Revolve Group, Ollie's Bargain Outlet, Tesla, General Motors and Ford highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 12, 2021 – Zacks Equity Research Shares of Revolve Group, Inc. RVLV as the Bull of the Day, Ollie's Bargain Outlet Holdings, Inc. OLLI as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tesla, Inc. TSLA, General Motors Company GM and Ford Motor Company F.
Here is a synopsis of all five stocks:
Based in California, Revolve Group is a popular online fashion retailer, selling a wide range of men’s and women’s apparel, shoes, accessories, and beauty items; their core customers are Millennial and Gen Z shoppers, and Revolve is known for carrying on-trend brands and styles at all price points. The company went IPO in June 2019.
Revolve Delivers Excellent Growth in Q2
Net sales increased 60% year-over-year to $228 million (and 41% over Q2 2019), while diluted net profit more than doubled compared to the year-ago period to $0.42 per share.
Domestic net sales were up 59% and international net sales increased 63%.
Gross margin increased 517 basis points to 55.6%, benefitting from healthy inventory levels and consumer demand dynamics. Also helping were higher sales at full-price and a decrease in “the depth of markdowns.”
Free cash flow was $32.8 million for the second quarter, helping to further the retailer’s balance sheet. As of June 30, cash and cash equivalents and net borrowings were $219.6 million.
“Our exceptional second quarter results were driven by record new customer additions and unprecedented numbers of reactivated customers who hadn’t purchased from us in several quarters while social events were on pause,” said co-founder and co-CEO Mike Karanikolas.
Can RVLV Surge Higher?
Year-to-date, shares of Revolve have risen over 117% compared to the S&P 500’s gain of 16.1%. However, because of the stock’s run so far this year, it’s reached quite a lofty valuation this year (shares currently trade at about 66X forward earnings).
This may have been one of the reasons, along with a sales deceleration after the end of Q2, why investors sold RVLV despite its impressive second-quarter report. RVLV sank over 20% the day after its earnings release.
Despite this hiccup, Revolve still remains a top shopping destination for fashion-minded consumers, positioning it as a stock that could still deliver great returns over the long term.
For the current fiscal year, one analyst has revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate remains steady at $1.04 per share. Earnings are expected to see double-digit growth for fiscal 2021, with 2022 continuing that growth trend.
Another big growth catalyst for Revolve is its recent hire Kendall Jenner; she was brought on to be the creative director of the company’s Forward brand. Forward, which is luxury-focused, is starting to take off thanks to a new loyalty program, and sales spiked 120% on a two-year basis through Q2.
RVLV is a Zacks Rank #1 (Strong Buy) right now.
If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep RVLV on your shortlist.
Based in Harrisburg, PA, Ollie’s Bargain Outlet is a popular discount retailer that sells a wide range of products under the Ollie’s, Ollie’s Army, and Good Stuff Cheap, among others. As of this past May, the company operates 416 outlets in 28 states.
Q2 Earnings Miss Expectations
Both Ollie’s top and bottom line lagged the consensus estimate. The retailer earned $0.52 per share on revenue of $415.9 million compared to expectations of $0.55 per share and revenue of $435.8 million.
Total sales were down 21.4% year-over-year.
On a two-year basis, comparable store sales jumped 15.3% but slumped 28% versus the second-quarter period of 2020.
Operating income fell considerable as well, decreasing 50.3% to $45.7 million while operating margin sank 640 basis points to 11%.
But, Ollie’s cash and cash equivalents totaled $444.3 million at the end of the quarter compared to $305.1 million at the end of Q2 2020.
Ollie’s declined to provide guidance for the rest of the fiscal year “given the uncertainties regarding the pace of economic recovery, consumer behavior and consumer demand amid the ongoing pandemic,” but CEO John Swygert did say that comps growth would be in the range of 5% to 7% on a two-year basis for the third quarter.
OLLI is now a Zacks Rank #5 (Strong Sell).
Seven analysts have cut their full year earnings outlook over the past 60 days. Ollie’s bottom line is expected to decline about 15.5% year-over-year, and the consensus estimate has fallen $0.24 to $2.67 per share for fiscal 2021. Next year’s earnings consensus has dropped as well, but Wall Street expects earnings to increase by 14% to $3.04 per share.
Shares have been volatile so far in 2021. Year-to-date, OLLI has fallen more than 25% compared to the S&P 500’s gain of 16.1%.
Unfortunately, business may still be rocky for the time being. Management warned that it continues to face “temporary supply chain challenges.” Potential investors may want to wait on the sidelines until the outlook improves.
Those who are interested in adding a discount retail stock to their portfolio could consider The TJX Companies (TJX). TJX is a #1 (Strong Buy) on the Zacks Rank with a dividend yield of 1.6%. Seven analysts have raised their earnings outlook for the current fiscal year, and earnings are set to soar over 860% year-over-year.
On Tesla's (TSLA) Price Hikes, Move to Texas
Tesla recently announced the decision to raise the prices for its Model 3 and Model Y line-up.
The electric vehicle (EV) behemoth increased the price of both the Model 3 Standard Range Plus and Performance. Tesla's online configurator now shows the price of the base rear-wheel drive Model 3 Standard Range Plus as $41,990 instead of the previous $39,990. The starting price of the Model 3 Performance has also received a price hike from $56,990 to $57,990, while the price of the Model 3 Long Range remains unaltered at $49,990.
Similarly, the Model Y Long Range saw a price bump of $2000, from $52,990 to $54,990. The higher-level Model Y Performance is now priced at $61,990 compared to the earlier price of $60,990.
This is not the first time Tesla has raised prices for its vehicles. Though the starting prices for both the Model 3 and Model Y were trimmed earlier this year, the same were again raised in July.
The latest $2,000-price bump for the base versions has ended up making Tesla vehicles significantly expensive in the United States. In fact, the Model 3 Standard Range Plus is now a whopping $5,000 more compared to its February price.
Meanwhile, at its annual shareholder meeting on Oct 7, Tesla CEO Elon Musk announced the decision to shift the company’s headquarters to Austin in Texas from Palo Alto in California.
Musk cited several reasons for the move, telling shareholders its Californian factory in Fremont was jammed. Further, expensive housing in the Bay Area, long commute times and difficulty in scaling operations in the Golden State prompted this move.
Musk had also moved to Texas last year to focus on two big priorities — SpaceX’s new Starship vehicle, under development on the Gulf Coast near Brownsville, and Tesla’s under-construction factory in Austin.
Texas is Tesla’s third biggest market in the United States, after California and Florida. The state has no personal income tax or capital gain tax. Meanwhile, California imposes the highest personal income levies in the nation on its wealthiest residents and has capital gains tax as high as 13.3%. Thus, the move to Texas has both personal and business tax implications for Musk and his company.
However, Tesla's latest decision does not mean it is bidding farewell to California. In fact, the company plans to further expand operations at its facility in Fremont in California by 50% in the future.
Tesla's move from California does not come as much of a surprise. Musk had criticized California several times in earnings calls and public appearances, and had fallen out with local politicians in Alameda County, where Tesla's Fremont facility is based, over its COVID-19 related response.
Founded in 2003, Tesla was initially based in San Carlos, CA. It shifted to Palo Alto in 2009, the year before its initial public offering.
Tesla, peers of which include General Motors and Ford, currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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Ford Motor Company (F): Free Stock Analysis Report
General Motors Company (GM): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Analysis Report
Ollie's Bargain Outlet Holdings, Inc. (OLLI): Free Stock Analysis Report
Revolve Group, Inc. (RVLV): Free Stock Analysis Report
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