Category Archives: Stocks

Investors are greedy and takes profit in the growth stock American Eagle Outfitters

I will continue to follow-up with an article about the retail market. In my recent articles I have had a focus on retailer stocks like Alibaba, Kohl`s and J C Penny. Some of them are plummeting, but others are skyrocketing.

Take a look at American Eagle Outfitters (AEO). The stock has gone from $10 to nearly $30 in just 12 months, but now, like other successful retailers, it seems like the bulls would take a break for a while. The stock hit a 10-year high of $29,88 last week.

AEO is set to report earnings before the open on Wednesday, August 29, and analysts are beginning to be skeptical to this equity right now.

Wedbush just lowered its AEO rating to «neutral» from «outperform,» saying it`s moving to the sidelines with the stock near its $29 price target. The brokerage firm suggested that L Brands recent struggles could give AEO a chance to gain market share, which may mean more promotional activity in the near term.

But bearish sentiment is building elsewhere. The unemployment rate is low and the wages is increasing a little bit. But  the new wave of consumer spending isn`t enough to justify a $30 share price for AEO at the moment.

Wall Street analysts are expecting sales to increase 10,12 percent compared to the prior year quarter. AEO is also expected to report a $930 million jump. Expected profit is $1,52 per share compared to profit of $1,16 per share last year.

A full-year revenue last year came in at $3,80 billion, while analysts estimate a full-year revenue to be $3,97 billion this time on average.

President Donald Trump made a new trade deal with Mexico today. That deal will be good for AEO that opened the first store in Mexico City at Fashion Mall Perisur on February 20, 2013 and at Centro Santa Fe on June.

Not only that. President Donald Trump slashed the tax which is helping AEO a lot. So does a stronger dollar. Just look at the numbers. Diluted EPS is up 57,14 percent. Net profit margin; +46,53 percent. Net income; +58,22 percent, and revenue +8,02 percent YoY. Not bad for a company with a $5 billion market cap.

The stock declined -$4,57 percent on Monday, and you can clearly see that investors are taking profit from this growth stock. By 2021, AEO`s earnings can reach $285 million, from current levels of $204 million. An annual growth rate of about 8 percent.

A share price above $30 would be overvalued, and the current share price of AEO is above its future cash flow value of $22,77.

American Eagle Outfitters Inc is expected to report earnings on August 29, 2018 before market open. The report will be for the fiscal Quarter ending July 2018. The consensus EPS forecast for the quarter is $0,31 versus $0,19 for the same quarter last year.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Alibaba is doing it well but the stock is declining while we are witnessing a divergence in EM and US tech

Alibaba is a great company. A chinese e-commerce giant I have collaborated with many year before it went public in the U.S. The firm have a strong fundamentals, but despite that, Alibaba has declined about 20 percent in the last 8 weeks.

This is very interesting because Alibaba grew revenues by nearly 60 percent, and I don`t think it will stop here at all. Nor is it expensive if we measure it with forward earnings which is about 32,4 right now. There must be something going on here.

Like we saw in Kohls a few days ago, maybe there is some profit taking here. Kohls has skyrocketed last 12 months. Up about 100 percent. But Alibaba has declined about 20 percent last two months.

I think it can be the fear of the coming trade war. There has been a carnage in the Chinese tech sector recently. We saw a collapse in Tencent. A company that lost more than Facebook`s drop. We also saw a big drop in JD.com following poor earnings.

What we are witnessing is a divergence in EM and US tech. Since June, the EM tech sector has accounted for about 40 percent in the value of EM equities. Both, the EM and the US tech sector has jumped about 50 percent to the end of June, but since then, the US tech sector is up by 5 percent, while the EM tech sector is down 6 percent.

This is very bad news for EM tech investors. JPM`s quant guru, Marko Kolanovic also spotted this bizarre phenomenon, and in a note he said that “the recent divergence in the performance of US Equities vs the rest of the world is unprecedented in history.”

Kolanovic also looks at price momentum which he finds is «positive for US stocks and negative for Europe and Emerging markets across all relevant look back windows, and this has never happened before.»

As Kolanovic summarizes: “buybacks are creating a shortage of US stocks, the Fed is creating a shortage of US dollars, and Trump`s trade wars and sanctions are further boosting the USD.”

You can clearly see how Alibaba reached an all-time high in the mid June, trading above $210, and then, alongside other Chinese tech stocks that has declined. The stock is also following the divergence trend.

All this is happening despite the fact that the firm is doing it well. The Amazon of China, are also operating three main sites like Taobao, Tmall and Alibaba. In addition, they have a cloud computing firm, and they grabbed 4 percent of the cloud computing market share last quarter.

Thats far beyond Amazon and Microsoft, but near IBM with 8 percent and Google with 6 percent, according to Synergy Research Group. Alibaba stock is up about 170 percent over the last three-year, but some investor fear that Alibaba can be negatively impacted by the ongoing trade dispute between the worlds two largest economies, which is reportedly starting to hit China harder than anticipated.

Alibaba stock is up about 170 percent over the last three years, which outpaced its industrys 96 percent.climb and the S&P 500s 50 percent jump. But the trade war can hit Alibaba more than we like to think. On top of that, the Chinese economy is slowing. The stock is up only 2,3 percent last 12 months, while S&P 500 is up 17 percent and its industry gained 37 percent.

Investors will await data on Alibabas cloud business, which is expected to nearly double YoY growth for its June quarter. Customer management revenue for Alibabas China Commerce Retail segment, which is driven by ads shown on Taobao and Tmall, rose 35 percent last quarter. The segment`s commisssion revenue, which is driven by Tmall, rose 39 percent.

Jack Ma must have done something right with its intime department stores and innovative Hema supermarkets, as well as Ele.me, which is set to merge with Alibaba`s Koubei local services JV and its Tmall Direct Import online store.

Alibabas China Commerce Retail segment rose more than 10-fold annually in June quarter. Cainiao is also contributing to Alibabas revenue growth.

«We belive the future of New Retail will be a harmonious integration of online and offline, and Hema is a prime example of this evolution that`s taking place,» Daniel Zhang, CEO of Alibaba Group said. «Hema is a showcase of the new business opportunities that emerge from online-offline integration.»

Alibaba Group Holding Limited is expected to report earnings on Thursday 23, 2018, before market open. The report will be for the fiscal Quarter ending June 2018, and the consensus EPS forecast for the quarter is $0,75 vs $0,94 for the same quarter last year.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Kohl`s is doing it much better than most of its competitors and the stock is up around 100% YoY

I wrote about J C Penny last week. A stock that is continuing to decline on Monday. Many retailers are struggling, but not all. Kohls is a much different story. Kohls is doing it much better than most of its competitors.

The stock is doubled from $35 in May last year to $78 on Monday. Up 3,15 percent before their earning report on Tuesday. They simply beat their competitors on e-commerce, store productivity, ROIC and revenue which is pretty impressive.

Many of Kohls competitors are closing down stores, but Kohls are going in the opposite direction by opening up stores. Sales revenue increased over 6 percent in their fourth-quarter report. Diluted earnings per share came in at $5,12 in the same period.

ROIC is between 10 – 20 percent for a healthy store, while Kohls is near 10 percent, and they are keeping up their momentum. Both, J C Penny and Macys reported bad reports last week, but also here, Kohl`s are reporting positive revenue growth.

Kohls opened up its fifth e-commerce fulfillment center last year, and they have an estimated 37 million views a month to their websites. The company is also collaborating with Amazon were people can return products to Kohls.

Kohls private brands, which include Sonoma, Croft & Barrow, and Apt 9 generate nearly half of the firms $19 billion in annual sales. They also has plans to re-launch and reimagine the billion-dollar Sonoma brand for apparel and home goods.

Other brands are Jennifer Lopez and Marc Anthony. Two artist with great success on the stage.

Kohl`s uses a «racetrack» aisle that circles the entire store, a technique borrowed from discount stores. In 2011, they announced plans to remodel 100 of its 1,100 locations. Changes included redone store sections, fitting room, and newer merchandise displays.

In 2015, Kohls opened a test store built around selling only returned, yet as new clothing, home goods, jewelry, and accessories. The store, called OFF/AISLE by Kohls, sells items at a marked down price. The stores have a restrictive return policy different from regular Kohl`s stores.

In early January 2017, Kohls shares fell 19 percent in value, in what Wall Street Journal said was "the stocks worst day on record.”

Kolhl`s Corporation is expected to report earnings on August 21, 2018 before market open. The report will be for the fiscal quarter ending in July 2018. Earnings in April was a 30 percent surprise with an EPS of 0,64. The consensus EPS for the quarter this time is $1,66.

The weekly chart is positive and positive news can push the stock to a new all-time high.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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J C Penny are declining alongside other big name retailers like Macy`s that reported a disappointing gross margin outlook

The competition in the retail market is huge. Just look at J C Penny. That stock has plummeted. It peaked in February 2007. Right before the financial crisis it peaked at $85, and now the same stock can be traded for $2,41. What a ride.

J C Penny is not alone. Swedish H&M is in the same boat. The stock peaked in February 2015, but the journey from 363 SEK to 125 SEK is huge. They both need to change their strategy as soon as possible as online retailers are flooding the market all around the world.

J C Penny was founded in 1902 by James Cash Penny and William Henry McManus. That`s 116 years ago. It is an American department store chain with 850 locations in 49 U.S states, and Porto Rico.

The company has been an internet retailer since 1998. It has streamlined its catalog and distribution while undergoing renovation improvements at store level. Competitors like Alibaba, Amazon and Ebay will push their prices down. So will competition from Wal-Mart, Kohls, Macys and Target.

The arrows are going in the opposite directions. Prices and lower margins are going down while house prices are going up. Internet retailers can afford to push down the prices because they don`t have any stores.

With 98,000 employees and growing wages it speak for itself. On January 15, 2014, the company announced it was closing down 33 underperforming stores and laying off 2,000 employees. A year later, they announced that they would close 39 underperforming stores nationwide and layoff 2,500 employees and the trend has been going since then.

In May 2018, the company reported an adjusted loss of $69 million in the first quarter and lowered its projections for the year. Sales fell 4 percent.

Earlier this year, J C Penny announced it would cut 360 jobs at its stores and corporate headquarters. They lowered its earnings forecast for the year to 13 cents per share at best, and said it can lose as much as 7 cents.

J C Penny finished the quarter with just $181 million in cash, which is down from $363 million a year ago. Much of the big decrease was because of a $190 billion debt replace. Not only that; in May, they announced resignation of their CEO Marvin Ellison.

Gross margin has declined significantly since 2016, but the U.S Census Bureau reported strong retail sales growth in May and June which can be positive for J C Penny. Sales at departments stores increased 1,8 percent YoY in May and were flat in June.

I said it many year ago; the retailer market is dead. Just look at the trend. Retailers must wake up before they end up like Radio Shack. New business models must be developed and there is no doubt that a few of them will win at the end.

It will be an enormous wild ride for the JCP stock from start on Thursday.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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The sales for clothing and footwear in Europe and North America will fall from more than 50 percent of the global market in 2017 to less than half in 2018

The luxury goods industry has faced a number of changes over the past two decades. Michael Kors is one of them. Kors have suffered some missteps and weakening demand as it tried to straddle the luxury and affordable accessories categories.

In order to reinstate it`s cache it started offering fewer online promotions, closed down underperforming stores and began innovating on new product lines which includes men`s footwear.

Kors is investing heavily in digital platforms in order to offer a more seamless customer experience at a time when online buying continues to expand.

 

 

International growth is anticipated to grow. Especially with acquisitions of brands such as Jimmy Choo. Credit Suisse reiterates an outperform rating on Michael Kors in front of the retailer`s FQ1 update.

«Our checks suggest F1Q trends were stable or slightly better than F4Q,» Credit Suisse writes.

The supply chain and retail network for the luxury goods industry have spread globally. However, Europe and the US have continued to account for a disproportionate share of sales. Although historically the industry has operated on a «West versus the Rest» basis, recent trends underline the growing importance of Asia, the Middle East, Latin America and Africa.

The sales for clothing and footwear in Europe and North America will fall from more than 50 percent of the global market in 2017 to less than half in 2018, while sales in Asia, Latin America, the Middle East and Africa combined will rise above 50 percent and continue to increase in subsequent years.

Most industry observers attribute this development not just to growing sales in emerging markets but also to innovative retail concepts and business models adopted in these regions.

The growing importance of non-western markets for the luxury goods industry has been supported by supply chain leadership, technological innovation and international investment. These factors will help maintain further strong growth in these geographical markets.

Italy is once again the leading luxury goods country in terms of the number of companies, while France has the highest share of sales.

China, France, Germany, Italy, Spain, Switzerland, the UK and the US together made up 83 percent of the Top 100 luxury goods companies and 90 percent of Top 100 luxury goods sales.

Cosmetics and fragrances was the top-performing sector in 2016, and the only sector with improving composite luxury goods sales growth, at 7,6 percent. Collectively, millennials and Generation Z will represent more than 40 percent of the overall luxury goods market by 2025, compared with around 30 percent in 2016.

Kors latest fashion is their exclusive graffiti print which celebrates street art and its influence on fashion. Inspired by 1980s New York, their new black and white graffiti print puts a graphic spin on todays fashion favorite jackets, shoes and bags.

Kors is still a solid company and a strong increase in store renovations will be rolled out more aggressively over the next few years. In addition, the company wants to expand Jimmy Choos store network, increasing the number of stores from 185 today to about 250.

Michael Kors Holdings Limited is expected to report earnings on Wednesday August 8, 2018 before the open, and the report will be for the fiscal Quarter Jun 2018. The consensus EPS forecast for the quarter is 1, which is 6 percent higher than Wall Street.

Revenues are also expected to come in higher at 1,16B as compared to the sell sides consensus of 1,14B. YoY EPS and revenue growth are expected to come in healthy at 25 percent and 22 percent respectively.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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