For Immediate Release
Chicago, IL – August 26, 2022 – Zacks Equity Research shares Avis Budget Group CAR as the Bull of the Day and First Majestic Silver AG as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Qualcomm Inc. QCOM and Ericsson ERIC.
Here is a synopsis of all four stocks.
Bull of the Day:
Avis Budget Group is a Zacks Rank #1 (Strong Buy) that provides car and truck rentals, car sharing, and ancillary products and services to businesses and consumers. The company is a leading global provider of mobility solutions through its three most recognized brands — Avis, Budget and Zipcar.
Late in 2021, CAR was the focus of a big short squeeze that came after a big earnings beat. But the stock came all the way back to the pre-earnings levels after just a few months.
Investors are now getting bullish after another recent earnings beat. Moreover, estimates for the upcoming quarters are ticking higher, which is helping investors gain renewed interest in the stock.
About the Company
Formerly known as Cendant Corp., Avis Budget was founded in 1946 and is headquartered in Parsippany, new Jersey. It employs 16,000 people and has a market cap of almost $8.5 Billion.
Avis Budget Group, Inc. operates in approximately 10,400 locations worldwide.The company has licensees in approximately 175 countries throughout the world.
CAR has a Zacks Style Score of “A” in Value, “A” in Growth and “B” in Momentum. The stock is very attractive to value investors as it had a Forward PE under 4.
Q2 Earnings Beat
Avis Budget reported EPS earlier this month, posting a 30% EPS beat. For Q2, CAR reported $15.94 v the $12.22 expected. Revenues came in at $3.2B v the $3.08B expected. Adjusted EBITDA was $1.21B, up from 0.62B last year.
Americas revenue was up 30% year over year, while international revenue was up 71% y/y.
CEO Joe Ferro had the following comments on the quarter:
“Through enhanced revenue generation, diligent fleet management and stringent cost control, we generated another record quarter for the Company, highlighted by the Americas reporting over one billion of Adjusted EBITDA for the first time in a quarter and International achieving their highest second quarter Adjusted EBITDA ever.”
The beat was the companies eighth straight. This winning streak has helped the stock start its run from $50, to where it is now near $200 a share.
Looking at estimates, the numbers are going up across all time frames.
For the current quarter, estimates have gone up 24% over last 30 days, from $12.14 to $15.05. For the next quarter, estimates have gone from $5.70 to $6.28, or 10%.
Looking down the road, analysts expect the momentum to continue. Over the last 30 days, next year’s numbers have gone up 24% from $18.34 to $22.67.
After earnings, JPMorgan Chase reiterated CAR with a Neutral, but took their price target up to $230 from $214.
When the stock took off to $500 in late 2021, the shorts were in panic mode. There was nothing on the chart that indicated price should have gone that high, but the market structure, combined with a heavy short squeeze, forced price to unrealistic levels.
After the pullback, the stock consolidated under the $200 level as the year started. From there, round two of the short squeeze brought he stock back to the $300 area. But once again the stock came back under $200 as the market weakened.
With fewer momentum players in the name, the stock is starting to trade in a more rational manner.
Earnings got things going and the stock managed to get back to that $200 level. There has been some back and forth, but recently the 50-day moving average was defended at $166.
From there, price has gravitated upwards and the stock is back above the 21-day MA. This is great news for the bulls, who will now look for the 200-day MA at $210.
Longer term, look for the stock to work its way to the $245 level if that 200-day can be taken back by the bulls.
Bear of the Day:
First Majestic Silver is a Zacks Rank #5 (Strong Sell) that engages in the acquisition, exploration, development, and production of mineral properties with a focus on silver and gold production in North America.
Earlier in the year, the stock had a nice run higher as gold and silver prices were hitting highs. However, the metals have slumped since April and with them came the miners.
First Majestic Silver has not been spared from the mining rout. The stock is 50% off the 2022 highs and with silver and gold prices drifting lower, earnings estimates are falling as well.
About the Company
First Majestic is headquartered in Vancouver, Canada. The company was founded in 1979 and employs over 5,300. The company owns 100% interest in multiple mines across the United States, Canada and Mexico.
AG is valued at $2.1 billion and has a Forward PE of 133. The company holds a Zacks Style Scores of “F” in Value, Growth and Momentum. The stock pays out a dividend of 0.3%.
The company reported EPS in early August, seeing a miss of 140%. An earnings miss for this company is not uncommon as this was the sixth in a row.
The company reported Q2 at -$0.32 v the $0.06 expected. Revenue came in at $159.5M, which was above last years $154.1M. The company raised their dividend 1.7% and guided Q2 silver production to 32.6-34.6M oz.
The stock bounced on the earnings numbers, moving from lows of the year to $8.60, a move of 36%. While the AG is well off its highs, this rally doesn’t seem deserved when looking at the earnings estimates.
Over the last 30 days, numbers have been taken down across all time frames.
For both the current and next quarter, estimates have dropped from $0.10 to $0.00. For the current year, we see a 70% drop, from $0.20 to $0.06.
Next year the trouble continues, with estimates falling to $0.47 from $0.70, or 33%.
With estimates going lower, price targets are dropping as well. Roth Capital kept their Buy rating, but lowered their target to $8 from $11. H.C. Wainright also has a Buy on the stock, but dropped their target to $11.50 from $12.50.
The stock took off early in 2021 when gold and silver broke higher. But with silver prices falling off a cliff and gold slumping lower, so has the stock.
Price now approaches the 2020 COVID lows of $5. This was a support level seen all the way back to 2015 and it looks like investors will be riding the stock lower to that level.
The good news is that the stock is above the 50-day MA at $7.50. However, if that breaks those COVID lows are in play.
If the stock can get going on any rally in the metals. The 200-day MA at $10.30 should be sold.
First Majestic is a great stock to own when the metals are in favor. But in an environment of rising interest rates and slumping metals prices, any miner will struggle.
2 Wireless Stocks with Decent Dividends for a Steady Return
The Zacks Wireless Equipment industry appears well-poised to benefit from the exponential growth of mobile broadband traffic and home Internet solutions as user demand for coverage speed and quality has increased manifold. The industry is benefiting from higher demand for scalable infrastructure for seamless connectivity amid a wide proliferation of IoT devices.
A steady pace of 5G deployment and investments by leading carriers to upgrade their network infrastructure to meet the increasing demand for flexible data, video, voice and IP solutions also seems to have buoyed the industry’s growth. Expansion of fiber optic networks by carriers to support their 4G LTE and 5G wireless standards, and wireline connections is also acting as a tailwind.
However, the demand-supply imbalance owing to an acute shortage of chips, which are the building blocks for various technological equipment, has largely affected the profitability of companies due to inflated equipment prices. High inflationary pressures are further escalating raw material prices.
To weed off the liquidity crisis, various firms have resorted to cost-cutting measures such as furloughs, layoffs and reductions in discretionary expenses. Some firms looked beyond the short-term funding avenues, such as revolving lines of bank credit, to bridge temporary cash shortfalls.
Others have employed dividend cuts or suspension of dividend payments until the overall situation improved. Although a bulk of the firms across diverse sectors increasingly followed the drift, a handful have chosen to swim against the tide and continue rewarding shareholders with steady dividends.
We have run the Zacks Stocks Screener to identify stocks that have a dividend yield in excess of 2% with five-year historical dividend growth of more than 0.1%. In order to shortlist the stocks, we have screened those that possess either a Zacks Rank #3 (Hold), Zacks Rank #2 (Buy) or Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Here are two key picks from the Zacks Wireless Equipment industry.
Qualcomm Inc.: Headquartered in San Diego, CA, Qualcomm designs, manufactures and markets digital wireless telecom products and services based on the Code Division Multiple Access (CDMA) technology. The products include CDMA-based integrated circuits (ICs) and system software for wireless voice and data communications, as well as global positioning system (GPS) products.
Qualcomm is one of the largest manufacturers of wireless chipset based on baseband technology. The company is focusing on retaining its leadership in 5G, chipset market and mobile connectivity with several technological achievements and innovative product launches. It is likely to help users experience a seamless transition to super-fast 5G networks, delivering low-power resilient multi-gigabit connectivity with unprecedented range and Qualcomm's best-in-class security.
This, in turn, would further offer the flexibility and scalability needed for broad and fast 5G adoption through accelerated commercialization by OEMs. Qualcomm is reportedly the only chipset vendor with 5G system level solutions spanning both sub-6 and millimeter wave bands and one of the largest RF (radio frequency) front-end suppliers with design wins across all premium-tier smartphone customers.
It is also witnessing healthy traction in EDGE networking that helps to transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets. The automotive telematics and connectivity platforms, digital cockpit and C-V2X solutions are fueling emerging automotive industry trends such as the growth of connected vehicles, the transformation of the in-car experience and vehicle electrification.
The buyout of Veoneer, Inc. offers Qualcomm a firmer footing in the emerging market of driver-assistance technology, as it aims to extend the Snapdragon Ride Advanced Driver Assistance Systems (ADAS) portfolio. Qualcomm believes that it is on track to become the largest smartphone RF front-end supplier by revenues in the near future.
This Zacks Rank #3 stock has a dividend yield of 2.1% and a five-year historical dividend growth of 4.4%. It has a long-term earnings growth expectation of 15%. Check Qualcomm’s dividend history here.
QUALCOMM Incorporated dividend-yield-ttm | QUALCOMM Incorporated Quote
Ericsson: Founded in 1876 and headquartered in Stockholm, Sweden, Ericsson is a leading provider of communication networks, telecom services and support solutions. The company is reportedly the world’s largest supplier of LTE technology with a significant market share and has established a large number of LTE networks worldwide. It is in demand among operators to expand network coverage and upgrade networks for higher speed and capacity.
Ericsson is focusing on 5G system development and has undertaken many notable endeavors to position itself for market leadership on 5G. The company believes that the standardization of 5G is the cornerstone for digitizing industries and broadband. Ericsson foresees mainstream 4G offerings giving way to 5G technology in the future. The deployment of 5G networks is expected to boost the adoption of IoT devices, with technologies like network slicing gaining more prominence.
This Zacks Rank #3 stock has a dividend yield of 2.4% and a five-year historical dividend growth of 22.9%. Check Ericsson’s dividend history here.
Ericsson dividend-yield-ttm | Ericsson Quote
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QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
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First Majestic Silver Corp. (AG) : Free Stock Analysis Report
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