Pinterest and Tesla have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – May 3, 2024 – Zacks Equity Research shares Pinterest PINS as the Bull of the Day and Tesla TSLA as the Bear of the Day. In addition, Zacks Equity Research provides analysis on NNN REIT, Inc. NNN, Getty Realty Corp. GTY and Frontline plc FRO.
Here is a synopsis of all five stocks.
Bull of the Day:
Pinterest became a Zacks #1 Rank in early April as analysts started to raise estimates ahead of their quarterly report this week.
Pinterest reported strong first-quarter 2024 results on Tuesday, with the bottom and top lines surpassing their respective Zacks Consensus Estimate.
The big story is that lots of architecture solutions for advertising and marketing technology are paying off and providing sustained ROI to sellers, such as bottom-of-funnel direct response ads and supporting ad-tech.
You can get all the quarterly numbers and growth metrics in this article we published Wednesday. Today I want to focus on the analyst reactions.
Monetizing Pinterest Gets Real
Several investment bank analysts were impressed by the quarter and management's ability to turn the levers of growth -- especially capitalizing on key relationships with Google and Amazon.
RBC Capital found that PINS strong Q1 performance was driven by the effectiveness of direct links that resulted in increased advertiser spending due to improved return on ad spend.
"Direct links is working, with advertisers spending more as they see better ROAS," said the RBC led by Brad Erickson.
"From here, we think direct links has only just begun enabling PINS's value-capture from higher conversions," they said, adding that Amazon and Google are open-ended contributors that have only just started.
Erickson also highlighted upcoming artificial intelligence (AI) measurement tools that could provide tailwinds for several years.
RBC raised their price target on PINS to $52 from $48 and reiterated their Outperform rating.
Goldman Sachs analyst Eric Sheridan like the "very strong" results for Q1, and noted "broad-based upside."
"In many ways, we see this quarterly report as evidence of management progress across its mix of product initiatives (shoppable content, direct response/bottom-funnel ad budgets and partnerships aiding in wider scaled monetization)."
Sheridan maintained his Buy rating while raising his price target from $41 to $44 and he added that the company's partnerships with Amazon and Alphabet "are contributing revenue momentum that should continue to build throughout 2024."
JPMorgan analyst Doug Anmuth wrote that Pinterest "shifted into a higher gear of growth with broad-based strength across users & monetization."
Anmuth reiterated a Neutral rating while raising his price target from $38 to $44.
Wedbush analyst Scott Devitt wrote in a note to clients that the PINS results reflected "broad-based strength stemming from ongoing initiatives to improve monetization as well as healthy MAU (monthly active users) and engagement growth."
Devitt observed that Pinterest has started to benefit from the "ongoing adoption of lower funnel advertising tools and new ad surfaces, which are driving monetization improvements."
He maintained a Neutral rating while raising his price target from $38 to $44.
Piper Sandler analyst Thomas Champion wrote that while users accelerated across all geographies, with total MAUs of 512MM (+12% year-over-year), management referred to an "aging down" of the user base and rightly bragged that "Gen-Z now ~40%+ of the user base and growing fastest."
Champion reaffirmed an Overweight rating while lifting his price target from $48 to $50.
Bottom line on PINS: With 17% topline growth expected this year and next to cross $4 billion, PINS only trades at 6 times forward sales. Since it looks like estimates will continue to rise from here, I'd be a buyer of this stylish social-shopping platform that continues to innovate and attract new, and younger, users and advertisers.
Bear of the Day:
Tesla became a Zacks #5 Rank again on April 12 when shares were still trading above $170 and estimates were still dropping ahead of the EV maker's Q1 report on Tuesday 4/23.
My colleague Shaun Pruitt described the situation in his April 15 article...
In the two months prior, the Zacks EPS Consensus fell over 20% from $3.44 to $2.73.
And next year plunged nearly 24% from $4.61 to $3.52.
These downward analyst revisions ahead of the company report cause TSLA shares to drop under $140 on Monday 4/22, the eve of judgment day.
But with the news on 4/23 the market seemed to breathe a collective sigh of relief that things were not worse than delivered.
While investors have been debating the company numbers, statements, and plans, here we'll just focus on why TSLA shares will remain in the cellar of the Zacks Rank.
Since the report, this year's EPS projection has fallen to $2.48, representing a 20% annual drop in profits.
Investors knew that Tesla was aggressively cutting the prices of its cars to gain dominant position in the EV market.
What they might not have counted on was how hard it would be for the top maker to also cut costs.
What's Ahead
The faithful got a welcome surprise this past Monday when it was announced that China was ready to partner with Full-Self Driving (FSD) initiatives.
This shot TSLA shares back above $190. But it remains to be seen if this is a near-term driver in 2024 of sales and profits.
As many debates rage about the best strategic moves for Tesla going forward -- FSD, the charging network, China imperatives -- the stock will likely remain hostage to the sales growth outlook tempered strongly by the profit metrics.
Since the profit peak in 2022, every quarter that goes by without a stabilization of net income gives investors reason to believe that the EV revolution of mass adoption may be farther away than they once believed.
Additional content:
3 Stocks to Defy "Sell in May, Go Away"
The winter months were incomparable for the stock market, making it hard to believe that there won’t be any profit-taking ahead of the historically weaker summer months. The Stock Traders Almanac’s “sell in May and go away” thesis highlights that the period from May through October is the worst for investors to put money in the equity market.
Most stocks generally trade within a narrow range during the summer months, and a breakout to the upside is few and far between. The Dow Jones Market Data added that the S&P 500, since 1928, has registered an average gain of 5.2% from November to April, while it has posted a meager gain of 2.1% from May to October.
May is here, and the S&P 500 already ended in the red in the first trading session. Interestingly, the broader index tumbled in April and snapped a five-month winning streak. The index also recorded its worst monthly return in April since September, sliding 4.2%.
So, what’s behind the stock market waning that could further weigh on stocks? The Federal Reserve’s favored inflation gauge, the personal consumption expenditures price index, increased 2.7% year over year in March and 0.3% sequentially. The incessant uptick in home and other service prices remained a nightmare for consumers.
Sticky inflation, thus, dampened hopes of an interest rate cut soon. Elevated interest rates jack up borrowing costs, affect consumer spending, dent economic growth and cause gyrations in the stock market. Many market pundits are now projecting fewer rate cuts this year and expect inflation to move sideways rather than down toward the Fed’s target of 2%.
Talking about the economy, GDP, for the first quarter, increased at an annualized pace of 1.6%, less than the expectation of an increase of 2.4%. Both government and consumer outlays cooled amid a pickup in price pressures.
What’s more, consumers aren’t feeling self-assured about the condition of the labor market and their outlook for the economy worsened. After all, the Conference Board’s consumer confidence index slumped to its lowest level in April since mid-2022.
But despite these discouraging developments along with the unrest in the Middle East, investors shouldn’t shun equities completely! Instead, market participants should place their bets on stocks such as NNN REIT, Inc., Getty Realty Corp. and Frontline plc since these can provide a steady income during the unpleasant summer months.
These stocks have a low beta (ranges from 0 to 1), making them immune to market upheavals. They also provide dividends, implying a stable financial structure that helps them counter market volatility. Moreover, the stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
NNN REIT invests primarily in high-quality retail properties. The company has a beta of 1.
NNN has a dividend yield of 5.6%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 2.5%.
Getty Realty is engaged in the ownership, leasing and financing of retail motor fuel and convenience store properties. The company has a beta of 0.88.
GTY has a dividend yield of 6.6%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 2.7%.
Frontline plc is a shipping company, currently with a beta of 0.03.
FRO has a dividend yield of 6.3%. The Zacks Consensus Estimate for its current-year earnings has moved up 10.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 17.5%.
Shares of NNN REIT, Getty Realty and Frontline have gained 15.8%, 39.1% and 59.1%, respectively, in the past decade.
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Frontline PLC (FRO) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
NNN REIT, Inc. (NNN) : Free Stock Analysis Report
Getty Realty Corporation (GTY) : Free Stock Analysis Report
Pinterest, Inc. (PINS) : Free Stock Analysis Report
