For Immediate Release
Chicago, IL – January 11, 2022 – Zacks Equity Research shares Target
TGT
as the Bull of the Day, and Turtle Beach Corp.
HEAR
asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on SilverBow Resources
SBOW
, Chesapeake Energy
CHK
and Comstock Resources
CRK
.
Here is a synopsis of all five stocks:
Target
stock went on a huge run before Covid and it then soared for roughly a year and a half as consumers flocked to its one-stop-shop offerings, e-commerce options, and more.
Some investors might be worried they
missed
their chance on Target. Yet, TGT stock is currently sitting at enticing levels for those with longer-term horizons, especially considering its solid fundamentals.
One-Stop-Shop
Target’s e-commerce growth helped business boom during the heart of the pandemic and its offerings will see it succeed in a retail age where customers want as many options as possible. Last year, its comparable digital sales soared 145%, with same-day services up 235%. These same-day offerings include in-store pickup, Drive Up, and its Instacart-style Shipt unit.
Along with its new-age shopping push, the Minneapolis-based retailer has focused even more heavily on its own in-house brands for fashion, furniture, food, and more. TGT’s various store brands succeed because of its ability to adapt and stay on-trend, while remaining affordable. Target’s growing slate of in-house brands have helped separate it from rivals like Walmart and Costco within some key demographics.
Recent Results & Outlook
Despite coming up against an extremely difficult to compete against year of 20% revenue expansion (vs. around 3.5% sales growth for several years leading up to 2020), Target continued its rapid sales growth during the first three quarters of 2021. For instance, TGT reported 23% sales growth in the first quarter, followed by 10% in Q2 and over 13% in the third quarter.
Target’s Q3 comps popped 13% on top of 21% expansion in the year-ago quarter. Last quarter’s growth was driven by a big jump in in-store traffic, as shoppers flocked back to TGT locations for in-person shopping. And all of its segments remained strong, with all five of its core merchandise categories posting double-digit comps growth.
Zacks estimates call for Target’s FY21 revenue to climb another 14% from $93.6 billion to $106.6 billion. Meanwhile, its adjusted earnings are projected to surge 40%, which would come on top of FY20’s 47% EPS expansion.
Peeking further down the line, Target’s FY22 revenue is projected to pop another 2.3%, to help push its earnings slightly higher. Next year’s estimates clearly mark a slowdown compared to its covid-boosted results in FY20 and FY21. But the firm’s earnings and revenue outlook continued to improve throughout the last year.
Target’s consensus earnings estimates for the fourth quarter of 2021 and fiscal 2022 popped following its Q3 release and executives remain optimistic in the face of global supply chain bottlenecks and rising prices. The company’s bottom-line positivity helps TGT land a Zacks Rank #1 (Strong Buy) right now. TGT has also beaten our EPS estimates in the trailing 12 quarters.
Other Fundamentals
Target’s management team is focused on higher-than-industry-average margins. The company is able to achieve these via various efforts, including its strong supply chain and ability to fulfill more than 95% of its sales (including its booming e-commerce space) from its own stores. The rapid success of its in-house private label brand also helps keep its margins solid.
In fact, TGT said in November that it continues to expect its full-year operating income margin rate will be 8% or higher. And it raised its guidance for the vital holiday shopping quarter.
Target also flexed its fiscal stability and confidence when it raised its dividend by 32% over the summer. TGT’s current 1.60% yield tops the S&P 500’s 1.2% and its industry’s 0.83% average.
In terms of performance, Target shares have soared 225% in the last three years to crush Walmart’s 52% and Costco’s 145%. As we alluded to up top, TGT cooled off in the back half of last year, with the stock down 10% in the past six months vs. the S&P 500’s 7% pop. And Target is currently trading 15% beneath its mid-November records.
The downturn pushed Target below both its 50-day and 200-day moving averages, where it hasn’t stayed for long during the past several years. And investors with long-term horizons might want to think about stepping in considering its valuation. The stock trades at a 30% discount to its own year-long highs and its industry’s current average at 17.5X forward 12-month earnings.
Taking a step back, Target shares are trading at a discount to where they were in the fourth quarter of 2019 and right around where TGT was prior to the pandemic selloff. Target’s valuation appears even stronger considering how relatively stretched the benchmark appears.
Bottom Line
Investors should also remember that being a part of a strong industry is important when it comes to stock price movement. Target is part of the Retail – Discount Stores space that’s in the top 20% of over 250 Zacks industries.
Wall Street is also very high on Target, with 14 of the 18 brokerage recommendations Zacks has for TGT at “Strong Buys,” with the remaining four at “Holds.” And investors might want to add stocks in 2022 with strong earnings power and stable businesses amid the Fed’s plans to raise interest rates that have Wall Street dumping tech stocks to start the year.
Turtle Beach Corp.
and its various brands make accessories for video games, including headsets. Gaming is an overall growth market, but Turtle Beach and many other industry players are subject to the larger boom and bust cycles that coincide with the launch of big blockbuster games.
Turtle Beach stock has also gone on a massive up and down roller-coaster ride over the past five years and it’s been trending in the wrong direction recently.
Turtle Beach Basics
Turtle Beach sells higher-end headsets for “all levels of gamer” and it has been a market leader in the console gaming audio space for the past 10 years. The company’s ROCCAT brand makes gaming-focused mice, keyboards, and headsets. Meanwhile, its Neat Microphones brand sells high-quality USB and analog microphones for gamers, streamers, and professionals, which is becoming more popular in the remote work world.
Turtle Beach revenue skyrocketed 54% in 2020 as the world focused on at-home activities. But this jump came up against an 18% drop in 2019 sales. Over the past seven years, every time Turtle Beach posted YoY revenue expansion it was followed up by a decline.
That said, Zacks estimates call for its revenue to climb 1.4% this year and another 5.6% in FY22. Despite the expected top-line expansion, Turtle Beach’s adjusted earnings are projected to fall by 44% this year and dip another 4.5% next year.
Turtle Beach updated Wall Street with its preliminary full year 2021 results on January 5, with its revenue now expected to come in at the low-end of its previous outlook. The company is also attempting to navigate a difficult industry environment.
“We have undertaken significant proactive work to deliver results in line with our guidance in an environment that has recently presented industry-wide challenges like weak retail traffic, constrained console supplies and poor performing AAA game launches,” CEO Juergen Stark said in prepared remarks.
Bottom Line
Turtle Beach’s consensus earnings estimates have trended heavily in the wrong direction since its Q3 report. And its Most Accurate (the most recent) EPS estimates are even lower. HEAR’s downward EPS revisions momentum helps it land a Zacks Rank #5 (Strong Sell) right now.
Turtle Beach also lands “F” grades for Growth and Momentum in our Style Scores system right now. Plus, its industry is in the bottom 25% of over 250 Zacks industries.
HEAR shares could bounce back, as they reach some overdone technical levels, with Turtle beach down 45% since mid-June. That said, the stock is somewhat heavily shorted and it might be more of a trader’s stock.
Additional content:
Natural Gas Gains in the Face of Intense Winter Forecast
The U.S. Energy Department’s weekly inventory release showed a lower-than-expected decrease in natural gas supplies. Despite the bearish inventory numbers, futures were up some 5% week over week, buoyed by weather forecasts, indicating bouts of severe cold snap over most of the country in the coming days.
But even if the mercury does plunge, downward pricing pressure over the past few weeks due to a warmer-than-normal December will still make it difficult for investors to be optimistic about the space. It would be wise to hold on to fundamentally sound gas-weighted producers
SilverBow Resources
,
Chesapeake Energy
and
Comstock Resources
.
EIA Reports a Withdrawal Smaller Than Market Expectations
Stockpiles held in underground storage in the lower 48 states fell by 31 billion cubic feet (Bcf) for the week ended Dec 31 compared to the 50 Bcf decline guidance, per the analysts surveyed by S&P Global Platts. The decrease was also below last year’s pull of 127 Bcf for the same corresponding week and the five-year (2016-2020) average net shrinkage of 108 Bcf.
The seventh successive draw of the winter heating season puts total natural gas stocks at 3,195 Bcf, which is 154 Bcf (4.6%) below the 2020 level at this time but 96 Bcf (3.1%) higher than the five-year average.
The total supply of natural gas averaged 99.3 Bcf per day, down 1.5% on a weekly basis due to lower dry production, partly offset by an increase in shipments from Canada.
Meanwhile, daily consumption rose 10.3% to 119 Bcf from 107.9 Bcf in the previous week, primarily reflecting stronger demand from the residential/commercial sector on the back of below-normal temperatures prevailing in the central and western United States. Natural gas consumption in the electric power and industrial sectors grew briskly too.
Natural Gas Still Registers a Weekly Increase
Natural gas prices trended upward last week despite the lower-than-expected inventory withdrawal. Futures for February delivery ended Friday at $3.916 on the New York Mercantile Exchange, rising around 5% from the previous week’s closing. The increase in natural gas realization is primarily the result of a freezing weather outlook (and the subsequent pick-up in heating demand) for the remainder of this month.
Final Thoughts
As is the norm with natural gas, changes in temperature and weather forecasts can lead to price swings. The latest models anticipate strong temperature-driven consumption over the next few weeks (especially in the Midwest and the Northeast), which is a positive for prices.
Natural gas also remained supported by a stable demand catalyst in the form of continued strong liquefied natural gas (“LNG”) feedgas deliveries. LNG shipments for export from the United States have been robust for months on the back of environmental reasons and record higher prices of the super-chilled fuel elsewhere.
Most analysts believe that deliveries appear poised for further gains through 2022 on surging consumption in Europe and Asia, especially as we head deeper into winter. The circumstances are particularly dire in Europe where gas supply is running low with the need for a steady refill from the United States going into the peak winter period. At the same time, promised flows from Russia have been limited.
But even the recent predictions of frosty temperatures and resilience in LNG exports cannot offset the ill-effects of a mild winter so far. With less-than-normal heating needs in December, withdrawals have been muted. The tepid inventory draws on the back of a warm December has brought back prices under the $4 threshold after recently topping $6 MMBtu for the first time since 2014 and reaching a 13-year high settlement of $6.312 in October.
Investing Strategy
With the natural gas market being unpredictable and spooked by mild weather, investors are quite unsure of what to do. As of now, the lingering uncertainty over the fuel means that investors should preferably wait for a better entry point before buying shares in natural gas-focused companies SilverBow Resources, Range Resources and Comstock Resources.
SilverBow Resources
is valued at around $360 million. SBOW went on to hit a 52-week high of $34.83 in October. The company’s shares have rocketed 289.7% in a year.
SilverBow Resources — carrying a Zacks Rank #3 (Hold) — reported EPS of $2.69 in November, reflecting a 30% surprise over consensus. SBOW beat the Zacks Consensus Estimate for earnings in three of the last four quarters but missed once. It has a trailing four-quarter earnings surprise of roughly 1.5%, on average.
You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Chesapeake Energy
has a projected earnings growth rate of 5.6% for the current year. CHK went on to touch a 52-week high of $69.69 on Friday.
Chesapeake Energy beat the Zacks Consensus Estimate for earnings in three of the last four quarters. The Zacks Rank #3 stock has a trailing four-quarter earnings surprise of roughly 23.1%, on average. CHK shares have rallied around 68.6% in a year.
Comstock Resources
has a projected earnings growth rate of 72.4% for the current year. CRK sports a Zacks Style Score of A for Value, A for Growth and B for Momentum.
Comstock Resources beat the Zacks Consensus Estimate for earnings in three of the last four quarters and met once. The Zacks Rank #3 company has a trailing four-quarter earnings surprise of roughly 42.5%, on average. CRK shares have gained around 72.1% in a year.
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