The coronavirus is spreading rapidly and it appears to be far from peaking. The spike late last week sent jitters across Wall Street as investors pulled out cash and some also went back to gold.
With the markets mostly in the red, there were however a few stocks that went the other way. In this article, I’ve picked 5 and tried to dig into why they did.
Let’s take a look-
Etsy, Inc. ETSY
Etsy operates online market places Etsy.com and Reverb.com for buyers and sellers primarily in the U.S., UK, Canada, Australia, France and Germany. Other than approximately 66 million items in its various retail categories, it offers various seller services, including Etsy Payments, a payment processing service; Etsy Ads, an advertising platform; and Etsy Shipping Labels, which allows sellers to purchase discounted shipping labels. It also offers various seller tools.
The company did see some pressure as the pandemic hit in the March quarter, but sales are growing strongly thereafter, propped up, according to management, by the strength in face mask sales (Etsy sold more than 12 million face masks worth $133 million in April).
A few days back, a Goldman Sachs analyst raised his price target from $88 to $120. Going by download trends of Etsy’s app, the analyst felt that the pandemic had created “significant opportunity to capitalize on the surge in e-commerce adoption as traditional retail remains less attractive to consumers”.
An RBC Capital Markets analyst also raised his price target last week from $79 to $117 as he thinks the stock’s recent rally is justified by “sustainably healthy growth and profitability levels.”
Estimates dropped after the company last reported to 45 cents, but have since jumped to $1.05 due to the increased optimism. The surprise history was impacted by the bad miss in the March quarter that is unlikely to repeat on account of the positives outlined above.
The shares carry a Zacks Rank #2.
The Automotive – Internet-Services industry, of which it’s a part, is in the top 30% of 250+ Zacks-classified industries. Historically, the top half (comprising industries with the best average Zacks Ranks) beats the bottom half (industries with the worst average Zacks Ranks) by a factor of more than 2 to 1. Companies in the top half of industries typically have some things going for them and therefore tend to perform better.
eBay Inc. EBAY
eBay operates as an online shopping site that allows visitors to browse through available products listed for sale or auction through each company's online storefront. Over the years, the company has evolved from a relatively small community user-based auction site to a worldwide commercial behemoth store.
The Street mentioned a couple of price target hikes that may have contributed to the jump in share prices.
Deutsche Bank’s Kunal Madhukar took it from $42 to $57, saying that eBay is not getting credit for the sales it could retain after the pandemic-induced surge levels out. He says that positive buyer experiences, positive impact from its payments business and too-low estimates that don’t account for any growth in the back half have led to a weak valuation. So he sees upside potential.
SunTrust Robinson Humphrey took its price target from $50 to $54, saying that the Covid-induced boost to e-commerce was bringing in new customers and reactivating old ones. There was caution in the tone however (the analyst has a hold rating on the shares) because he feels that these customers may not be retained in a more normalized environment.
But since nobody really knows exactly when the pandemic is going away or whether there will be a second wave, the company does look to enjoy this advantage for quite some time. And by then, who knows, customers may not be that eager to move away.
For now, we can take heart from the 2020 Zacks Consensus Estimate, which jumped from $3.02 to $3.45 in the last 90 days, while the estimate for 2021 went from $3.34 to $3.76.
The shares have a Zacks Rank #2 and are part of the Internet-Commerce industry, which is in the top 30% of more than 250 Zacks-classified industries.
Group 1 Automotive, Inc. GPI
Group 1 Automotive is a leading automotive retailer. As of February 5, 2020, the company owned and operated 186 automotive dealerships, 242 franchises, and 49 collision centers offering 31 automobile brands across 15 U.S. states, 33 UK towns and 3 Brazilian states. Through these dealerships, it sells new and used vehicles and related services like maintenance and repair, replacement and aftermarket services, vehicle financing and insurance.
Last week, the company provided a business update for the second quarter, in which it said that results would be better than hoped.
The company’s U.S. operations opened up in early May with revenue increasing faster than cost. Its UK sales operations didn’t open up until June and dealership services weren’t operational until May 18th, but there was dramatic strength thereafter in used vehicles and services. Brazil remained an underperformer with the virus yet to peak. So it’s basically the U.S. market that will support “substantial” profitability in the ongoing quarter, which will be marred by some one-time charges.
Analysts were quick to cut estimates as the pandemic hit, but there have been no estimate cuts in the last 30 days. On the other hand, the Zacks Consensus Estimate for 2021 has edged up 1.1% in the last 7 days.
The company has a solid earnings surprise history, having topped the Zacks Consensus Estimate in each of the last four quarters at an average rate of 20.4%. In the March quarter, results came in 58.1% better than expected.
The shares carry a Zacks Rank #2 (Buy) and Value Score A. It operates in the Automotive - Retail and Whole Sales industry, which is in the top 23% of 250+ Zacks-classified industries.
Pure Storage, Inc. PSTG
Pure Storage provides storage-as-a-service in a multicloud world. Its software-defined all-flash solutions are uniquely fast and cloud-capable for customers. Its primary offerings are FlashArray and FlashBlade products, which include Purity Operating Environment (Purity OE) software, Pure1 cloud-based software, and FlashStack, the company’s joint converged infrastructure solution with Cisco CSCO.
Last week, the company reported that both its FlashArray and FlashBlade solutions received “top-rated” awards by TrustRadius “based directly on feedback from its customers which is an essential metric and testament to the value customers attribute to the adoption of these technologies,” in the words of Megan Headley, VP of Research at TrustRadius.
The company is a “leader” in the 2019 Gartner Magic Quadrant for primary storage.
After dropping to a loss of 6 cents 60 days ago, the Zacks Consensus Estimate for the company’s 2020 EPS has now gone to a profit of 24 cents. Its 2021 EPS estimate has also jumped from 21 cents 60 days ago to 37 cents.
The shares carry a Zacks Rank #2 and belong to the attractive Computer- Storage Devices industry, which is in the top 38% of 250+ Zacks-classified industries.
Nutanix Inc. NTNX
Nutanix Inc. provides an enterprise cloud operating system that combines server, storage, virtualization and networking software into one integrated solution. Nutanix’s solution can be delivered either as an appliance that is configured to order or as software-only. The company currently offers two software product families — Acropolis and Prism.
Being a cloud enabler, the company is one of the beneficiaries of the work from home trend. Based on everything we are hearing from employers and governments, this trend is here to stay. So it isn’t surprising to see its shares buoyant.
Last week, there was also a bit of good news about Christian Goffi, who is bringing 25+ years of experience as Juniper Networks’ JNPR Channel Leader to the position of Vice President, Americas Channel Sales at Nutanix. The company has a strong product line and a sales boost is what it really needs to get in the black.
Its loss per share estimate for 2020 went up slightly from $2.93 60 days ago but then dropped to $2.67 30 days ago. It remains unchanged in the last 7 days.
The shares carry a Zacks Rank #2.
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Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
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eBay Inc. (EBAY) : Free Stock Analysis Report
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Etsy, Inc. (ETSY) : Free Stock Analysis Report
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