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Acushnet Holdings, CareDx, Lululemon and Chewy highlighted as Zacks Bull and Bear of the Day

·12-min read

For Immediate Release

Chicago, IL – December 1, 2021 – Zacks Equity Research Shares of Acushnet Holdings Corp. GOLF as the Bull of the Day, CareDx, Inc CDNA as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Lululemon Athletica Inc. LULU and Chewy, Inc. CHWY.

Here is a synopsis of all four stocks:

Bull of the Day:

Acushnet Holdings is a Zacks Rank #1 (Strong Buy) that sports a C for Value and B for Growth.  This leisure name is best known as the company that owns Titleist and Footjoy. The company just reported earnings last month and hasn’t been hit in the market selloff, so let’s take a deeper look at this stock in this Bull of the Day article.

Description

Acushnet Holdings Corp. designs, develops, manufactures, and distributes golf products. The company's operating segment consists of Titleist Golf Balls, Titleist Golf Clubs, Titleist Golf Gear and FootJoy Golf Wear. Acushnet Holdings Corp. is headquartered in Fairhaven, Massachusetts.es.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

For GOLF, I see a good history of beating the Zacks Consensus Estimate.  There are four beats over the last four quarters.

The average positive earnings surprise over the last fours quarters works out to be 151%, so the beats are pretty big. 

Earnings Estimates Revisions

The Zacks Rank tells us which stocks are seeing earnings estimates move higher.  For GOLF, I see annual estimates moving higher.

Over the last 90 days, I see a few increases.

This quarter has declined from a loss of $0.09 to a loss of $0.29.

Next quarter has a small increase from $0.85 to $0.86.

The full year 2021 has moved from $2.25 to $2.41.

Next year has seen an increase from $2.35 to $2.51.

Positive movement in earnings estimates like that is why this stock is a Zacks Rank #1 (Strong Buy).

Valuation

The forward earnings multiple for GOLF checks in at 23x, which is a little high given topline growth last quarter came in at 8%. The price to book is 3.5x, and that is just a little over where value investors would get excited as they like a book multiple of 3x or lower. The price to sales multiple checks in at 1.9x, which leaves a lot of room for growth.

Bear of the Day:

CareDx is a Zacks Rank #5 (Strong Sell) despite beating the Zacks Consensus Estimate in each of the last four quarters.  You don’t often see a stock that has beaten the number as consistently as CNDA fall to a Zacks Rank #5 (Strong Sell) so let’s take a look at why that is the case in this Bear of the Day article.

Description

CareDx, Inc. is a commercial stage company. It develops, markets, and delivers a diagnostic surveillance solution for heart transplant recipients. The Company provides AlloMap, a noninvasive blood test used to aid in the identification of heart transplant recipients. It is also pursuing other areas of transplant surveillance, such as the use of cell-free DNA (cfDNA) as a biomarker for rejection. CareDx, Inc. is based in Brisbane, California.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

In the case of CDNA, I see four straight beats of the Zacks Consensus Estimate over the last year.  This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower.  For CDNA I see a mixed bag.

This quarter increased from $0.01 to $0.02.

Next quarter dropped from $0.10  to $0.05.

The Zacks Rank is more heavily influenced by the move in the annual numbers, and the movement is mixed for those numbers.

The 2021 consensus number has increased from $0.29 to $0.33.

The 2022 number has dropped from $0.47 to $0.41 over the last 60 days.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a majority of stocks in the Zacks universe are seeing positive earnings estimate revisions.  That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).

Additional content:

Buy These 2 Stocks Before December Earnings

Covid and new strains are likely here to stay and investors and consumers have largely proven they are willing to focus on signs of progress in favor of fears. It is also worth constantly remembering that selling is a healthy aspect of all well-functioning markets, especially one that’s soared for over a year and a half.

Looking back, investors helped wash away all of the losses from the September and early October downturn in a matter of weeks. And the bulls appear to be in control, at least for now, with the S&P 500 and the Nasdaq both trading well above their 50-day moving averages despite Friday’s big drops.

There could certainly be more selling and profit-taking in December. Luckily, the positive backdrop for stocks remains in place even in the face of continued supply chain bottlenecks, rising prices, and difficulty filling millions of open jobs.

First off, interest rates will remain historically low for the foreseeable future no matter when the Fed starts to lift its core rate. Secondly, the S&P 500 earnings picture remains strong. And U.S. consumer spending was solid in October, which is a great sign for the entire pivotal holiday shopping period.

With this in mind, investors likely want to remain on the hunt for strong stocks as we enter the final month of 2021. Here are two modern retail stocks that investors might want to consider buying…

Lululemon – (Q3 Financial Results Due Out Thursday, December 9)

Lululemon has transformed from a small high-end yoga clothing maker 20 years ago into a global apparel powerhouse. The company currently sells an array of athletic apparel for women and men, alongside clothing that can be worn to work, dates, the golf course, and beyond. LULU has also rolled out self-care items, more outwear such as coats, and other accessory-style products.

The athletic retailer expanded beyond clothing and apparel last year when it bought digital-focused at-home fitness company Mirror. The purchase has already outperformed LULU’s expectations and it’s adding additional live and on-demand digital workout content and putting more Mirror ‘shop-in-shops’ within Lululemon locations—200 excepted by the holiday season.

Lululemon closed last quarter with 534 total company-operated stores, up from 506 in the prior-year period. LULU is focused on expanding in Asia and Europe, while continuing to improve its digital offerings. The company topped our Q2 estimates and raised its guidance, with e-commerce accounting for 42% of revenue.

Looking ahead, Zacks estimates call for fiscal 2021 revenue to surge 42% to $6.26 billion, with FY22 projected to come in another 17% higher to hit $7.33 billion. This growth, which is driven in part by Mirror, follows 11% top-line expansion last year and FY19’s 21%. Meanwhile, its adjusted earnings are projected to soar 60% and 21%, respectively during this stretch.

Lululemon has beaten our EPS estimates by an average of 25% in the trailing four periods, including a 36% beat last quarter. The company’s consensus earnings estimates have climbed recently and its Most Accurate estimates (or the newest) are higher. This bottom-line positivity helps LULU land a Zacks Rank #2 (Buy) right now.

Plus, 15 of the 21 broker recommendations we have for Lululemon are “Strong Buys,” with none below a “Hold.” The athleisure firm also boasts a strong balance sheet and its Textile-Apparel space sits in the top 20% of over 250 Zacks industries.

LULU hit records in mid-November, with shares up 45% in the last six months. This run helped end an up-and-down stretch that saw the stock move roughly sideways for nearly a year. Longer-term, Lululemon stock has skyrocketed over 700% in the last five years to crush its industry’s 75% and the S&P 500’s 120%.

Despite sitting near its records, LULU trades at a 20% discount against its own year-long highs in terms of forward earnings and sales. And the recent market pullback has it near neutral RSI levels at 56, which could give it room to run if it’s able to impress Wall Street next week.

Chewy – (Q3 Financial Results Due Out Thursday, December 9)

Chewy is an e-commerce pet store that went public in 2019. The company has expanded rapidly as consumers gravitate toward convenience in the form of delivery and beyond. CHWY sells pet food, supplies, treats, medications, and more for a variety of animals. Chewy has found success by adding loyal pet owners to its ranks, with roughly 70% of sales coming from its Autoship business that allows people to have food and more delivered at regular intervals.

Chewy posted a banner year in 2020 on the back of the pandemic. The firm added 43% more users in 2020 to close the year with 19.2 million. The company, which has been in business for over a decade, has also moved far beyond food and toys. Its offerings include a telehealth service called Connect with a Vet and a beefed-up pet pharmacy platform.

Unfortunately for Chewy, the near-perfect backdrop to succeed in business and on Wall Street is over as people return to their normal lives. The firm fell short of revenue estimates last quarter—which it rarely does—and it reported a larger-than-projected quarterly loss. Chewy did close Q2 with 20.1 million customers, up 21% from the year-ago quarter and its revenue climbed 27%. But Wall Street has continued to dump the stock amid rising costs and slowing growth.

Zacks estimates call for CHWY’s FY21 revenue to climb 25% to $8.95 billion and then pop 19% higher in 2022. These estimates would follow a 47% climb last year and 37% expansion in FY19. Meanwhile, its adjusted earnings are projected to slip 11% this year to $0.08 a share, with its FY22 figure expected to skyrocket 320% to $0.33 a share.

Chewy’s overall consensus earnings estimates have trended lower since its last report to help it grab a Zacks Rank #3 (Hold) at the moment. And it’s part of a group that’s in the bottom 11% of all Zacks industries. That said, nine of the 15 brokerage recommendations Zacks has are “Strong Buys” and it operates a business that isn’t going out of style anytime soon, even though its days of huge 40% growth might be over.

CHEWY shares dipped on Monday as the market climbed and it has now fallen over 20% this year, including a 23% drop since its Q2 release. Taking a step back, Chewy is still up 190% in the last two years and its current Zacks consensus price target of $98.33 a share represents 45% upside to Monday’s levels.

The pullback has Chewy trading at over a 50% discount to its own year-long highs at 2.8X forward 12-month sales. And the nearby chart shows CHWY attempting to return to its 50-day moving average. That said, some investors might want to wait for more signs of a comeback, especially given that Wall Street is currently betting somewhat heavily against the stock—short interest at roughly 20% of the float.

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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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lululemon athletica inc. (LULU) : Free Stock Analysis Report
 
Acushnet (GOLF) : Free Stock Analysis Report
 
CareDx, Inc. (CDNA) : Free Stock Analysis Report
 
Chewy (CHWY) : Free Stock Analysis Report
 
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