has delivered a trailing four-quarter average earnings surprise of 4.71%.
While last year WB witnessed a decline in earnings, this year is a different story. Analysts covering the social media company have increased their full-year EPS estimates by +3.15% in the past 60 days. The 2023 Zacks Consensus EPS Estimate now stands at $2.29/share, reflecting potential growth of 8.69% relative to last year.
Let's Get Technical
WB shares have advanced over 125% in the past year since bottoming in October. Only stocks that are in extremely powerful uptrends are able to make this type of price move and handily outperform the major indices. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
WB has been making a series of higher highs on increasing volume. With both strong fundamentals and technicals, WB is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Weibo has recently witnessed positive revisions. As long as this trend remains intact (and WB continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Despite the impressive performance, WB remains relatively undervalued, irrespective of the metric used.
Solid institutional buying should continue to provide a tailwind for the stock price. Strong momentum combined with renewed strength in emerging markets will likely translate into more upside for this current market leader.
Robust fundamentals combined with a powerful technical trend certainly justify adding shares to the mix. Backed by a leading industry group and robust history of earnings beats, it's not difficult to see why this company is a compelling investment.
Bear of the Day:
Viasat provides broadband and communications products and services globally. The company offers satellite-based fixed broadband services, including internet access and voice-over-internet protocol services to consumers and businesses. Viasat also provides in-flight entertainment and aviation software services to commercial airlines, as well as internet services to cruise ships and yachts. VSAT's products also assist in earth imaging, remote sensing, and space system design.
The Zacks Rundown
VSAT, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Wireless Equipment industry group, which ranks in the bottom 41% out of more than 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months. This industry has steadily underperformed the market over the past year.
Candidates in the bottom tiers of industries can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in a poor-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much tougher.
The odds are stacked against VSAT, and the stock is agreeing with this notion. Shares experienced a climax top in November of 2021 and have been in a price downtrend ever since. VSAT stock is hitting a series of 52-week lows and represents a compelling short opportunity.
Recent Earnings Misses
VSAT has fallen short of estimates in three of the last four quarters. The company most recently reported a fiscal Q2 loss back in November of -$0.97/share, missing the $0.22/share consensus EPS estimate by -540.91%. The stock has steadily drifted lower since the announcement.
Over the last four quarters, VSAT has posted an average earnings miss of -350.02%. Consistently falling short of earnings estimates is a recipe for underperformance, and VSAT is no exception.
Viasat has been on the receiving end of negative earnings estimate revisions as of late. For the current fiscal year, analysts have revised their EPS estimates downward by -7.1% in the past 60 days. The 2023 Zacks Consensus Estimates is now -$1.81/share, translating to negative growth of -761.9% versus last year. Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
VSAT is in a sustained downtrend. The stock has not been able to rally much despite the market moving higher this year.
While not the most accurate indicator, VSAT has also experienced what is known as a death cross, wherein the stock's 50-day moving average (blue line) crosses below its 200-day moving average. VSAT would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. The stock has fallen nearly 25% in the past year alone.
A deteriorating fundamental and technical backdrop show that this stock is not set to make new highs anytime soon. The fact that VSAT is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock's downtrend.
Our Zacks Style Scores depict a weakening outlook for this stock, as VSAT is rated a second-worst possible 'D' in our Momentum category. Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of VSAT until the situation shows major signs of improvement.
Is a Beat in the Cards for Novo Nordisk in Q4?
Novo Nordisk A/S is scheduled to release its fourth-quarter 2022 results on Feb 1.
The company's earnings surprise history has been good so far, with its earnings beating the Zacks Consensus Estimate in three of the trailing four quarters and missing in the remaining one, the average beat being 3.09%. In the last reported quarter, Novo Nordisk delivered an earnings beat of 2.38%.
Shares of Novo Nordisk have gained 46.5% in the past year compared with the industry's increase of 12.7%.
Let's see how things are shaping up for the quarter to be reported.
What Our Model Predicts
Our proven model predicts an earnings beat for Novo Nordisk this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP for NVO is +11.25% as the Zacks Consensus Estimate currently stands at 80 cents per share and the Most Accurate Estimate is currently pegged at 89 cents per share.
Zacks Rank: The company currently carries a Zacks Rank #2.
Factors at Play
Novo Nordisk operates under two segments — Diabetes and Obesity Care, and Biopharmaceuticals.
Novo Nordisk's revenues in the last reported quarter increased 15% at constant exchange rates, driven by higher sales of Diabetes and Obesity Care products, a trend that most likely continued in the fourth quarter as well.
The Diabetes and Obesity Care segment's sales grew 17% year over year in the last reported quarter, a trend that most likely continued in the fourth quarter as well.
Obesity Care (Saxenda and Wegovy) sales were up significantly year over year in the last reported quarter, a trend that most likely continued in the to-be-reported quarter.
Sales in the Rare disease segment grew 4% year over year in the last reported quarter, a trend that most likely continued in the to-be-reported quarter.
Higher costs driven by clinical activity for late-stage studies are likely to have escalated research and development costs in the third quarter.
Sales and distribution costs also increased year over year in the last reported quarter. This increase was due to International Operations and North America Operations reflecting promotional activities related to Ozempic and Rybelsus as well as Obesity care market development activities. The trend has most likely prevailed in the to-be-reported quarter.
Concurrent with the third quarter results, management stated that intensifying competition within both Diabetes care and Rare disease as well as a negative impact on global sales growth from Volume Based Procurement of insulin in China will impact the annual performance.
Persistent pricing pressure within Diabetes Care, especially in the United States, is likely to have negatively impacted sales in the fourth quarter.
Other Stocks to Consider
Sanofi has an Earnings ESP of +2.22% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
Sanofi beat earnings estimates in each of the trailing four quarters. It delivered an earnings surprise of 9.50%, on average.
Novartis has an Earnings ESP of +1.03% and a Zacks Rank #3.
NVS beat earnings estimate in three of the last four quarters, with the average earnings surprise being 0.64%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Sanofi (SNY) : Free Stock Analysis Report
Novartis AG (NVS) : Free Stock Analysis Report
Novo Nordisk A/S (NVO) : Free Stock Analysis Report
Viasat Inc. (VSAT) : Free Stock Analysis Report
Weibo Corporation (WB) : Free Stock Analysis Report
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