Author: AnswerStock

After a rough couple of years, Target stock is up 63% year to date.

The majority of the retail industry has struggled in 2019, mainly because a few companies dominate most of the market share. Target is undoubtedly one of those big players. The stock is up 63% year to date, and it’s one of the few companies that can stand its ground with Amazon. 

However, the future wasn’t always so bright for Target. For several years, Target struggled to adapt to the rising e-commerce trends. And the stock got hit particularly hard from 2017 to 2018.

But this year, it’s like we’re seeing a whole new Target. The company continues to deliver stable earnings, and it continues to improve its stores and the services it offers its customers. 

3 reasons Target is winning in 2019

Listed below are three tailwinds that will continue to propel Target forward in 2019.  

Target is expanding its grocery division

For Target customers, one of the biggest draws is the company’s grocery division. The typical Target customer doesn’t want to stop at three different stores while running errands. 

With Target, you can buy all of your household staples under one roof. And for customers that hate grocery shopping, the company also offers same-day grocery delivery through Shipt.   

Still, many people pointed out that Target’s supply of fresh food leaves something to be desired. That’s why the company is launching a new grocery brand called Good & Gather. It will offer many new products, like salad mixes, fruits and veggies, nut butter spreads, and more.

The introduction of the new line won’t be complete until the end of 2020. However, it should be worth the wait. Target executives expect Good & Gather to become a multibillion-dollar brand. 

Target is partnering with other retailers

Another way Target has boosted its presence is by partnering with other reputable brands. The company recently announced a new partnership with Disney. And the company has partnered with dozens of designers to offer clothing, accessories, and home decor.  

And most recently, Target announced it would help relaunch ToysRUs.com. The company is partnering with TRU Kids, the parent brand of Toys R Us. 

When Toys R Us shoppers visit the new website and try to purchase certain items, they will be rerouted back to Target’s website. This plug could give the company a significant boost over the holidays. 

The company still has room to grow

And finally, the growth story for Target is far from over. The company continues to come up with new initiatives, like its in-store grocery pickup, expanded loyalty program, and free shipping. 

Target has its finger on the pulse of what’s most important to its customers. And this should continue to drive further growth in the coming years.

SnapChat managed to turn things around in 2019, but will the momentum continue?

SnapChat has been one of the most exciting stocks to watch this year. The company’s shares are up 164% year to date, and the company’s recent earnings report showed that its subscriber base is booming. 

The company does an excellent job of consistently appealing to a younger audience. And the company fixed some of the earlier problems with its app. 

But Wall Street is still on the fence when it comes to the stock. SnapChat is considered a moderate buy with an average price target of $18.01, which represents an 18% upside. 

So is SnapChat a buy, or should you hold out a little while longer? Here are three things to know before investing in Snap stock. 

Facebook will continue to pose a problem for Snap

One of SnapChat’s primary appeals with subscribers has always been its unique features. But the problem is, it’s easy for larger companies to replicate those features and steal SnapChat’s subscribers. 

Facebook is one of the best examples of this. Remember that kid who always copied you in school and then received all the credit? That’s probably how SnapChat management feels about Facebook.  

Facebook created a couple of different apps designed to compete with SnapChat, but neither succeeded. Then the company famously copied SnapChat’s Stories feature for both Instagram and Facebook. Stories was a hit on both platforms, with more than 500 million subscribers per day. 

And most recently, Facebook announced its launching a messaging app for Instagram called Threads. The feature allows Instagram users to send photos and videos to people on their friend’s list. The feature closely mirrors SnapChat’s messaging platform. 

The copycatting is a problem because Instagram has over 500 million daily active users. This massively outnumbers SnapChat’s 203 million daily active users. 

The company is still losing quite a bit of money

SnapChat is doing well, and its bottom line continues to grow. But investors can’t ignore the fact that the company continues to lose millions of dollars every quarter. During its most recent quarter, the company posted losses of $255 million.

The fact that the company is losing money doesn’t necessarily mean it’s a poor investment. Amazon lost money for a long time before becoming profitable, and I’m betting there are few people who regret investing in the company.

The problem for SnapChat is that the company continues to play second-fiddle to companies like Facebook. Instead of becoming a leader and dominating the market, the company is easily outmaneuvered and thrown off course by larger companies. 

The company is a turnaround success

And finally, let’s give credit where credit is due. In 2018, SnapChat had a pretty abysmal year, so the fact that it’s been able to turn things around is impressive. It shows a lot about the company’s resourcefulness and ability to adapt to a changing market.

And the company continues to grow its active user base and improve its monetization strategies. The most significant indicator will be whether SnapChat can keep this momentum up in spite of increased competition.

Pepsi beat earnings and revenue forecasts during Q3.

On Thursday, Pepsi released its third-quarter earnings report and the results were just what investors were hoping to see. The company saw gains across the board and beat its revenue and earnings forecasts substantially. 

Best of all, management expects this momentum to carry into the fourth quarter. Here is an overview of Pepsi’s third-quarter results:

• Revenue: $17.19 billion instead of $16.93 billion forecasted
• Adjusted earnings: $1.56 per share instead of $1.50 forecasted

3 Takeaways from Pepsi’s Q3 earnings

Investors reacted positively to the latest earnings report and Pepsi’s shares rose 3% on Thursday. Listed below are the three biggest takeaways from the earnings report.

1. Revenue grew but so did the company’s spending

Most of Pepsi’s third-quarter growth can be attributed to an uptick in spending on advertising. Advertising costs are always a bit of a trade-off because while Pepsi’s revenue jumped, its net income also fell slightly.

According to Pepsi CFO Hugh Johnston, Pepsi’s ad spending is up 12% this year. But it certainly seems to be money well spent since the company saw its organic revenue grow 4.3% during the most recent quarter.   

2. The company saw growth across its various brands

During the third quarter, Pepsi saw strong growth across several of its brands. The company’s Frito Lays brand, which includes Cheetos and Doritos, grew by 5.5%. And Pepsi saw its healthier options, like Bare and Off the Eaten Path, increase as well. 

Pepsi’s beverage business saw strong growth as well. Gatorade and Gatorade Zero saw substantial gains during the most recent quarter. And the company’s flavored water brand Bubly continues to take market share from La Croix. 

3. Management expects to hit its full-year growth target

Going forward, Pepsi reiterated its guidance for the fourth quarter. Pepsi CEO Ramon Laguarta said the company expects it will meet its full-year target of 4% organic revenue growth. 

Final thoughts

2019 has been an excellent year for Pepsi and the shares are currently up more than 30%. And the fact that the company is experiencing strong organic sales growth should be very attractive to potential investors. It demonstrates that the brand still has strong consumer demand and is adapting to the changing marketplace.

The company’s third-quarter production and delivery numbers didn’t meet Wall Street’s expectations.

This week, Tesla announced that it delivered 97,000 vehicles during the third quarter. These numbers broke down to 79,600 Model 3 cars and 17,400 Model S and X cars. 

The third-quarter deliveries are a new record for Tesla and beat the company’s second-quarter deliveries of 95,200 vehicles. But Wall Street was unimpressed by these results, mostly because they fell on the low side of what investors were expecting. 

Investors were expecting the company to deliver between 95,000 and 100,000 vehicles. The company’s shares fell more than 7% as a result.

The backstory on Tesla

Tesla’s production and delivery numbers are one of its most closely watched metrics. Mostly because this is a direct indicator of how strong the demand is for the company’s vehicles. It also gives investors a little insight into what they can expect from the company’s upcoming earnings report. 

In 2019, CEO Elon Musk has been building up a lot of excitement around the company’s production and delivery numbers. Just last week, a leaked email from Musk stated that the company “has a shot” at finally delivering 100,000 vehicles in a quarter.

This kind of talk is nothing new since Musk always sets the bar high for sales and deliveries. He previously forecast that the company will deliver between 360,000 and 400,000 vehicles in 2019. 

If Tesla met these numbers, it would be a 45% to 65% increase from 2018. If Tesla can deliver 105,000 vehicles during the fourth quarter, that figure is still within reach. 

Analysts worried about demand for Tesla

Tesla is one of those stocks that always seems to bring out the Wall Street bulls and bears. There is very little middle ground when it comes to analysts’ opinions of the company. 

Of the 26 analysts currently reviewing the stock, eight recommend holding it, seven recommend buying, and 11 analysts recommend selling. And on Wednesday, JMP Securities analyst Joseph Osha turned a bit bearish on the company. 

Osha downgraded Tesla, saying that for the first time, he’s concerned about the company. According to Osha, operational issues didn’t prevent the company from delivering more vehicles. So the deliveries miss could indicate waning customer demand. 

Ultimately, we’ll know more once the company delivers its third-quarter earnings on Oct. 24.

A JP Morgan analyst issued a word of warning about McDonald’s third-quarter earnings. 

This week, shares of McDonald’s fell slightly after a JP Morgan analyst questioned the company’s pending third-quarter results. Analyst John Ivankoe lowered his guidance for the company’s same-store sales and full-year guidance. 

After talking with company leadership, Ivankoe said the company’s guidance is “trending softer than we thought.” Recent McDonald’s promotions haven’t been getting the same level of attention that they normally receive. 

In spite of the forewarning from Ivankoe, the stock is up 24% from a year earlier. And Ivankoe did maintain his overweight rating and $230 price target on the stock. Listed below are a few reasons the McDonald’s momentum should continue.

McDonald’s is cashing in on the meat-free trend

McDonald’s is currently testing out a new sandwich that is called the P.L.T. This stands for plant, lettuce, and tomato and uses Beyond Meat’s signature patties. The company is testing out this sandwich in 28 different locations across Canada. 

McDonald’s decided to try out this new strategy after seeing Burger King’s success using Impossible Foods patties. Meat substitutes continue to grow in popularity and McDonald’s is probably making a good choice to get in on this trend. 

The company’s sales continue to grow

Current McDonald’s investors can take heart in the company’s record of strong sales. During the most recent quarter, McDonald’s saw its global comparable sales increase by 6.5%. 

Even Ivankoe acknowledged the company’s strong fundamentals as a reason to be optimistic about the stock. However, Ivankoe does expect the company’s comparable sales to fall to 5% but even this would be pretty solid growth.  

McDonald’s is taking advantage of third-party apps

In the past year, one of the biggest drivers for McDonald’s has been its use of third-party delivery apps. At a time when many companies are seeing their in-store traffic slow or stall, third-party delivery apps are a great way to make up for this. These apps make the company’s food even easier to access.

However, Ivankoe did issue a word of caution when it comes to meal delivery apps. Ivankoe wrote, “McDonald’s contributed significant scale to Uber’s UberEats platform, and UberEats in turn used that delivery network to add thousands of restaurants that compete effectively against McDonald’s.” 

This week the company announced it is filing for Chapter 11 bankruptcy protection.

For many companies, it’s tough to be in the retail business right now. This is undoubtedly the case for Forever 21, which announced it is filing for Chapter 11 bankruptcy this week. 

The company plans to close 178 stores across the U.S. and exit many of its locations across Asia and Europe. The company will maintain its locations across Latin America and Mexico. 

Forever 21 obtained $275 million in financing from JP Morgan and $75 million in capital from TPG Sixth Street Productions. These funds will allow the company to continue to operate throughout its bankruptcy. 

Details about the bankruptcy

Forever 21 is a privately-held company but the bankruptcy is significant because it demonstrates many of the fears people have about the retail sector in general. The company signifies consumers changing tastes, especially when it comes to mall-based retail stores.

Forever 21 took off during the early 2000s thanks to its inexpensive designer-knock off styles. But according to Linda Chang, the company’s vice president, the company’s mistake was expanding too quickly too soon. 

The company expanded to 47 countries to a short period of time and with that expansion came added complexity. Then technology began changing at a rapid pace and consumer preferences continue to shift online.

The news didn’t come as a huge surprise since there were speculations that the company was planning to file for bankruptcy. Forever 21 has been steadily losing customers and in-store traffic for a long time. Plus, the company had to deal with competitors like Zara and H&M.   

What’s next for Forever 21?

On the company’s Chapter 11 filing, it listed its total assets between $1 billion and $10 billion. One of the goals of the bankruptcy is to restructure the company and move forward as a smaller entity.  
Chang said that the company still plans to operate its website and it doesn’t plan to exit any major markets within the U.S. Chang says the company hopes to “…simplify things so we can get back to doing what we do best.”

A Wedbush analyst upgraded the stock and raised its price target.

Shares of Bed Bath & Beyond are up more than 5% on Monday morning after the stock was upgraded by Wedbush from neutral to outperform. This is a bit of much-needed good news for the company, which is set to release its second-quarter earnings this Wednesday. 

And according to Wedbush analyst Seth Basham, investors shouldn’t discount Bed Bath & Beyond just yet. Basham said he believes the company will be able to stabilize its earnings in the coming years.

So is Bed Bath & Beyond a lost cause or is there a comeback story for the stock? Here are a few things you need to know. 

Bed Bath & Beyond Struggles to Remain Competitive 

At one point, Bed Bath & Beyond was one of the biggest retailers for home goods. But over the past five years, the company faced increased competition from companies like Amazon and Target. The company’s sales and in-store traffic declined over the past five years. 

This week, investors are expecting Bed Bath & Beyond to report adjusted earnings of 29 cents per share and $2.77 billion in revenue. Even if the company reaches these figures, both are down more than 5% from where the company was a year earlier. 

The Company Has a Rebuilding Plan

Bed Bath and Beyond’s comparable sales were down 7% during the previous quarter. This means the company’s sales have declined for the past three consecutive quarters. But according to interim CEO Mary Winston, the company has a plan to turn things around.

The company will close all of its underperforming stores, cut costs substantially, and reduce its hefty inventory load. But the company is most focused on bringing traffic back to its stores. On Wednesday, investors will be looking for signs that this is starting to happen.

Expectations Are Low for Bed Bath & Beyond

Hopefully, the company will deliver good news this Wednesday. But heading into the earnings report, expectations couldn’t be much lower. Bed Bath & Beyond hasn’t demonstrated that it has the strategy or vision to be able to compete with companies like Amazon.  

Ultimately, most analysts take a wait and see approach when it comes to the company. Of the 12 analysts currently reviewing the stock, eight give it a hold rating. However, the average price target is $14.50, which represents an upside of more than 38%. This could be a sign that Wall Street believes a comeback story is possible. 

Shares of Peloton fell 11% after the company’s IPO on Thursday.

This week, Peloton joined a growing list of companies that crashed at burned during their initial public offerings. On Thursday, the company’s shares fell 11%, bringing its total market valuation to $7.2 billion. 

Shares of Peloton are currently trading at $25.09, which is lower than its IPO price of $29 per share. This makes Peloton the second-worst IPO of the year, falling short only to SmileDirectClub, which fell 28% in its market debut. 

Peloton’s poor performance even caused Endeavor Group Holdings to postpone its own planned IPO. Last week, WeWork’s parent company postponed its public offering as well. 

The backstory on Peloton

Peloton was off to a shaky start even before its market debut. The company has been criticized due to heavy losses and it’s currently battling a $300 million lawsuit over its music licensing fees.

Peloton makes connected fitness equipment like indoor bikes and treadmills. The company’s fitness equipment is somewhat pricey, with indoor bikes costing $2,245 and treadmills costing around $4,295.

The treadmills come with an HD touchscreen where customers can stream classes. To participate in classes, customers pay an additional $39 per month. 

Many consumers are worried about a coming recession, so investing in fitness equipment and workout classes may not be on most people’s radar. However, Peloton is starting to offer memberships below $20 that don’t require any equipment. This could help the company appeal to more budget-conscious customers. 

And Peloton does have 1.4 million members and it generated $915 million in revenue last year. But the company’s business model comes with hefty expenses as well. Peloton lost $195.6 million last year, which is up from $47.9 million in losses the previous year. 

What’s next for Peloton? 

In a recent interview, Peloton CEO John Foley said that’s he’s trying not to get too discouraged by the company’s stock performance. Foley said, “Obviously, we’d rather have it going the other way, but I don’t think it’s a reflection on our fundamentals or the excitement of investors who came in.”

Peloton does have a compelling business model and its built a strong base of loyal customers. So it’s possible that the IPO miss is nothing more than a temporary setback for the company. 

The company’s shares soared after a positive earnings report.

This week, Nike released its fiscal first-quarter earnings report and the results beat analyst expectations. By midday, the company’s shares rose more than 6% to reach a new 52-week high of $92.79. Nike’s shares are up 22% year to date.

According to CEO Mark Parker, this is the result of recent investments the company made. During the first quarter, Nike focused on improving its sneaker line as well as building the e-commerce side of its business. Here is an overview of Nike’s first-quarter earnings results:

• Earnings per share: 86 cents per share, as opposed to forecasted 70 cents
• Revenue: $10.66 billion, as opposed to forecasted $10.44 billion

Things that went well during the first quarter

This year, one of Nike’s main focuses has been to do a better job appealing to women. The company is working on being more inspirational, which is a message that is more appealing to women. The company used tennis champ Serena Williams as its brand ambassador.

And Nike rolled out dozens of new styles of sports bras and yoga pants. These investments seem to have paid off since its women’s business grew by double digits during the first quarter. 

The company also launched a subscription service for kids called Nike Adventure Club.  It’s designed for kids ages two to 10-years-old and lets parents order new shoes on a monthly, bi-monthly, or quarterly basis. 

This is the first subscription service ever launched by a major sneaker retailer. Nike was able to capitalize on back-to-school shopping, mostly thanks to this subscription service. According to a Nike spokesperson, the kids’ section is one of the fastest-growing segments on the company’s website. 

All of these factors helped the company’s revenue grow by more than 7% year over year. Sales in North America were up by 4% while revenue in China grew by 27%, even in spite of the ongoing trade war. The company’s gross margins grew by 45.7% as well.

What’s next for Nike?

Nike did well during the first quarter and analysts responded favorably to the news. An analyst at Cowen & Co. raised its price target from $100 per share to $103, citing the company’s strong growth potential. A Jefferies analyst also raised the price target, saying Nike “crushed it” during the first quarter. 

Going forward, Nike expects more of the same during the fiscal second quarter. The company reaffirmed its full-year fiscal guidance and raised its outlook for its gross margins. 

Devin Wenig steps down after serving as CEO of eBay for five years.

On Wednesday, shares of eBay were hit after the company announced that CEO Devin Wenig is stepping down. The company’s stock fell nearly 2% after the announcement. Here is an overview of the leadership transition and what to expect from eBay going forward.

Details on the leadership change. 

Devin Wenig became CEO of eBay in 2014 and led the company through several transitions, including a spin-off from PayPal. CFO Scott Schenkel will step in as interim CEO while the board looks for a replacement.

Chairman Thomas Tierney released a statement praising Wenig for acting as “a tireless advocate for driving improvement in the business.” But Tierney concluded by saying that both Wenig and the board agree that it’s time for the company to move forward with new leadership.

Wenig also addressed his resignation over Twitter, saying that it’s become clear that he and the board are not on the same page. Wenig added, “It has been an incredible privilege to lead one of the world’s great businesses for the past eight years.” 

The company also announced it will continue an operating review of its asset portfolio with the assistance of Goldman Sachs. The company is reportedly considering the sale of its StubHub ticket exchange and eBay Classified Group.

What’s next for the company?

eBay was once considered a leader in the e-commerce market but the company has struggled in recent years. The company has dealt with increased competition from businesses like Shopify, Amazon, and Walmart. 

eBay has 182 million global active subscribers but the volume of goods sold on its platform has continued to decline over the years. This caused eBay’s shares to fall sharply toward the end of 2018. 

Since then, eBay has shifted its focus and found new ways to improve the customer experience on its platform. eBay implemented a new payment platform and a promoted listings platform. These efforts have definitely paid off and the stock is up 38% year to date. 

During the announcement, Tierney stated that the company plans to “focus on our strategic plan and product initiatives, while also ensuring a great customer experience and a smooth transition.”