The Zacks Analyst Blog Highlights Sleep Number, TrueCar and Yext
For Immediate Release
Chicago, IL – July 25, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Sleep Number Corp. SNBR, TrueCar, Inc. TRUE and Yext, Inc. YEXT.
Here are highlights from Monday’s Analyst Blog:
3 Stocks to Buy Before They Report Q2 Results
If estimates are really to start going up next quarter, as some experts have predicted, there would have to be a period of stabilization, making this quarter significant as a pivot.
Since our earnings commentary (on the S&P 500) shows what appears to be a stabilizing trend so far, we are incrementally optimistic about the second half of the year. Overall estimates are still negative, however, with aggregate earnings expected to be down 8.9% on a 0.5% decline in revenue (ex-energy, they’re likely to be down 2.9% on 3.1% higher revenue).
Since oil is in such a bad place, we have to look elsewhere for growth.
A big driver of the outcome, whatever it may be, will be the technology sector, simply because it contributes so much to the aggregate. Additionally, the sector itself is influenced by big tech, which pretty much dwarfs the rest of tech, although they may be of great importance individually, in terms of the products they provide. Chipmakers, for example, and the associated companies like chip equipment and services providers are also significant as a group.
While the top 5-7 companies generate the most revenue, the revenue sources are varied. Companies like Alphabet and Meta generate the bulk of their revenue from advertising, with Amazon being an emerging heavyweight. Microsoft, NVIDIA and Tesla, on the other hand, are more product-oriented. Then again, Microsoft is essentially a software platform provider with a focus on the cloud, which is why it’s similar to Amazon, which offers a platform for retail. But while Microsoft’s success depends to a large extent on corporate sales, Amazon primarily targets consumers. NVIDIA and Apple are into hardware, targeting both corporates and consumers. Tesla sells cars that it produces through a highly automated process.
Therefore, although the tech sector, especially the big tech stocks have an outsized impact on overall results, they’re not a homogenous group, from which we can easily extrapolate and apply to related areas, to try and estimate what the results mean for other technology stocks. Nor do they really point towards what the rest of the market is likely to do, unless it is to do with advertising, retail, or consumer goods.
So while the next couple of weeks will be exciting, we need more concrete information, preferably tried and tested formulas to apprehend stock movements in response to earnings, and to jump on attractive trends.
The Zacks Rank is a proven tool that captures the trend in estimate revisions. It has proven its effectiveness in the last 20+ years. Therefore, a #1 (Strong Buy) or #2 (Buy) ranked stock has an above average chance of upside, based on what experts/analysts expect.
Another Zacks tool called the earnings Expected Surprise Prediction (ESP) is of particular help going into the earnings season. It gives us, as a percentage, the difference between the consensus and the most recent estimate. Since the last estimate is likely to be the most updated in terms of capturing available information, it gives us an idea of the direction results are likely to take.
The following three examples are worth noting:
Sleep Number Corp.
Minneapolis-based Sleep Number is a U.S. company that designs, manufactures, markets and retails beds, pillows, sheets and other bedding products through the retail, online, phone and chat channels. The company also provides adjustable bases under the FlextFit and smart beds under the Climate 360 brands.
Analysts expect this Zacks #1 ranked stock to report single-digit declines in revenue and profits this year. In 2024, however, revenue is expected to grow 5.3% while earnings grow 47.3%.
What’s more, analysts have been raising their estimates on this stock. In the last 7 days, the 2023 estimate went from $1.35 to $1.50 (11.1%). The 2024 estimate increased 7.8%. The June quarter loss estimate went from 6 cents to a penny, the September quarter went from 56 cents to 62 cents (10.7%).
Its earnings ESP is an eye-opening 1380%. The rank and ESP together indicate a possibility of a positive surprise when the company reports on Jul 27.
TrueCar, Inc.
Santa Monica, CA-based TrueCar is an internet-based information, technology and communication services company. Its platform spans a website and mobile apps that provide users market-based pricing data on new and used cars, as well as connections with certified dealers. The company also offers valuation and consulting services, TrueCar Trade (for trade-in vehicle valuations) and DealerScience (for advanced digital retailing software tools for dealers).
#2 ranked TrueCar is currently expected to generate revenue growth of 1.2% and 21.0% in 2023 and 2024. The bottom line is to grow a respective 12.5% and 61.9%. The estimates for the June and September quarters are up a respective 18.8% and 20.0%.
The loss estimates for 2023 has improved 10.6% and for 2024 5.9% in the last 7 days.
The ESP is 23.08%. Therefore, the company should report a positive surprise on Jul 31, its expected earnings date.
Yext, Inc.
New York-based Yext is a cloud-based platform that organizes business facts to provide answers to consumer questions. It allows businesses to control and manage their information across various maps, apps, search engines, digital assistants and social networks. The platform centralizes data fields like store information, professional details, job information and FAQs. It serves industries such as healthcare, retail and financial services.
The #2 ranked stock is expected to grow its 2024 (ending January) top and bottom lines 1.4% and 1500%, respectively. This will be followed by 5.6% revenue growth and 23.8% earnings growth in 2025.
The revisions trend is positive: up 7.7% for 2024 and 6.1% for 2025 in the last 30 days.
The ESP is 10.5%. Along with the Zacks rank, this indicates a positive surprise when Yext reports on Sep 6.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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