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YETI, Avis Budget, Uber and Lyft highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research

For Immediate Release

Chicago, IL – November 7, 2019 – Zacks Equity Research Shares of YETI Holdings YETI as the Bull of the Day, Avis Budget Group CAR asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Uber UBER and Lyft LYFT.

Here is a synopsis of all four stocks:

Bull of the Day:

YETI Holdings designs and distributes consumer products for the outdoor and recreational markets under the popular YETI brand. The company’s product line-up are made for activities like hunting, fishing, and camping, and include premium coolers, drinkware, waterproof and everyday bags, and other outdoor gear.

Q3 Earnings Better-Than-Expected

Both YETI’s top and bottom line beat the Zacks Consensus Estimate. Net sales jumped 17% year-over-year, and adjusted EPS saw growth of 24%.

Notably, the company reported direct-to-consumer sales of $92.9 million, up 31% over the prior year quarter. This double-digit growth was thanks to strong performance in both its Drinkware and Coolers & Equipment product categories.

YETI raised its fiscal 2019 guidance, and now expects EPS between $1.12 and $1.14 per share (reflecting 23% to 26% growth).

“Third-quarter results were powered by a strong new product lineup and expanding gross margins — both powerful indicators of brand health and momentum,” said CEO Matt Reintjes.

YETI on the Rise

Shares of YETI are up over 100% since January compared to the S&P 500’s return of about 25.6%. Earnings estimates have been rising too, and YETI is a Zacks Rank #1 (Strong Buy) pick right now.

For the current fiscal year, eight analysts have revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up five cents from $1.09 to $1.14; earnings could see about 25% growth compared to the prior year period. 2020 looks pretty strong too, with earnings and revenue expected to see double-digit year-over-year growth.

YETI currently trades around 28X its forward full-year earnings estimates, above the broader Consumer Discretionary Market (18.8X).

In addition to generating growth in key product divisions, YETI has been able to successfully navigate new tariffs, changing their supply chain to regions other than China. Plus, the company is actually profitable, making it one of the few buzzy IPOs from 2018 to be so. If you’re an investor searching for a broader consumer stock to add to your portfolio, make sure to keep YETI on your shortlist.

Bear of the Day:

Avis Budget Group is a leading vehicle rental company, boasting an average rental fleet of nearly 650,000 vehicles. The company has three popular brands under its umbrella: Avis, Budget, and Zipcar. Avis operates in roughly 180 countries, with more than 11,000 car and truck rental locations throughout the world.

Q3 Profit Misses Expectations

Avis’s top and bottom line numbers missed the Zacks Consensus Estimate. Adjusted net income came in at $223 million compared to $265 million in the year-ago quarter.

Revenue slightly decreased to $2.75 billion from $2.78 billion in Q3 2018.

The company also revised their 2019 guidance downwards, and now expects revenue between $9 billion and $9.2 billion. Adjusted net income is projected to fall in a range of $3.35 and $4.20 per share.

Analysts have turned bearish on Avis, with four cutting estimates in the last 60 days for fiscal 2019.

Earnings are expected to see negative growth for the year, and the Zacks Consensus Estimate has dropped 58 cents for that same time period from $4.05 to $3.47 per share.This sentiment has stretched into 2020. While earnings growth could turn positive, our consensus estimate has dropped 73 cents in the past two months.

CAR is now a Zacks Rank #5 (Strong Sell).

Shares of the rental car company have seen decent growth since January, up around 30%, but the stock took a major hit after its Q3 earnings release; CAR plunged 11% in the wake of the report. The S&P 500 is up about 25.6% in comparison.

Additional content:

Uber: Ride-sharing May Favor the Underdog

Uber’s share lock-up just hit its expiration date, and early investors are more than happy to liquidate their piece of the pie. This is following an ostensibly disappointing earnings report on Monday that sent these shares tumbling to their lowest level since the company went public.

Today there are more sellers than buyers in UBER’s market, and the stock has plunged another 4%. The stock is now down over 35% since its close on the first day of trading.

Lyft’s investor losses still exceed UBER’s, at a 45% decline from its first close as a public company. Uber is quickly closing in on those losses.

Lock-Up Expiration                                              

A lock-up period is meant to keep a stock price from plummeting in the first days of trading. It prevents private investors from dumping their shares for 90-180 days (general 6 months after IPO). What it does is set a hair-trigger sell-off for the lock-up expiration date.

The expiration day slide is typically around 1-3%, according to Market Beat, and shouldn’t affect long term investors’ strategies though a larger sell-off could be a signal that this position may be toxic.

Early investors rushing to rid themselves of UBER shares isn’t a great sign for the company, especially considering the substantial losses the company has incurred over the past 3 months. 

Uber’s (Recent) Story

Uber has been in free fall since its disappointing Q2 earnings in early August. The company reported an over $5 billion quarterly loss, over 6 times that of a year earlier and over five times the prior quarter's loss. Uber's topline only grew by 14% year-over-year in Q2, which was below expectations and lowered consumer sentiment for the stock.

In this most recent report (Q3), Uber demonstrated a top and bottom-line beat, but investors were still not satisfied. Uber missed on key metrics such as monthly active users and total bookings, which are crucial for this growing ridesharing company.

Ridesharing Duopoly

Uber and Lyft are in a competitive duopoly where predatory pricing is used to secure customers. I can attest to this here in Chicago where most people I know check both Uber and Lyft for the best pricing before deciding on which service to use. This is causing these firms to undercut each other into losses.

Uber has a much more diversified portfolio of services, which you would think would give them a competitive edge over Lyft, but I am starting to think it's going to be the companies downfall. Uber's other bets, such as Uber Eats and Uber Freight, are both competing in increasingly competitive spaces. These segments are driving down margins as these lose an increasing amount.

Uber is still liquid enough to have no concern about bankruptcy quite yet, but its lack of a profitability timeline worries me. Cash is being hemorrhaged from Uber at an increasing rate, and I don't think they have as many years as they believe in figuring out how they are going to turn a profit.

Lyft's (nearly) pure-play ridesharing strategy is looking like a competitive edge as its losses continue to narrow every quarter. Over the past month, LYFT is rose over 8% as this ridesharing company looks increasingly attractive at its substantially lowered valuation.

Lyft says it will have a profitable EBITDA by full-year 2021.

Lyft continues to take market share from Uber.

Take Away

Ridesharing is something brand new to the public markets, and its lack of profitability is scary to investors. Despite Uber having substantially more money to burn, its lack of a profitability timeline scares investors. Lyft's recent announcement of EBITDA profitability by 2021 is a positive sign for the company.

Both of these ridesharing stocks appear to be falling knives, but LYFT is looking increasingly attractive as it slides.

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Click to get this free report Avis Budget Group, Inc. (CAR) : Free Stock Analysis Report YETI Holdings, Inc. (YETI) : Free Stock Analysis Report Uber Technologies, Inc. (UBER) : Free Stock Analysis Report Lyft, Inc. (LYFT) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research