Williams-Sonoma, Ryman Hospitality, Qorvo, Teradyne and SMART Global as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 14, 2020 – Zacks Equity Research highlights Williams-Sonoma, Inc. WSM as the Bull of the Day and Ryman Hospitality Properties, Inc. RHP as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Qorvo, Inc. QRVO, Teradyne, Inc. TER and SMART Global Holdings Inc. SGH.
Here is a synopsis of all five stocks:
Williams-Sonoma, Inc.continues to telegraph strength in the home furnishings market. This Zacks Rank #1 (Strong Buy) just raised its quarterly dividend for the first time this year as business continues to rebound nicely from the COVID pandemic shutdowns.
Williams-Sonoma is a specialty retailer which makes products for the home. It is more than just its namesake, Williams-Sonoma. It also owns several well-known furniture brands including Pottery Barn, Pottery Barn Kids, West Elm, Pottery Barn teen, Williams Sonoma Home, Rejuvenation and Mark and Graham.
It sells online, through catalogs and its global retail stores.
It operates in the US, Puerto Rico, Canada and the United Kingdom and has unaffiliated franchisees which operate stores in the Middle East, the Philippines, Mexico and South Korea.
Raised Its Dividend and Re-Starts Share Repurchases
On Oct 12, Williams-Sonoma announced its Board of Directors had raised its quarterly dividend by $0.05 a share to $0.53.
That's a 10% increase.
The dividend is currently yielding 1.9%.
The company was one of the few which continued to pay its dividend earlier this year, even as the pandemic hit.
However, it did suspend its share repurchases at that time but it also announced it would now resume those as well.
Paid Back the $500 Million Revolver
The company also announced it had repaid its short-term borrowing in full on the $500 million revolver.
On Aug 26, when it reported its fiscal second quarter results, it had $948 million in cash on hand.
"Our decisions to increase our quarterly dividend, resume our share buyback program and pay down our revolver reflect the strength of our business and financial position, and our commitment to maximizing returns for our shareholders," said Laura Alber, President and CEO.
"Our strong performance during this pandemic reinforces the relevance of our curated, sustainable products and the power of our digital-first platform. We are seeing an inflection point in our business and are more confident than ever in our strategies to deliver strong, long-term growth with increasing profitability."
Analysts Continue to be Bullish
After posting a big earnings surprise of 81% in fiscal Q2, the analysts continue to be bullish about the fiscal year.
9 estimates have been revised higher for fiscal 2020 in the last 60 days.
That's pushed the Zacks Consensus up to $6.36 which is year-over-year earnings growth of 31.4% as the company only made $4.84 last year.
All of its brands have seen strong demand during the pandemic.
In the fiscal second quarter, Williams-Sonoma, the brand, saw a record 29.4% brand revenue growth, beating even West Elm, it's usual superstar.
Furniture, small kitchen appliances and home accessories have been among the hottest retail items in 2020.
Williams-Sonoma specializes in them all.
Shares Soar to New 10-Year Highs
After Williams-Sonoma announced the dividend increase, the shares surged 6% to new multi-year highs.
They've jumped 44% year-to-date but are still surprisingly cheap with a forward P/E of just 15.7.
All of their competitors continue to report solid numbers.
On Oct 12, Ethan Allen Interiors preannounced its fiscal Q1 EPS results and blew by the Zacks Consensus with a guide of $0.34 to $0.36 compared to the consensus of a loss of $0.02.
Sales also topped the consensus.
The company also announced it was paying off its remaining $50 million in debt.
In 2020, there really is no place like home.
For investors looking for a way to play the hot home furnishings market, Williams-Sonoma is one to keep on the short list.
[In full disclosure, the author of this article owns shares of WSM in her personal portfolio.]
Ryman Hospitality Properties, Inc.is navigating its way through the pandemic as hotels and entertainment venues are slow to reopen. This Zacks Rank #5 (Strong Sell) is expected to see earnings fall 142% in 2020.
Ryman Hospitality Properties is a lodging and hospitality REIT that specializes in upscale convention center resorts and country music entertainment experiences, mostly in Nashville.
It's core holdings include 5 of the top 10 largest non-gaming convention center hotels in the United States which operate under the Gaylord Hotels brand and are managed by Marriott International.
Those hotels include the Gaylord Opryland Resort & Convention Center, Gaylord Palms Resort & Convention Center, Gaylord Texan Resort & Convention Center and the Gaylord National Resort & Convention Center.
It also is the majority owner and managing member of the joint venture that owns Gaylord Rockies Resort & Convention Center.
It has a total of 10,110 rooms and more than 2.7 million square feet of total indoor and outdoor meeting space.
The entertainment segment includes the Grand Ole Opry, Ryman Auditorium, WSM 650 AM and Ole Red and Circle, a country lifestyle media network it owns in a joint venture with Gray Television.
Nashville Reopened on Oct 1
On Sep 24, Ryman issued a business update as Nashville was set to move into the Phase 3 of its reopening plan.
Beginning on Oct 1, Nashville permitted conventions and other group events to expand to a capacity of up to 500 people.
This would enable Gaylord Opryland to host more convention and group customers.
As of Oct 1, its four operating Gaylord HOtels could conduct meetings as follows:
1. Gaylord Opryland: group events of up to 500 persons.
2. Gaylord Palms: group events of any size.
3. Gaylord Texan: group events at 50% of state capacity.
4. Gaylord Rockies: group events of up to 100 people.
The Phase 3 in Nashville also meant that the Grand Ole Opry House and the Ryman Auditorium could reopen for performances and concerts up to 500 people.
Recovery Is Happening
At the JP Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum on Sep 14, 2020, Ryman gave an update on what it was seeing in its business.
In September, it had 4 hotels open. Only the Gaylord National remained closed.
It was seeing an occupancy range around 30%, up from 20% earlier in the summer.
The company was also happy with what it was seeing in the spend outside the room, as its hotels have multiple restaurants and sports bars.
Ryman estimated a monthly cash burn rate of between $22 million and $24 million. It has seen a recovery in the cash burn from the bottom, which was in the second quarter.
Ryman hosts a lot of conventions and group meetings as its largest hotel has 2800 rooms.
While they are seeing cancellations through the first quarter of 2021, 46% of the cancellations have been rebooked into later periods.
Estimates Still on the Decline
The analysts are still bearish about 2020 as one analyst has lowered their estimate in the last week which has pushed the Zacks Consensus Estimate down to a loss of $2.92 from a loss of $2.37 just 30 days ago.
That's a decline of 142.6% compared to 2019 where the company made $6.86.
Analysts expect a rebound in 2021 but they've gotten more bearish about next year recently as well.
One estimate has been cut in the last 30 days pushing the Zacks Consensus down to $0.35 from $0.62 just a month before.
Shares Still Down Big in 2020
Ryman shares plunged when the coronavirus pandemic first hit in March and have mostly stayed depressed.
They're still down 52.9% year-to-date.
When there's a vaccine and business travel picks up, these hospitality companies will see strong improvement.
But right now, the analysts are still bearish on the near term.
For investors looking for ways to play the recovery in the hospitality industry, Ryman is one to keep on the short list as the travel industry improves and the Zacks Rank improves.
3 Top Semiconductor Picks as Industry Consolidation Continues
The Semiconductor industry is undergoing a massive consolidation wave. A huge number of mergers and acquisitions (M&A) worth hundreds of billion dollars have taken place over the last few years.
Consolidation is natural in a mature industry like semiconductor, which is now more than 60 years old. This industry is currently plagued with two huge challenges, which include escalating costs of producing chips for devices and a sluggish growth rate.
With continued innovation over the decades, the size of chips has shrunk to that of a few atoms, while the costs of producing these have flared up. Moreover, rising costs for designing, packaging and testing are becoming unaffordable for most companies, especially for the smaller firms.
Additionally, the industry has been countering a sluggish growth-rate challenge despite big trends like Internet of Things (IoT), which is believed to add an extraordinary volume in the sales of electronic devices. Over the last 15-20 years, the semiconductor industry has recorded growth at an annualized rate of less than 5%.
Industry Finds M&A as a Solution
In such a turbulent environment, semiconductor companies need to be huge in order to compete effectively. Therefore, these companies have resorted to M&A in an effort to grab more market share, cut costs, boost productivity and improve investment returns through scale economies.
Over the last year, the industry has witnessed more than 30 mergers and acquisitions.
During second-quarter 2020, the industry witnessed two major merger and acquisition deals which have a combined worth of more than $60 billion. In July, Analog Devices agreed to acquire Maxim Integrated Products in an all-stock deal worth $20.9 billion. The transaction, which is expected to complete in summer 2021, will be accretive to Analog’s earnings and provide cost synergies.
Last month, NVIDIA entered into a definitive agreement to buy the U.K.-based Arm Holdings in a deal valued at $40 billion. The transaction is anticipated to be immediately accretive to the graphic chip maker’s gross margin and earnings.
Last week, The Wall Street Journal reported that AMD is interested in buying Xilinx in a deal that could be worth $30 billion. The business-focused news agency reported that the companies are in advanced talks and a deal could be finalized as early as this week.
All the recent M&A events are hinting toward a new wave of consolidation in the semiconductor industry in the near future.
Grab this Emerging Opportunity
M&A announcements generally result in a massive surge of the targeted company’s share prices, thereby, providing investors the opportunity to make huge money overnight. As the consolidation cycle for the semiconductor industry does not seem to end any time soon, it is wise to stay focused on stocks that could be potential takeover targets.
We, at Zacks, have picked three semiconductor stocks which can be considered as the best takeover targets given their bright growth prospects and impressive valuations.
The first stock in our list is Qorvo, Inc., which is a leading provider of core technologies and radio frequency (RF) solutions for mobile, infrastructure and aerospace/defense applications. The company has been benefiting from broad-based demand in 5G handsets, Wi-Fi 6 and IoT products. Synergies from Decawave, Active-Semi and MEMS technology acquisitions have significantly expanded Qorvo’s capabilities and position it well to gain from the surging demand for proximity awareness, secure payments and secure access for smartphones, automotive and IoT.
In the IoT-powered connectivity and broadband business, the company is increasing shipments of Wi-Fi 6 solutions and secured multiple cable amplifier design wins for catering to the rising need for data to homes owing to the COVID-19-induced shelter-in-place guidelines. Notably, Qorvo is expanding its global customer base for Wi-Fi 6 solutions, front-end modules (FEM) and BAW filters.
Further, although the stock has appreciated 18.2% in the year-to-date period, it is still undervalued given the fact that it currently trades at a forward P/E multiple of just 19.5x, significantly lower than its industry average of 27.6x. Moreover, the company has an expected long-term EPS growth rate of 12.3%. Qorvo currently carries a Zacks Rank #2 (Buy) and has VGM Score of B.
Another potential pick is Teradyne, Inc., which provides automated test equipment to semiconductor companies. The company has been gaining from robust Semiconductor Test and System Test businesses. Further, it continues to benefit from the expanding memory market exposure and an impressive product line-up. Additionally, robust Test demand is a key positive.
Management is also optimistic about the Universal Robots acquisition and the continuous design wins. We believe the company has significant growth opportunities in the high-growth wireless test market for the long haul. Moreover, rising memory and storage test shipments, and new product design wins are major growth drivers.
Although the stock has appreciated approximately 27% in the year-to-date period, it is still trading at a huge discount to the industry average based on forward earnings estimates. The company trades at a forward P/E multiple of 22.2, which is a significant discount to the industry average of 29.4. Apart from this, the company has an expected long-term EPS growth rate of 16.7%, much higher than the industry average of 9.1%.
At present, Teradyne carries a Zacks Rank #3 (Hold) and has VGM Score of A.
SMART Global Holdings Inc., which is a leading provider of DRAM memory to the Brazil market, is another semiconductor company which looks like a potential takeover target. Although the company was founded 25 years back, it got listed in May 2017. The company’s last three quarterly results have been stellar, thanks to the elevated demand as well as prices of DRAMs.
Shares of the company have declined nearly 33% in the year-to-date period. The stock is highly undervalued as it trades at a forward P/E multiple of 7.5x, which is a significant discount to the industry average of 20.2x. Moreover, the stock currently carries a Zacks Rank #3 and has VGM Score of A.
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