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1 Stock To Buy, 1 To Dump When Markets Open: Best Buy, Avis

By Investing.com (Jesse Cohen/Investing.com)Stock MarketsNov 22, 2020 07:19AM ET
www.investing.com/analysis/1-stock-to-buy-1-stock-to-dump-when-markets-open-best-buy-avis-200545418
1 Stock To Buy, 1 To Dump When Markets Open: Best Buy, Avis
By Investing.com (Jesse Cohen/Investing.com)   |  Nov 22, 2020 07:19AM ET
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Stocks on the S&P 500NASDAQ and Dow Jones ended lower on Friday, as investors weighed the worrying increase of new COVID-19 cases against apparent progress on vaccines. The small-cap Russell was the one outlier, closing the day in green.

More than 12 million coronavirus cases have been reported in the U.S. since the pandemic began nine months ago. The nation has not only set records for daily infections, but also for the number of COVID-related fatalities.  

Wall Street will have a shortened trading week with the stock market shutting down on Thursday, Nov. 26 for Thanksgiving and closing early at 1:00 PM ET on Friday.

There will, however, be a full slate of earnings reports and data releases coming out in the days prior, providing investors an opportunity to monitor additional developments in the lingering health crisis.

Below we're highlighting one stock likely to see losses in the days ahead and one which has proven it can push higher even in this unclear market environment:

Stock To Buy: Best Buy

Best Buy (NYSE:BBY) has been one of the premier performers in the retail sector this year, with the consumer tech giant benefitting from rapid growth in e-commerce and online sales during the coronavirus pandemic.

Year-to-date, shares of the Richfield, Minnesota-based company have gained 36%, outpacing the benchmark S&P 500’s 10% rise since the start of the year, as it continues to be one of the few electronics retailers thriving even with growing competition from Amazon.com (NASDAQ:AMZN).

The stock ended at $119.14 on Friday, rallying back towards its all-time high of $124.82 reached on Nov. 5, giving the largest U.S. consumer electronics retailer a market cap of $30.8 billion.

Best Buy Daily Chart
Best Buy Daily Chart

Best Buy, which reported an impressive beat on earnings and revenue in the second quarter, is projected to report third quarter results on Tuesday, Nov. 24 before the U.S. market opens.

Consensus estimates call for the tech gadget retailer to post earnings of $1.70 per share, jumping 50% from EPS of $1.13 in the same quarter a year earlier.

Revenue is forecast to rise 12% year-over-year to nearly $11 billion, as consumers flocked to its digital app to order computers, tablets and other work-from-home equipment amid the ongoing nation-wide health crisis.

Investors will therefore pay close attention to growth in Best Buy’s domestic online sales, which soared by a whopping 242% in the previous quarter even as most of its stores reopened from earlier lockdowns.

Despite lofty expectations, we anticipate Best Buy will post another striking quarter, driven by the ongoing spike in e-commerce spending due to the coronavirus outbreak.

One key earnings update to watch: comments on the overall economy and health of the U.S. consumer from executives on Best Buy’s post-earnings conference call. This could signal what the company forecasts as virus cases surge ahead of the holidays.

Stock To Dump: Avis Budget Group

Investors may want to stay away from Avis Budget Group (NASDAQ:CAR) this week after a number of states and cities across the U.S. have reimposed social distancing restrictions in an effort to slow the rapid spread of the virus ahead of the winter season.

U.S. public health professionals are also urging the public to forgo holiday gatherings. With Thanksgiving just a few days away, the demand for rental cars is likely to remain depressed.

Year-to-date, shares of the Parsippany, New Jersey-based car rental company have underperformed the S&P 500 for the year, with Avis climbing under 8%, while the S&P rose 10 over the same period.  

The stock closed at $34.79 on Friday, giving it a market cap of roughly $2.4 billion.

Avis Budget Group Daily Chart
Avis Budget Group Daily Chart

Avis topped consensus estimates for earnings and revenue when it released third quarter financial results on Oct. 29, even as profit and sales recorded sharp year-over-year declines.

The rental car company reported adjusted earnings per share of $1.13, down roughly 62% from EPS of $2.96 in the year-ago period. Revenue tumbled 44% from the same quarter a year earlier to $1.53 billion, above the $1.44 billion consensus estimate.

However, the earnings beat failed to impress investors as management warned that it expects the travel environment to remain challenging given the implications of the pandemic.

Considering the struggles of the underlining the car rental services, revenue from its Americas segment—which contributes almost 73% to total revenues—shrank 40% year-over-year to $1.114 billion.

Taking this into account, CAR shares look set to remain under additional pressure in the days ahead as investors brace for a difficult holiday travel season.

1 Stock To Buy, 1 To Dump When Markets Open: Best Buy, Avis
 

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1 Stock To Buy, 1 To Dump When Markets Open: Best Buy, Avis

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Comments (10)
Job Aram
Job Aram Dec 18, 2020 4:00AM ET
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Nope!!
Brad Smith
Brad Smith Nov 23, 2020 7:53PM ET
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Jesse, thanks for these trade ideas. Despite BBY's recent performance, I'm still a bit skeptical of this retailer in the longer term. They are still lagging behind in the digital store front and this will be increasingly costly against digital giants like AMZN.
Steven West
Steven West Nov 22, 2020 4:20PM ET
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took advice and shorted Macy. went up through the roof last week lost heavily
Kelvin Collado
Kelvin Collado Nov 22, 2020 4:20PM ET
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curious when did you execute the trade 🤔? I'm looking a Macy's chart and there was def a short ing opportunity if you bought puts on 11/9 and closed out 11/12.
Kelvin Collado
Kelvin Collado Nov 22, 2020 4:20PM ET
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and there looks to be same opportunity to short it again if the volume starts dies off this coming week
Steven West
Steven West Nov 22, 2020 4:20PM ET
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it was tipped to go down 15th Nov I bought mon 16th nov. stock went up all week.
Nov 22, 2020 4:20PM ET
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Steven West so lesson learned?
Steven West
Steven West Nov 22, 2020 4:20PM ET
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lesson learned. lol giving avis a wide birth it's been going up today.
Marcel Bilt
Marcel Bilt Nov 22, 2020 2:43PM ET
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I've noticed that after each "1 to buy/1 to dump" article, the market reaction is exactly the opposite
Rachel Thomas
Rachel Thomas Nov 22, 2020 2:43PM ET
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Yup!
Lake Lot
Lake Lot Nov 22, 2020 2:43PM ET
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Yep
Lake Lot
Lake Lot Nov 22, 2020 2:43PM ET
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Biy avis , dump wirest buy
Pappy Jay
Pappy Jay Nov 22, 2020 2:43PM ET
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I've noticed the same thing. This guy has no idea what he's talking about. He said to dump OXY at $10. It's done nothing but go up since then. Might be a good strategy to do the exact opposite of what he suggests.
Jesse Mulliniks
Jesse Mulliniks Nov 22, 2020 2:27PM ET
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Market in desperate need of a pullback. We are so ocervalued right now
Marc Pratt
Marc Pratt Nov 22, 2020 2:03PM ET
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So Best Buy will tank and Avis will double. Got it.
Adrian Wooldridge
Adrian Wooldridge Nov 22, 2020 2:02PM ET
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The market is way overbought again. RSI is over 75
cran Vivid
cran Vivid Nov 22, 2020 12:53PM ET
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I think its time to dump Bestbuy untill it back to $90 area
Kent Beason
Kent Beason Nov 22, 2020 12:18PM ET
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Last time I read this headline, it said to dump OXY. Had my doubts. lol
Ame me
Ame me Nov 22, 2020 11:46AM ET
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Humble Junior
Humble Junior Nov 22, 2020 11:46AM ET
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hiii
 
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