Yahoo Finance Signet Jewelers and Papa John's International have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – May 22, 2024 – Zacks Equity Research shares Signet Jewelers SIG, as the Bull of the Day and Papa John’s International PZZA, asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on NVIDIA Corporation NVDA, Alphabet Inc. GOOGL, and Seagate Technology Holdings plc STX.
Here is a synopsis of all five stocks:
Bull of the Day:
With the US economy remaining stubbornly robust, it is likely that we will see continued progress in consumer discretionary spending.
Signet Jewelers should enjoy a boost to sales thanks to this favorable development.
Headquartered in Akron, Ohio, Signet Jewelers is the world's largest diamond jewelry retailer, operating prominent brands such as Kay Jewelers, Zales, Jared, and H. Samuel. With 2,700 stores across the U.S., Canada, UK, and Ireland, Signet combines extensive brick-and-mortar presence with a strong e-commerce platform. The company specializes in diamond engagement rings and fine jewelry, catering to various customer segments.
Signet Jewelers stock has struggled over the last decade, sitting essentially flat over that period. However, recent bullish catalysts lead me to believe there are considerable near-term tailwinds that may drive the stock higher.
Although at its most recent quarterly earnings meeting Signet Jewelers showed a -6% fall in sales, management also highlighted growing margins (160bps), $600 million in free cash flow, a 30% increase in share buybacks, and an increase in the dividend payment.
The company also enjoys a robust balance sheet, with a large cash position and zero long-term debt.
Additionally, Signet Jewelers just jumped onto the Zacks Rank, reflecting upward trending earnings revisions, and has formed a convincing technical chart pattern, which indicates a bull run may be coming.
All these factors together make Signet Jewelers stock a worthwhile consideration for any investor.
Earnings Estimates on the Rise
Analysts have taken a liking to the stock, boosting earnings estimates nicely. Excluding the current quarter’s earnings estimates, all future timeframes have seen hefty increases.
FY24 earnings estimates have risen by 10% and FY25 by a whopping 17.2%, giving SIG a Zacks Rank #1 (Strong Buy) rating.
Signet also sits in an industry near the top of the Zacks Industry Rank. As of today, the Retail-Jewelry industry is in the top 13% (33 out of 248) of all industries, indicating near-term bullish expectations.
Technical Setup
The price action on SIG stock is what really caught my attention. Below we have a weekly candlestick chart showing a prototypical cup and handle pattern.
If the price can trade above the $103 level, it would signal a technical breakout. If the pattern is completed, I think the stock could quickly trade towards $120, and after that, target its all-time high of $127.
However, it is worth noting that if Signet Jewelers stock loses the $95 level of support, the pattern is nullified, and tactical traders may want to wait for another trading opportunity.
Valuation
Signet Jewelers is trading at a one year forward earnings multiple of 9.3x, which is well below the market average and just below its 10-year median of 9.6x.
This is a fairly reasonable valuation but reflects minimal growth estimates. Current year sales are expected to fall -4.3%, while next year should pick up a bit to +2.8%. These are low expectations, so if SIG can surprise to the upside it should allow for some multiple expansion and send the stock higher.
Bottom Line
As of today, Signet Jewelers is a stock that has very little downside risk, with potential for some near-term price appreciation. The business is sturdy, but growth expectations are low. However, with the strong economy, SIG’s burgeoning e-commerce segment, and the top Zacks Rank, I think we could see some upside surprises from the jewelry retailer.
Based on this setup, I think Signet Jewelers is a worthy investment to consider.
Bear of the Day:
Papa John’s International, the pizza delivery and takeout shop with nearly 6,000 locations globally, has struggled in recent years with flat sales growth and falling profits.
In 2024, the stock has been collapsing, and its stock price is approaching four-year lows, reflecting extremely bearish investor sentiment.
While I do believe Papa John’s will still be around in the future, the company is overvalued based on its floundering growth rates and was recently downgraded to a Zacks Rank #5 (Strong Sell) rating.
Because of these bearish factors, I think investors should avoid Papa John’s International stock for now and seek better opportunities in the market.
Collapsing Earnings Estimates
Analysts have unanimously lowered earnings estimates for PZZA across timeframes. Current quarter earnings estimates have fallen by -14.3% over the last month, and current year earnings estimates by -6.5%.
Current year earnings are forecast to fall -9.2% YoY.
Papa John’s International has a Zacks Rank #5 (Strong Sell) rating and sits in the bottom 38% (145 out of 248) of the Zacks Industry rank.
Elevated Valuation
As of today, Papa John’s International has a one year forward earnings multiple of 20.1x, which is below the market average and below its 10-year median of 29x.
However, those higher valuations of the past reflected higher growth estimates, so unless the company can turn that around, we could see that multiple fall even further.
Bottom Line
As of today, I think there are far better opportunities in the stock market than Papa Johns, and thus investors should focus on those prospects.
However, I will say that I do believe Papa John’s International does enjoy an enduring brand that could recover, although the takeout food space grows increasingly competitive. Additionally, with the company paying a dividend yield of 3.8%, income investors could soon be interested.
But I would recommend avoiding the stock until there is a marked improvement in the earnings estimates and Zacks Rank before considering getting involved.
Additional content:
3 Silicon Valley Tech Stocks to Buy as Nasdaq Edges Higher
As the tech juggernaut rolls on, the Nasdaq Composite registered its ninth-record close this year on May 20. The tech-laden index climbed 0.7% to close at 16,794.87, powered by gains in NVIDIA Corporation and other tech bigwigs. The index has soared more than 11% year to date, way more than the 30-stock Dow Jones Industrial Average’s gain of 5.6%.
The Nasdaq, in reality, has jumped from “extreme” oversold territory to “extreme” overbought territory for the second time in six months, thanks to its latest ascent to record highs, per Bespoke Investment Group. However, this doesn’t mean that the index is subjected to an imminent downward trend. The recent rate cut optimism is driving the index higher and will continue to do so in the near future.
The Federal Reserve has indicated that the central bank won’t be raising interest rates in the upcoming policy meetings this year, and they agreed that concerns about stagflation are implausible. The CME FedWatch tool currently shows that market participants believe that there is almost a 50% chance that the Fed will trim interest rates by a quarter-point in the September meeting.
So, what’s behind the rate cut expectations? Consumer prices eased last month after rapid price increases in the first quarter, raising hopes that the Fed will become more dovish. The core Consumer Price Index increased by 3.6% in April, down from 3.8% in March. The index that excludes the volatile energy and food prices also registered its lowest annual increase since early 2021.
Recent consumer spending patterns are also offering some relief for the Fed. Sales at U.S. retailers remained flat in April, in contrast to economists’ expectation of growth, a tell-tale sign that consumer spending is cooling. Fewer job additions and a decline in wage growth to its lowest level in April in three years did little to pump up consumers’ spending propensity. This means that the Fed would be less inclined toward an aggressive monetary policy.
A lower interest rate environment is a boon for tech stocks as their future cash inflows aren’t affected. Interest rate cuts lead to a decrease in the cost of borrowing, which in turn lift profit margins.
Thus, it’s prudent for astute investors to place bets on the hottest Silicon Valley tech stocks such as NVIDIA, Alphabet Inc., and Seagate Technology Holdings plc that are poised to make the most of the Nasdaq’s upward movement banking on rate cut hopefulness. They have a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Our Picks
NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. NVIDIA currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has increased 2.2% over the past 60 days. NVDA’s expected earnings growth rate for the current year is 87.1% (read more: NVIDIA a Solid Buy as it Squashes Bubble Fears).
Alphabet is one of the most innovative companies in the modern technological age. It offers various products and platforms across the globe. Alphabet presently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has increased 12.4% over the past 60 days. GOOGL’s expected earnings growth rate for the current year is 31.2% (read more: Bill Ackman’s Favorite "Magnificent 7" Stock is a Big Winner).
Ireland-based Seagate Technology has its operational headquarters in Fremont, CA. Seagate Technology currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has increased 73.6% over the past 60 days. STX’s expected earnings growth rate for the current year is 384.2%.
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Seagate Technology Holdings PLC (STX) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Signet Jewelers Limited (SIG) : Free Stock Analysis Report
Papa John's International, Inc. (PZZA) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
