Author: AnswerStock

Walgreens released disappointing Q1 earnings but management remains hopeful about the company’s future.

On Wednesday, Walgreens released its first-quarter earnings report, and the results were even worse than investors feared. The earnings report showed that the company fell short on its revenue and earnings. 

On its own, the earnings report might not seem so bad. But Walgreens was the worst-performing stock on the Dow Jones Industrial Average in 2019. The company lost 14% in 2019, while the index gained 23% overall.

Here is a closer look at the earnings report, and what Walgreen needs to do to turn things around.

Walgreens falls short during Q1

Shares of Walgreens sank after the company announced that it fell short on its first-quarter guidance. The company’s revenue rose 1.6% year over year to reach $34.3 billion. This wasn’t bad, but it fell slightly short of analyst estimates of $34.6 billion.

Walgreens’ adjusted earnings fell 6% year over year to reach $1.37. This fell short of analyst estimates of $1.41 per share. 

The one bright spot in the company’s earnings report is that it didn’t lower its full-year guidance. Walgreens CEO Stefano Pessina acknowledged that the company fell short this quarter, but expressed confidence in the coming year. 

Pessina assured investors that the company’s strategy would begin to pay off and “drive long-term sustainable growth going forward.”

Is a turnaround possible for Walgreens?

Few analysts have anything good to say about Walgreens stock. It’s considered a moderate sell on Wall Street, and a Wells Fargo Securities analyst recently downgraded the stock. The company’s poor performance has even led to buyout speculations, though it’s hard to see how this would play out. 

All in all, a turnaround is possible for Walgreens, though it doesn’t seem likely. The company continues to struggle in its international pharmacy business. And it’s U.S. retail sales have taken a hit after the company put limits on tobacco sales. 

But Walgreens’ U.S. retail business is still profitable. And it will be interesting to see how recent partnerships the company formed with Kroger and McKesson play out in the coming year. 

The Dow fell overnight after Iran launched an attack on American troops based in Iraq. 

Stocks opened flat on Wednesday, regaining losses after Iran fired missiles at U.S. troops stationed in Iraq. Investors have been bracing themselves for this type of fallout ever since last week when a U.S. airstrike killed a top Iranian official. 

Iran’s retaliation sent the U.S. stock markets tumbling overnight, though the markets stabilized on Wednesday. The Dow Jones fell 400 points overnight but rose seven points by morning. 

Details on the Iranian attacks

On Wednesday, Iran attacked two bases in Iraq that housed American troops. The attack is retaliation for the killing of Gen. Qasem Soleimani, a top Iranian commander. 

In total, Iran fired 22 missiles at the military bases where American troops were stationed. No deaths or injuries were reported following the attacks, and the attacks didn’t target any oil infrastructure.

Following the attacks, President Trump met with his top national security advisors to discuss a possible response. In the past, he has vowed to take a hard line against any Iranian attacks on American targets. But Trump’s Twitter response was more upbeat than many analysts expected.

A few hours after the attacks, he tweeted, “All is well! Missiles launched from Iran at two military bases located in Iraq. Assessment of casualties & damages taking place now. So far, so good! We have the most powerful and well equipped military anywhere in the world, by far! I will be making a statement tomorrow morning.”

Iran’s foreign minister, Mohammad Javad Zarif, seemed ready to de-escalate the situation as well. Following the attacks, he tweeted that “Iran took & concluded proportionate measures in self-defense.”

How should investors respond?

On Tuesday, investors were unnerved by the reports of the Iranian attack. But the muted response from President Trump, the Pentagon, and Iran’s foreign minister went a long way to calm their nerves. 

Historically, conflicts between Iran and the U.S. have never led to a long term market downturn. Data from Barclays showed that the S&P 500 gains an average of almost 3% in the months following a conflict between the two countries. 

Plus, positive labor market data came out, which helped qualm fears over a possible economic slowdown. ADP and Moody’s Analytics found that the private sector added 202,000 new jobs in December, beating expectations of 150,000 added jobs.

Bed Bath & Beyond sold a sizable amount of its real estate to fund company turnaround efforts.

Mark Tritton has been CEO of Bed Bath & Beyond for two months, but he’s already made big changes. In December, Tritton got rid of six senior-level executives, stating that he has a new vision in mind for the company.

And this week, the Wall Street Journal reported that Bad Bath & Beyond signed a deal to sell half of its real estate to a private equity firm. The private equity firm will then lease the space back to the company.

Why the company sold its real estate

This latest turn of events is a big shift for Bed Bath & Beyond. The former company leadership was opposed to the idea of selling off its real estate. 

The company is selling its real estate to a private equity firm in a deal that covers over two million square feet of space. This includes the company’s executive offices, its distribution center, and many of its retail locations. 

The real estate transaction will generate more than $250 million for Bed Bath & Beyond. Management plans to use this money to repay debt and fund the company’s new turnaround efforts. 

By leasing the property instead of owning it outright, the company can save money and free up some cash flow for the business. 

What we can expect from Bed Bath & Beyond

$250 million is a lot of money, but it’s not going to be enough to fix the problems Bed Bath & Beyond faces. Bed Bath & Beyond is scheduled to release its third-quarter earnings report on Jan. 8, and it’s not expected to be a good one. 

The company has an excessive amount of inventory it still needs to clear out, and it still carries a heavy debt load. Not to mention, Bed Bath & Beyond still needs to deal with falling sales and traffic at its retail stores. 
Investors will be waiting to hear comments from CEO Mark Tritton to get a sense of what’s to come from Bed Bath & Beyond. The company is currently considered a moderate buy on Wall Street.

Nordstrom struggled over the last year, but the company could turn things around in 2020. 

Retail department stores like Nordstrom struggled for most of 2019. The stock is up from its August lull but still hasn’t managed to bounce back to its 2015 highs. 

And most analysts have been negative about department store stocks in general, including Nordstrom. The stock is considered a hold on Wall Street, with a potential downside of more than 11%. 

But JP Morgan analyst Matthew Boss seems to have had a change of heart when it comes to Nordstrom. The analysts upgraded the stock from neutral to underweight and raised his price target from $26 per share to $41. 

3 reasons to invest in Nordstrom stock

Here are a few reasons why Nordstrom could turn things around in 2020.

1. Nordstrom’s digital sales are improving

One of the biggest problems department stores face is the increase in online shopping. That’s why Nordstrom has been working on improving its digital sales and creating an omnichannel experience for its customers. 

And so far, these efforts seem to be paying off. The company’s digital sales rose 7% during the third quarter. During its most recent earnings report, management said that its e-commerce business now represents 34% of its total business.    

2. The company’s strategic partnerships

Brick-and-mortar is still a viable business model, but these companies need to think outside of the box. The successful retail stores are the ones that have found a unique way to position themselves in the market.

One of the ways Nordstrom has done this is by forming strategic partnerships with other companies. The company features popular brands that don’t sell through many other retail outlets. 

For instance, the company recently set up “mini-shops” for the popular beauty brand Glossier at seven different Nordstrom locations across the U.S. The event was promoting Glossier’s new fragrance launch and was a great source of foot traffic for Nordstrom.  

3. Nordstrom continues to improve its profitability

Nordstrom also continues to improve its profitability through supply chain improvements and more discipline when it comes to expenses. The company did a good job of managing its inventory during the holiday shopping season. And management expects its cost-savings plan to save between $150 million and $200 million this year.

Challenges still lie ahead for Nordstrom, but these are all positive indicators for the company. If the company can continue to improve its execution and increase its digital presence, it may be able to turn things around in the coming years.

Netflix was the best-performing stock of the past decade — but will the momentum continue?

Netflix faced a lot of scrutiny in 2019. For the first time, the streaming giant dealt with a significant amount of competition as companies like Disney and Apple released streaming services.

The “streaming wars” became a frequent topic of conversation as analysts debated whether Netflix can withstand the competition. As a result, the company’s shares encountered a lot of highs and lows over the past year.

Recently, CNBC reported that Netflix was the top-performing stock of the past decade. From 2010 to the end of 2019, the stock rose more than 4,000%, beating out every other stock in the S&P 500.

But will this same momentum carry into the coming decade? Here are three things to expect from Netflix in 2020.

1. The company’s subscriber base should increase

Netflix investors became very concerned when the company lost subscribers during the second quarter of 2019. Fortunately, the company was able to make up for this misstep and exceed its third-quarter guidance. 

During the first three quarters of 2019, Netflix was able to add 19.1 million new subscribers. The company is scheduled to release its fourth-quarter earnings report on Jan. 21. 

This earnings report will be very telling since both Disney and Apple launched their streaming services during the fourth quarter. But Netflix’s subscriber growth will likely continue into 2020.

2. Netflix will continue to expand globally

One of the biggest growth opportunities for Netflix is the possibility of continuing to expand globally. The company’s growth in international markets is outpacing its growth in the U.S. 

Company management has stated that it plans to focus on expanding its non-English original content. This should help Netflix continue to grow its international reach. 

3. Disney won’t be as big of a problem as analysts anticipated

Most likely, Disney won’t be nearly as big of a problem for Netflix as some analysts predicted. Not because Disney’s service won’t be successful — it will be. 10 million new members signed up for Disney+ on the first day it launched, and this growth will continue into 2020.

But the assumption that Netflix subscribers will leave the service for Disney is flawed. Roughly 80% of Disney+ subscribers also have a Netflix account. 
Overall, Netflix is considered a moderate buy on Wall Street with a potential upside of more than 13%. It doesn’t seem like the growth story is over for Netflix just yet.

The stock hit a new 52-week high after exceeding Wall Street’s delivery expectations.

Tesla is starting off 2020 with a bang. This week, the company released its fourth-quarter delivery results, and they handily beat Wall Street’s expectations. This good news caused the stock to rally by nearly 15% and reach a new 52-week high on Friday.

Tesla’s Q4 delivery numbers

During the fourth quarter, Wall Street analysts were expecting Tesla to deliver 106,000 vehicles. The company handily beat this number and delivered 112,000 vehicles. 

The Tesla Model S accounted for 92,550 of these deliveries. The Model S is the company’s lowest-priced vehicle. The pricier Model S and Model X made up 19,450 of the company’s deliveries.

Production also reached 105,000 cars, which is a new record for Tesla. The company’s full-year deliveries came to 367,500 vehicles. This figure falls within the company’s forecasted range of 360,000 to 400,000 vehicles, though it is on the low side. 

However, management pointed out that Tesla only counts a vehicle as being delivered once it’s been sent to the customer, and the paperwork has been finalized. So the final delivery numbers could be slightly higher.

Tesla is also making progress on its Shanghai plant. The company produced just under 1,000 cars in the plant. According to management, the plant is capable of producing over 3,000 units per week.

Analysts are divided when it comes to Tesla

Few companies seem to bring out the bulls and the bears the way Tesla does. Most analysts are deeply divided when it comes to the stock. The average price target on the company is $300.46, which represents a potential downside of more than 32%.

However, Tesla gained a new bull this week in Canaccord Genuity analyst Jed Dorsheimer. The analyst raised his price target on the stock to $515. Dorsheimer has maintained a buy rating on the stock since February of 2019. 

Dorsheimer brushed off the assertion that demand for Tesla vehicles will wane once tax credit expire. He explained, “We believe the trend towards electrification will only accelerate in 2020.”

Wall Street is optimistic about Disney thanks to Disney+ and other strong tailwinds.

2019 was a good year for Disney, largely thanks to the launch of Disney+, the company’s new streaming service. The service launched in November, and more than 10 million people signed up on the first day. 

The demand was so high that the streaming service experienced technical issues in the week following its launch. And now some analysts are predicting that Disney+ will have over 25 million subscribers by the end of the first quarter. 

Does that mean that now is the right time to invest in Disney? Here are a few things to know about the stock in 2020.

Reasons to Be Bullish About Disney in 2020

Wall Street has been bullish on Disney ever since its Investor Day last March. Disney’s CEO Bob Iger outlined the company’s vision and in particular, his goals for Disney+. 

Iger explained the company’s goals for subscriber growth and how long he believes it will take Disney+ to become profitable. But the streaming service is not the only reason to get excited about Disney. 

The company’s other businesses are also performing well. Seven of Disney’s films brought in over $1 billion in 2019 and the recently released Star Wars is on track to do the same. And Disney also continues to enjoy record attendance at its theme parks.

And this past year, Disney finished up the acquisition of the former 21st Century Fox, now known as the Fox Corp. This deal is worth of $80 billion and helped Disney increase its content production capacity. 

And the robust content lineup makes it easier for the company to compete with companies like Netflix and Amazon.   

Bottom Line

Of course, it’s not all smooth sailing for Disney. The Fox acquisition has been a drag on the company’s earnings. However, management doesn’t expect this segment of its business to become profitable until 2021. 

And the company doesn’t expect Disney+ to become profitable for at least another five years. But many analysts believe Disney’s long-term projections for the service are on the low side.

Overall, the company is considered a strong buy by analysts with a potential upside of 7%. Considering the company’s investments in streaming, movies, television networks, and its theme parks, it seems likely Disney’s revenue will be strong for years to come.  

2019 has been a challenging year for retailers, and these three brands are on the verge of becoming irrelevant.

For many brick-and-mortar retailers, 2019 was not a great year. Over 10,000 stores closed their doors this year, including DressBarn, Gymboree, and Payless. And it’s estimated that for every 1% increase in online sales, up 8,500 stores will close their doors. 

Of course, this isn’t true for everyone. Stores like Target and Walmart outperformed the market in 2019, and most analysts agree these companies will continue to be more profitable. 

But the following three companies find themselves at a crossroads. Unless they make some significant changes, each of these retail brands risks becoming irrelevant in 2020.

1. JC Penney

In early August, JC Penney was notified that it was at risk for being delisted from the New York Stock Exchange. The reason? The company’s shares were trading below $1. The company has since regained compliance, but the problems aren’t over for this struggling retailer. 

JC Penney does have a new management team in place, and the company did see improvements during the third quarter. But the company’s sales continue to decline, and it’s still saddled with $4 billion in debt. 

2. GameStop

GameStop’s shares are currently down more than 50% year to date. The company continues to fall short on its quarterly earnings reports, and investors have grown accustomed to hearing bad news.

GameStop used to be a big player in the gaming market, but then customers began shifting to mobile gaming. During its latest earnings report, management reported that sales had declined by 26%.

However, the company is hopeful that it can improve profits by 2021.

3. Victoria’s Secret

Victoria’s Secret used to be one of the most popular lingerie retailers, but the company has experienced a lot of backlash in recent years. Increasingly, consumers are embracing body positivity.

But Victoria’s Secret doesn’t seem to have changed its marketing strategy since the 90’s. The company’s website still features images of rail-thin model. Whereas competitors like Aerie and ThirdLove cater to customers of all sizes.

The company’s management has stated that it plans to re-evaluate every aspect of the brand. But the company’s shares are still trailing by more than 30% this year. 

The stock market had some winners and losers this year. Here are the five best-performing stocks of 2019.

This year has been a good year for the stock market. The S&P 500 is up nearly 30%, and the Dow Jones is up more than 20%. These gains are largely thanks to a few key stocks. Let’s look at five of the best-performing stocks of 2019. 

1. Apple

As of this writing, Apple is up more than 84% in 2019. This year, Apple was able to break the $1 trillion market cap, even in light of the trade war concerns that plagued the company. 

The company experienced some moderate success with its core iPhone business this year. And analysts are looking forward to the pending release of the 5G iPhone. 

But the company saw the biggest gains by expanding other areas of its business. In particular, the company saw the wearables and services segments of its business take off. 

2. Advanced Micro Devices

2019 was a good year for semiconductor stocks. These gains were somewhat surprising, given the ongoing trade war. But the proof is in the numbers, and Advanced Micro Devices is currently up 145% year to date. 

AMD continues to chip away at competitor Intel’s market share by releasing new products. And the company’s operating margins and revenue have continued to improve since 2018. 

3. Microsoft

Microsoft continues to go to battle with Amazon over who will lead the market in cloud computing. Amazon is still in the lead, but 2019 has been a great year for Microsoft. The company’s shares are up 55% year to date. 

And Microsoft recently landed a $10 billion cloud-computing contract with the Pentagon. Major wins like this indicate that there will be more good things to come from Microsoft in the coming year. 

4. Visa

Shares of Visa are up 42% year to date, thanks largely to the growth in cashless transactions. Payment processing companies will continue to be in-demand for years to come, so Visa is likely a good long-term investment thanks to its stable growth.

5. Lam Research

Advanced Micro Devices is not the only win for the semiconductor industry. Not to be outdone, Lam Research Corp. is up 115% in 2019.

The company’s shares jumped by about 14% in October after it reported positive fiscal first-quarter earnings. If Lam can maintain this momentum, the company could do good things in 2020 and beyond.

Is now a good time to invest in Verizon Wireless?

If you’re like most people, you probably didn’t give Verizon Wireless a whole lot of attention in 2019. The stock didn’t have any major drops this year, but it’s also only up 9% from the beginning of the year. 

And most of the media attention went toward T-Mobile and Sprint’s embattled merger. Plus, there is the chance that Dish Network could be entering the telecommunications market very soon.

In comparison, there doesn’t seem to be a lot going on with Verizon. Analysts consider the stock a moderate buy, but overall, Wall Street is pretty lukewarm when it comes to the company. 

But the fact that things have slowed for Verizon right now may indicate that it’s a good time to invest. Here are three things to watch for from Verizon Wireless in 2020. 

1. Competition in the wireless industry will continue to increase

The wireless industry is incredibly competitive, and this will only increase in the coming years. Sprint and T-Mobile continue to go to battle in court over their $26 billion merger. 

And now, several cable companies are offering their own wireless plans, adding more competition to the mix. For its part, Verizon did acquire Yahoo! and AOL, but these acquisitions did little to improve the company’s online presence. 

2. Verizon boosted its subscriber base this year

Verizon got off to a slow start this year in terms of subscriber growth, but things did start to pick up during the second quarter. The company added 451,000 new subscribers during the second quarter and 61,000 subscribers during the third quarter. 

Both of these figures beat Wall Street’s expectations. However, the company significantly increased its marketing and promotional efforts to make this happen.

3. Verizon is building out its 5G network

The biggest opportunity for Verizon is the transition from 4G LTE to 5G. This will provide much faster connection speeds for consumers. 

Verizon is reportedly planning to spend up to $18 billion to build out its 5G network in the U.S. However, the company doesn’t expect 5G to meaningfully contribute to its revenue until 2021.

Overall, if you’re looking for a wireless telecommunications company to invest in, then Verizon may not be a bad bet. But given that the company continues to underperform the S&P 500, there are likely better investments to be found.