Supreme Court ruling moves retail stocks

Physical retailers rise, online retailers drop after Supreme Court tax ruling

Supreme Court ruling moves retail stocks, Stockwinners
Supreme Court ruling moves retail stocks, Stockwinners

Shares of brick-and-mortar retailers are rising, while shares of e-commerce firms are slipping, after the Supreme Court ruled that online retailers can be required to collect sales taxes in states where they have no physical presence.

SUPREME COURT RULING

On Thursday, the Supreme Court sided with the state of South Dakota in a fight it brought against Wayfair (W) to require a business that has no physical presence in the state to collect its sales tax.

Supreme Court ruling moves retail stocks, Stockwinners
Supreme Court ruling moves retail stocks, Stockwinners

The Supreme Court ruled in a 5-to-4 vote that a 1992 judgement in Quill Corporation v. North Dakota regarding the physical presence rule was “unsound and incorrect,” according to a judgement posted to the high court’s website.

Justice Anthony Kennedy, in writing for the majority opinion, said the Quill decision had distorted the economy and resulted in states losing annual tax revenues between $8B-$33B.

“Quill puts both local businesses and many interstate businesses with physical presence at a competitive disadvantage relative to remote sellers,” he wrote.

“Remote sellers can avoid the regulatory burdens of tax collection and can offer de facto lower prices caused by the widespread failure of consumers to pay the tax on their own.”

WHAT’S NOTABLE:

Following the ruling, industry trade organization National Retail Federation issued a statement saying,

“Retailers have been waiting for this day for more than two decades. The retail industry is changing, and the Supreme Court has acted correctly in recognizing that it’s time for outdated sales tax policies to change as well.

This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both.”

ANALYST COMMENTARY

KeyBanc analyst Edward Yruma called the ruling a negative for Wayfair, arguing that it may reduce some of the price differential that has helped it gain share from traditional peers.

The ruling is also a negative, but to a lesser degree, for eBay (EBAY) and Etsy (ETSY), said Yruma, who views the impact on those two as more related to compliance and implementation.

He adds that the news could be a modest positive for retailers of high-ticket and branded products, such as Best Buy (BBY), Home Depot (HD), Lowe’s (LOW), La-Z-Boy (LZB), Kirkland’s (KIRK), RH (RH) and Williams-Sonoma (WSM).

PRICE ACTION

At Thursday midday, Target (TGT) rose 1.8%, Walmart (WMT) was up 0.7%, Costco (COST) rose roughly 1.1% while Amazon (AMZN) was down 0.4%, Etsy dropped about 2.5%, eBay fell 1.4% and Wayfair (W) was down 1.2%.

In addition, Avalara (AVLR), a software company focused on automated tax compliance that recently held its initial public offering, gained 17.1%.


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Amazon higher on Prime members

Amazon rises as Prime reaches 100M paid members

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Amazon higher on Prime members

Amazon’s (AMZN) CEO Jeff Bezos told investors that the company has exceeded 100M paid members globally and has shipped more than 5B items with Prime worldwide.

The good news for the e-commerce giant may not end there, as Morgan Stanley analyst Brian Nowak told investors that his analysis shows that Amazon has gained 1.5% of U.S. apparel market share in 2017 and may achieve number one U.S. apparel market share in 2018 as Prime members and Millennials shift spending to Amazon and away from traditional brick and mortar retailers.

100M PAID MEMBERS

According to a regulatory filing, Amazon said that it has exceeded 100M paid Prime members globally 13 years post-launch.

In 2017, Amazon shipped more than 5B items with Prime worldwide, and more new members joined Prime than in any previous year — both worldwide and in the U.S., the company said, adding that members in the U.S. now receive unlimited free two-day shipping on over 100M different items. The company expanded Prime to Mexico, Singapore, the Netherlands, and Luxembourg, and introduced Business Prime Shipping in the U.S. and Germany.

Additionally, CEO Jeff Bezos informed shareholders that Amazon Music now has tens of millions of paid customers, with Amazon Music Unlimited expanding to more than 30 new countries in 2017.

GAINING APPAREL MARKET SHARE

In a research note to investors this morning, Morgan Stanley’s Nowak said his analysis shows that Amazon gained 1.5% of U.S. apparel market share in 2017, largely at the expense of department stores.

According to his work around Amazon’s apparel gross merchandise value, the analyst estimates the e-commerce giant continues to be the second largest U.S. apparel retailer, trailing only Walmart (WMT), as the company has grown to about 7.9% of the overall U.S. apparel market, excluding shoes, or $21.1B apparel gross merchandise value.

Further, #Nowak told investors he expects Amazon to achieve the number one spot in 2018, as Prime members and Millennials shift spending to Amazon and away from traditional brick and mortar retailers.

The analyst pointed out that Amazon’s 2017 share gains look to have come largely at the expense of department stores, estimating Sears (SHLD), Macy’s (M) and J.C. Penney (JCP) lost 0.8% share in 2017, with shareholding remaining roughly flat for Target (TGT) and Kohl’s (KSS).

L Brands (LB) lost share due to the elimination of its swimwear and apparel categories, he contended.

Additionally, his U.S. apparel market deep-dive indicated that Walmart and Costco (COST) showed “impressive gains” despite a weak industry backdrop. Among the Softline retailers, Gap’s (GPS) Old Navy, Ross Stores (ROSS) and Nordstrom’s (JWN) Nordstrom Rack also added 10-15 bps of market share in 2017, he added.

Nowak reiterated an Overweight rating and $1,550 price target on Amazon shares.

PRICE ACTION

In Thursday’s trading, shares of Amazon have gained 2% to $1,554.90.


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Bed Bath & Beyond tumbles after guidance

Raymond James  says sell Bed Bath & Beyond after guidance

Bed Bath & Beyond tumbles after guidance, Stockwinners
Bed Bath & Beyond tumbles after guidance,

Shares of Bed Bath & Beyond (BBBY) are sliding after the company announced better than expected fourth quarter results but issued a weaker 2018 forecast.

Following the news, several Wall Street analysts cut their price targets on the stock, while Raymond James analyst Beryl Bugatch downgraded Bed Bath & Beyond to Underperform, a sell-equivalent rating.

RESULTS

Last night, Bed Bath & Beyond reported fourth quarter earnings per share of $1.48 and revenue of approximately $3.7B, both above consensus of $1.39 and $3.68B, respectively.

However, the company also said that it sees FY18 EPS in a low-to-mid $2 range, with consensus at $2.76.

Additionally, Bed Bath & Beyond outlined its “roadmap for continuing the evolution of its foundational structure” with the goals of: growing its comparable sales, which it expects to begin in fiscal 2018; moderating the declines in its operating profit and net earnings per diluted share, in fiscal 2018 and fiscal 2019; and growing its net earnings per diluted share by fiscal 2020.

SELL, SAYS RAYMOND JAMES

In a post-earnings note, Raymond James’ Bugatch downgraded Bed Bath & Beyond to Underperform from Market Perform.

The analyst noted that the company’s management announced multiple initiatives ranging from new store concepts to new organizational structures, to new investments in technology that will come at a cost, as underscored by management’s view for continuing operating profit declines in FY18 and FY19.

Despite the array of initiatives announced, a key issue for the analyst is that the fleet of over 1,000 legacy Bed Bath & Beyond stores continue to deliver in-store mid-single-digit comparable sales declines.

Bugatch argued that it is “Beyond” him that management did not cite a remodeling of its flagship store base that he finds “increasingly unattractive” due to being dated, cluttered and crowded.

Without some underlying growth in management generated earnings over the next two years, shareholder value is likely to erode further, he added. Nonetheless, Bugatch pointed out that at its current valuation, Bed Bath may attract activist interest.

TARGETS CUT

Meanwhile, Morgan Stanley analyst Simeon Gutman lowered his price target for Bed Bath & Beyond to $16 from $20 as he is not convinced its revenue will respond to the company’s initiatives.

The analyst told investors that beyond a lift from the Babies R’ Us bankruptcy, it is hard for him to see how the company can drive positive same-store sales without the aid of promotions.

Gutman reiterated an Underweight rating on the shares.

His peer at JPMorgan also lowered his price target for Bed Bath & Beyond to $16 from $18.

Analyst Christopher Horvers noted that the company’s negative comparable sales in Q4 and over the past two quarters are “particularly disappointing” as is the acceleration in gross margin declines. The analyst also kept an Underweight rating on the shares.

Additionally, Wedbush analyst Seth Basham, Credit Suisse’s Seth Sigman, and Loop Capital’s Anthony Chukumba all lowered their price targets on the name to $18, $20 and $18, respectively, while reiterating neutral-equivalent ratings.

PRICE ACTION

In Thursday’s trading, shares of Bed Bath & Beyond dropped over 19% to $17.39.


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Finish Line sold for $558 million

Finish Line to be acquired by JD Sports Fashion for $13.50 per share 

Finish Line sold for $558 million

Finish Line (FINL) announced that it has entered into a merger agreement providing for JD Sports Fashion to acquire 100% of the issued and outstanding Finish Line shares at a price of $13.50 per share in cash representing an aggregate deal value of approximately $558M.

JD is the leading European retailer of sports, fashion and outdoor brands.

The terms of the merger represent a premium of 28 percent for Finish Line shareholders compared to the closing price of Finish Line’s shares of $10.55 as of March 23, 2018.

This provides an excellent strategic fit for Finish Line and JD.

Finish Line moves into a stronger position to compete as part of a global enterprise that leads in the industry.

JD gains a significant physical and online retail presence with direct access in the US which they have long identified as a highly attractive growth opportunity.

Finish Line and JD together create a leading global, premium, multichannel retailer of sports, fashion and outdoor brands who embraces the latest online and in-store digital technology. Upon closing of the agreement, the Finish Line executive team will continue their involvement with the business.

The expected timeline to close on this agreement is no earlier than June 2018.

FINL closed at $10.55.


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Barron’s is bullish on Facebook, La-Z-Boy

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:

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Stockwinners offers Barron’s review of stocks to buy

BULLISH   MENTIONS:

Barron’s lists potential takeover targets in cloud software – Shares of young cloud software companies like MongoDB (MDB) and SendGrid (SEND) have soared since the Nasdaq’s bottom on February 8, in part on speculation of a takeover, Barron’s Tiernan Ray contends. Takeover targets form a long list in addition to the aforementioned, and include Friday’s initial public offering Dropbox (DBX), Appian (APPN), Veeva Systems (VEEV), Atlassian (TEAM) and ServiceNow (NOW), Ray writes.

La-Z-Boy shares could rally 20% within a year or two – La-Z-Boy (LZB) shares currently trade at 13.8 times forecast earnings for the next 12 months, which is well below the small-cap Russell 2000 Index’s price/earnings ratio of 25, the Standard & Poor’s 500 index’s 17, and its own five-year average of 16.3 times forward earnings, writes Barron’s Brett Arend. He believes the stock, which closed Friday at $28.75, could merit a valuation of $36 per share, or roughly 20% higher, within a year or two “by simply getting back to its average five-year multiple.” Higher consumer spending, a new relationship to sell on Amazon.com (AMZN), and successful efforts to reach millennials could propel the shares even higher, Arend contends.

Time Warner shares look appealing with antitrust trial under way – Time Warner (TWX) investors face a “win-win” scenario with the antitrust trial for AT&T’s (T) proposed takeover now under way in Washington, Andrew Bary of Barron’s writes. Time Warner shares “look appealing, based on their underlying value and AT&T’s strong chances of winning,” Bary contends. He notes the stock closed Friday roughly $11 below the current value of AT&T’s cash and stock bid, worth $103.60 per share. The 12% deal spread is appealing with “many observers” believing AT&T and Time Warner will prevail over the U.S. government, according to Bary. He adds that while Time Warner shares could fall $5 if the government wins, some analysts think the stock will quickly recover to its current price of $92.57.

Interactive Brokers tops Barron’s list of best online brokers – Interactive Brokers (IBKR) sits atop Barron’s 23rd annual ranking of The Best Online Brokers. Interactive scored highly in trading experience, range of offerings, and portfolio analysis, Theresa Carey writes in a feature story for this weekend’s magazine. Interactive Brokers is followed by Fidelity, TD Ameritrade (AMTD), Charles Schwab (SCHW), TradeStation, Merrill Edge (BAC), E-Trade (ETFC) and tastyworks in Barron’s annual ranking.

Facebook may now be more tempting to investors – In its cover story titled “Facebook Comes Under Siege,” Barron’s says Facebook  (FB) shares may be more tempting to investors following last week’s 14% decline. With more than 2B users, however, Facebook is “almost certain” to not walk away unscathed as the top target for privacy concerns, Jon Swartz writes. Nonetheless, with nearly $42B in cash and investments, Facebook has the flexibility to diversify into other business lines, as it did with Instagram and WhatsApp, Swartz adds.


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Barron’s is bullish on Allergan and Gaps

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:

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Barron’s is bullish on Gaps

BULLISH   MENTIONS:

Allergan shares could rise 20% or more– New competition to Allergan’s top product, Botox, and the loss of patent exclusivity for its second biggest, the dry-eye treatment Restasis, have left investors with “worry lines,” Vito Racanelli writes in this week’s edition of Barron’s.

However, Racanelli says concerns are way overdone as the company’s pipeline of new drugs should eventually replace the lost revenue from products going off patent. The shares could rise 20% or more, to $200-$225 by the end of 2019, Barron’s adds.

Old Navy may lift Gap (GPS) by 25% – Old Navy is enjoying fast sales growth and plump profit margins but is trapped inside a Gap, a name that has been an investor turnoff, Jack Hough writes in this week’s edition of Barron’s.

Old Navy contributes close to half of company sales and within two years could generate three-quarters of profits, and yet Gap shares trade at just 12 times projected earnings for the next four quarters, which is one sign Gap could have plenty of upside left – perhaps 25% or more over the coming year, he adds. GPS closed at $31.74.

CAUTIOUS MENTIONS:

Broadcom Plan B looks complicated – After Broadcom’s (AVGO) bid for Qualcomm (QCOM) ended last week after President Trump blocked it on grounds of national security, the Wall Street now wants to know what the former will try to buy as plan B, Tiernan Ray writes in this week’s edition of Barron’s. The two most heavily speculated-about targets are Xilinx (XLNX) and Micron Technology (MU), he notes, adding that several others are conceivable, including Microchip Technology (MCHP), Marvell Technology Group (MRVL), Maxim Integrated Products (MXIM), and Analog Devices (ADI). However, with nearly $18B in 2017 revenue, Broadcom is big enough to make finding targets that matter challenging, he contends.

Goldman Sachs’ next CEO will have to fix trading– In a follow-up story, Barron’s notes that Goldman Sachs (GS) was once known for its trading prowess but has recently humbled by a trading slump. The bank has created something of a hedge with its apparent choice of successor, David Solomon, a lender and investment banker but not a trader, the report says. If a long-awaited trading rebound materializes in the quarters ahead, CEO Lloyd Blankfein can hand over the keys with a grin, but if not, the Solomon era could see Goldman reduce exposure to trading, Barron’s points out.


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Stitch Fix shares could unravel at the seam

Stitch Fix drops after earnings,  analyst sees lock-up bringing pressure

Stitch Fix drops after earnings. Stockwinners.com
Stitch Fix drops after earnings

Shares of Stitch Fix (SFIX) dropped in Tuesday morning trading following the company’s quarterly earnings report.

The personal shopping and clothing provider saw revenue come in above the Wall Street consensus and posted a 31% year-over-year increase in active clients.

Following the earnings report, an analyst at JPMorgan estimated that about 31M shares will be released from lock-up on Wednesday, which could create near-term weakness.

EARNINGS AND GUIDANCE

After the market close on Monday, Stitch Fix reported second quarter adjusted earnings per share of 7c, slightly exceeding analysts’ 6c consensus, though its EPS including items was 2c. Revenue for the quarter of $295.5M beat the $291.24M consensus and Stitch Fix said it grew active clients to 2.5M, an increase of 588,000 and 31% year-over-year.

Looking ahead, Stitch Fix forecast third quarter revenue of $300M-$310M, at the high end of analysts’ $300.29M consensus, and fiscal 2018 revenue of $1.19B-$1.22B, against the Street consensus of $1.2B.

On its quarterly earnings conference call, Stitch Fix said its net revenue per active client for the 12 months ended January 27 was $437, a decrease of 3.9% vs. last year.

The company commented, “This decline was primarily driven by our continued and growing strategic expansion into Men’s and lower price point merchandise. Although our male clients on average have a lower purchase frequency, which dilutes our overall net revenue per active client, we continue to be pleased with the revenue contribution and profitable unit economics of the Men’s category.

Similarly, we’ve been encouraged by our ability to serve lower price point clients effectively and plan to further penetrate this market.”

WHAT’S NOTABLE

Stitch Fix’s quarterly earnings report was its second as a public company.

The company’s IPO in November was overshadowed by the disappointing IPO of another subscription service, Blue Apron (APRN), as well as a threat from Amazon’s (AMZN) Prime Wardrobe and Nordstrom’s (JWN) Trunk Club.

Stitch Fix, which debuted at $15 per share, has seen its shares gain over 50% since November.

ANALYST COMMENTARY

In a research note to investors, JPMorgan analyst Doug Anmuth estimated that about 31M Stitch Fix shares will be released from lock-up before the market open on Wednesday, March 14, which could create near-term weakness.

#Anmuth explained that Stitch Fix’s IPO held a price-triggered lock-up agreement where 35% of the locked-up shares become eligible for release beginning 90 days after the IPO if certain criteria are met, including shares closing 25% or more above the IPO price on 10 out of 15 consecutive trading days and if the company is not in its trading black-out period.

The analyst noted that Stitch Fix qualified for the price and reporting threshold last month, but since this occurred during its black-out period, shares do not qualify for release until one day post-earnings.

While Anmuth remains confident in Stitch Fix’s market opportunity and ability to stabilize growth, he thinks growth will become more challenging as the company has passed the period of heavy viral growth and margin compression is likely through fiscal 2019.

The analyst has a Neutral rating and $26 price target.

PRICE ACTION

Shares of Stitch Fix are down 2% to $24 in Tuesday’s trading.


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Barron’s in bullish on Citi, bearish on GE

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review of stocks to buy, stocks to watch

BULLISH   MENTIONS: 

Hovnanian (HOV) stock too cheap to ignore- Hovnanian Enterprises offers an interesting speculative bet, because more than a decade’s worth of problems are reflected in the price, Brett Arends writes in this week’s edition of Barron’s. A successful resolution of its legal issues, a corporate turnaround, a takeover, or a continued recovery in the U.S. real estate market are all potential catalysts, he adds.

JPMorgan, Walmart cash flow yields exceed dividend yields – The cash flow yields of JPMorgan (JPM), Johnson & Johnson (JNJ), Walmart (WMT), Pfizer (PFE), Cisco (CSCO), AbbVie (ABBV), PepsiCo (PEP), 3M (MMM), Bristol-Myers (BMY), United Technologies (UTX), Texas Instruments (TXN) and Abbott Laboratories (ABT) exceed their dividend yields, a good signal for dividend coverage and growth, Lawrence Strauss writes in this week’s edition of Barron’s.

Alphabet, Citi well positioned for later stages of market rally – It is time for investors to think about how and when bull markets end, Jack Hough writes in this week’s edition of Barron’s. Groups to favor now include financials, which benefit from rising interest rates, and industrials, he notes, adding that technology still looks attractive. Alphabet (GOOG; GOOGL), Lam Research (LRCX), Citigroup (C), and Cummins (CMI) are all well positioned for the later stages of a long market rally, Hough contends.

Bears, bulls battle over Under Armour – In a follow-up story, Barron’s says that Under Armour (UA) reported fourth quarter revenue that beat Wall Street’s estimate, but is difficult to tell whether the revenue upside represents a turning point for the business. Bulls and bears both found something to support their arguments, as revenue increased but gross margin declined while inventories swelled and store count rose 22%, the report notes.

BEARISH  MENTION:

General Electric stock could drop another 10% – General Electric (GE) lost $6B in 2017 after a series of charges and impairments, cut its dividend by 50%, and its accounting is under investigation by the Securities and Exchange Commission, but lately it has been attracting fresh attention from value-oriented investors, Andrew Bary writes in this week’s edition of Barron’s. Nonetheless, the stock is not a bargain and could drop another 10% or more, he contends


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Bed Bath & Beyond tumbles on competition

Bed Bath & Beyond sinks after analyst says sell with competition rising

Bed Bath & Beyond tumbles on competition. Stockwinners.com
Bed Bath & Beyond tumbles on competition

Shares of Bed Bath & Beyond (BBBY) dropped in Friday morning trading after an analyst downgraded the stock to his firm’s equivalent of a Sell rating, citing concerns over the growth and margin outlook relative to peers.

ANALYST TURNS BEARISH

JPMorgan analyst Christopher #Horvers downgraded Bed Bath & Beyond to Underweight, his firm’s equivalent of a Sell rating, and cut his price target for the shares to $18 from $21.

In a note to clients titled “If you can’t comp positively now…”, Horvers noted that the stock has run up 16% since the House passed the tax bill in November, and recent estimate revisions suggest the Street is assuming 50% flow through of tax savings.

He believes this could prove “aggressive” considering the increased competition in the home furnishings space and Bed Bath & Beyond’s need to invest in advertising, price and infrastructure.

Horvers doesn’t see a turn “in sight” for the company’s comps given that the retailer was unable to post positive same-store sales during the critical holiday season despite a “robust” consumer backdrop.

Bed Bath & Beyond posted a 0.3% decline in SSS last quarter despite including November, “which was arguably the best month of the year for retailers.”

Additionally, the analyst noted that his work indicates that trends have slowed sequentially quarter-to-date, in contrast to a string of positive pre-announcements from retailers. He sees margin pressure getting worse before getting better and believes that sales may take longer to rebound.

COMPETITORS

Bed Bath & Beyond competes with offerings from Amazon (AMZN) and Target (TGT), as well as companies including Kohl’s (KSS), Overstock (OSTK) and Wayfair (W).

Earlier this month, Loop Capital said Amazon has become “more aggressive” in its pricing strategy, and that in a study across a basket of 50 items for both companies, Bed Bath & Beyond prices were on average 19.8% more expensive than Amazon.

Target recently said that its comparable sales in the combined November/December period grew 3.4%, which was better than the company previously said that it expected, and Target raised its FY17 earnings view.

Kohl’s, meanwhile, said that its total and comparable sales for the November and December combined period were up 6.9% over last year.

Kohl’s Chief Executive Officer Kevin Mansell noted that “All lines of business and all regions reported positive comp sales” for the critical holiday period.

In December, Bed Bath & Beyond beat analysts’ estimates on the top and bottom line and backed its FY17 adjusted EPS view.

The company forecast FY17 revenue flat to slightly positive and SSS down in the low single-digit percentage range.

PRICE ACTION

Bed Bath & Beyond is down about 6% in morning trading to $21.70.


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Dick’s Sporting shares may have topped

Dick’s Sporting dips despite fifth upgrade this month

Dick's Sporting dips, Stockwinners.com
Dick’s Sporting dips

This morning, Telsey Advisory analyst Joseph Feldman upgraded Dick’s Sporting Goods (DKS) to Outperform as he expects industry pressures will stabilize. Since the beginning of the month, four other Wall Street analysts have upgraded the stock to buy-equivalent ratings, citing better sector trends and benefits from new U.S. tax reforms.

BUY DICK’S SPORTING

In a research note to investors, Telsey Advisory‘s Feldman upgraded Dick’s Sporting Goods to Outperform from Neutral and raised his price target on the shares to $42 from $25 as he adjusted his earnings per share estimates for the benefit from tax reform.

While the analyst acknowledged that the company is currently in a period of earnings pressure due to price competition on athletic apparel and footwear, driven by increased distribution to new channels such as department stores and online and too much inventory, he expects industry trends to stabilize in the second quarter of 2018, leading to better results for Dick’s Sporting in the second half of the year.

BETTER INDUSTRY TRENDS

Earlier this week, Susquehanna analyst Sam Poser also upgraded Dick’s Sporting to Positive from Neutral, saying the company’s results should surprise to the upside given a low bar and “less worse” weather driven sales trends.

The analyst said he continues to believe Dick’s needs to proactively take control of its business and focus on customer engagement rather than succumb to the promotional environment.

Overall, #Poser contended that better than expected earnings, starting with the fourth quarter of 2017 results and continuing with 2018, will drive shares higher.

The analyst also raised his price target on the sock to $41 from $25. Last week, his peer at Buckingham had upgraded Dick’s Sporting to Buy from Neutral, with a $39 price target, citing tax reform benefits and recent strength across retail.

Back on January 12, Deutsche Bank analyst Mike #Baker also upgraded Dick’s Sporting Goods to Buy, while raising his price target on the shares to $39 from $33.

The analyst told investors he sees industry trends bottoming, inventory levels coming back into balance with demand and therefore lessen the impact on gross margins, and reduced risk to margin forecasts as models already reflect increased investment spending.

Wells Fargo analyst Ike #Boruchow was the first to upgrade the stock this month to Outperform back on January 3, saying the outlook for Dick’s is improving.

The analyst noted that high-level industry trends appear to be stabilizing, and the company has already re-based 2018 numbers in a “prudently conservative manner.”

Further, with the consolidation occurring in the sporting goods industry, Dick’s Sporting can continue to take market share from struggling brick-and-mortar competitors and be the “survivor” of the industry’s consolidation, he contended.

Additionally, the analyst pointed out that as a 100% domestic retailer with a high tax rate, the company is a key potential beneficiary of U.S. tax reform. Boruchow raised his price target on the shares to $35 from $26.

PRICE ACTION

In Thursday morning’s trading, shares of Dick’s Sporting (DKS) have dropped over 1% to $33.36. However, over the last month Dick’s shares are up nearly 13%.


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Barron’s is bullish on Netflix and Boeing

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names: 

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review of stocks to buy

BULLISH MENTIONS:

Boeing not a sell just yet – Boeing  (BA) stock has come quite far, quite fast and the pace has only accelerated in 2018, but such a rapid rise could reflect an overly optimistic outlook for the airplane manufacturer that could be difficult to meet, Ben Levisohn writes in this week’s edition of Barron’s. Nonetheless, Boeing is not a sell just yet, he argues. While at first glance, betting on Boeing now seems like a risk, the stock can remain extended for a long time, Levisohn adds.

Netflix among likely candidates for an Apple purchase – Especially for tech companies, tax cuts will boost dividends, buybacks, and mergers and acquisitions, but tech usually has a hard time putting vast amounts of cash to work as it requires little R&D to produce huge amounts of revenue, Tiernan Ray writes in this week’s edition of Barron’s. For example, Apple (AAPL) does not have many places to invest that will demonstrably boost financial results. Without the excuse that the cash is stuck overseas, pressure may grow for Apple to do something big, with Netflix (NFLX) as the most likely candidate for a purchase, he contends.

Still time to shop Walmart shares as company makes changes – In a follow-up story, Barron’s notes that some Walmart’s experiments, like curbside pickup for groceries, are getting solid results, and points out that late-year shopping was robust and corporate tax cuts have warmed investors to retailers. While high-income taxpayers will get larger cuts amid the new tax reform than low- and middle-income ones, those are more likely to spend the extra money, which bodes wells for Walmart, publication said, adding that Walmart continues making changes, such as paying one-time bonuses and closing 63 underperforming Sam’s Club locations.


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Kohl’s shares higher on Amazon partnership

Kohl’s shares could rally 50% from ‘win-win’ partnership with Amazon

Kohl's shares could rally 50% from 'win-win' partnership with Amazon. Stockwinners.com
Kohl’s shares could rally 50% from ‘win-win’ partnership with Amazon

Shares of Kohl’s Corp (KSS) rallied in morning trading after an analyst called the retailer’s partnership with Amazon (AMZN) a “win for both companies” and said Kohl’s stock could rise another 50% or more.

JEFFERIES ANALYST EXPRESSES OPTIMISM

Jefferies analyst Randal Konik raised his price target for Kohl’s stock to $100 from $66 and said the stock could rally at least another 50%.

In a note to clients, Konik asid Kohl’s is “addressing the digital revolution head on” and beating rivals with its emphasis on proprietary brands, rightsizing its square footage and its partnership with Amazon.

Konik said Kohl’s partnership with Amazon is “sleeping with the enemy,” but believes their agreement is a “win for both companies.”

He expects the pilot to roll out nationally, allowing Kohl’s stores to see stronger traffic and “a nice added convenience” for Amazon customers. Konik also said he expects Kohl’s sales growth to accelerate and margins to rise, and views current consensus estimates as “way too low.”

The company’s off-mall real estate is an additional positive, as is the closing of peer stores, Konik added.

WHAT’S NOTABLE

In order to combat weakness stemming from the increasing popularity of fast-fashion retailers and an increase in online shopping on sites like Amazon Kohl’s is currently offering free Amazon returns in 82 stores.

The retailer previously announced plans to roll out a “smart home experience” in 10 stores across the Los Angeles and Chicago areas.

Shoppers at these stories are able to purchase Amazon devices, accessories and smart home devices and services directly from Amazon.

Kohl’s said 1,000-square-foot “zones” within its stores will be dedicated to Amazon products, including the Echo, Echo Dot, Fire TV and Fire tablets.

Kohl’s has also partnered with Under Armour (UA, UAA), Nike (NKE) and adidas (ADDYY) to sell the companies’ shoes and apparel in Kohl’s stores.

Earlier this month, Kohl’s CEO told CNBC at ICR’s conference that the retailer plans to lease portions of its bigger stores to other retailers like grocery stores. The retailer is also testing smaller store formats of about 35,000 square feet.

PRICE ACTION:

Kohl’s is up 2.8% to $66.66 in morning trading.


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Casey’s General Stores encouraged to explore options

Casey’s General Stores shareholder JCP encourages exploration of alternatives

Casey’s General Stores encouraged to explore options
Casey’s General Stores encouraged to explore options

JCP Investment Management, BLR Partners and Joshua Schechter, which together are “significant shareholders” of Casey’s General Stores (CASY) that collectively own approximately $45M of the company’s common stock, issued an open letter to Casey’s shareholders, stating in part:

“We believe Casey’s shares are significantly undervalued as they do not reflect the true earnings power and full real estate value of the Company’s irreplaceable fleet of 2,000+ stores…Rapid consolidation has been ongoing in the convenience store industry over the past five years. We have played a constructive role in this consolidation while serving as directors during the successful sale of The Pantry, Inc. to ATD in 2014 and as part of a settlement agreement with CST Brands, which resulted in a sale to ATD in 2016.

Based on the above transaction multiples, we believe Casey’s shares could be worth from $150 to greater than $170 per share to a potential acquirer. We believe this is realistic given the significant synergies and real estate value that Casey’s offers.

We note that ATD is projecting $125M in synergies for its acquisition of Pantry and between $150-200M in synergies for its acquisition of CST, both of which were smaller than Casey’s and owned less real estate…We do not believe that waiting for an increase in share price in the face of significant declining EBITDA is the prudent path to take considering that we believe that Casey’s could potentially realize $150 to greater than $170 in a sale today.

We believe that Casey’s Board should immediately engage a financial advisor to explore all strategic alternatives, including a potential sale, merger or similar transaction in order to maximize shareholder value.”

CASY last traded at $112.39.


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Barron’s is bullish on Chevron and Corning

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names: 

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review of stocks to buy

BULLISH  MENTIONS

Chevron positioned to benefit in 2018 – No oil major is better positioned to benefit than Chevron (CVX) in 2018, who said it would spend about $18B next year while it starts to reap the benefits from the big projects that had been consuming cash since 2011, Ben Levisohn writes in this week’s edition of Barron’s.

Corning shares could gain over 25%– Shares of Corning (GLW) could keep climbing as demand grows for optical fiber, LCD-panel glass, and Gorilla Glass, Leslie Norton writes in this week’s edition of Barron’s.

Facebook could consider cash dividend – None of the fast-growing giants, namely Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Alphabet (GOOG; GOOGL), pay a cash dividend, but that may change before long, Jon Swartz writes in this week’s edition of Barron’s. Facebook is pushing up against the limits of growth, and if growth begins to taper, investors will begin calling for new strategies, such as dividends and stock buybacks, he notes. Several factors make Facebook the most likely FANG candidate to offer a dividend, perhaps as early as 2019, including sufficient earnings, Swartz contends.

 ‘Good time’ to buy GlaxoSmithKline stock.  GalxoSmithKline’s (GSK) earnings estimates have been sliding and shares have tumbled since the summer, but now looks like a good time to buy the stock, Jack Hough writes in this week’s edition of Barron’s. While GlaxoSmithKline will suffer an earnings hit in 2018 from new generic competition, it should get back on track quickly, he contends.

BEARISH MENTIONS

Some retail stocks look vulnerable – In a follow-up story, Barron’s says that prudent investors should assume that the recent burst of sunshine will give way to more rainy days for retail. Macy’s (M) may look inexpensive but its earnings per share are expected to tumble in each of the next two years, J.C. Penney (JCP) is in a long-term fight for its existence, Sears Holdings (SHLD) makes the former look like Amazon (AMZN), and Abercrombie & Fitch (ANF) sells a deflationary good at a dying venue against a fashion headwind, the report added. On the other hand, Barron’s argued that Wal-Mart’s (WMT) improvement remains intriguing, Home Depot (HD) and TJX (TJX) remain long-term winners, and Five Below (FIVE) seems to be a genuine fast-grower.


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Bazaarvoice sold for $521 million

Bazaarvoice to be acquired by Marlin Equity Partners 

Bazaarvoice (BV) announced that it has entered into a definitive agreement to be acquired by entities affiliated with the global investment firm, Marlin Equity Partners.

Under the terms of the agreement, Marlin will acquire each share of outstanding common stock of Bazaarvoice in exchange for $5.50 in cash for a total value of approximately $521M.

This price represents an 18% premium to the average closing price of Bazaarvoice common stock for the 30-calendar day period ending November 24, 2017.

Upon completion of the transaction, Bazaarvoice will become a privately-held company.

Bazaarvoice will maintain its headquarters in Austin, Texas.

The closing of the transaction is subject to customary closing conditions, including regulatory approvals and the affirmative vote by a majority of the votes cast by the holders of Bazaarvoice common stock at a to-be-scheduled special meeting of stockholders.

The transaction is expected to close in the first quarter of calendar 2018.

BV closed at $4.80.


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