For Immediate Release
Chicago, IL – December 16, 2019 – Zacks Equity Research Tilly's (NYSE:TLYS) as the Bull of the Day, Gourmet Burgers, Inc. (NASDAQ:RRGB) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Salesforce (NYSE:CRM) and Zendesk (NYSE:ZEN) .
Here is a synopsis of all five stocks:
Tilly's is a retail stock that has soared since it topped our quarterly estimates at the start of December. Plus, TLYS shares are trading under $15, which might make it an attractive prospect for some investors.
The Quick Pitch
Tilly’s is a trendy clothing, footwear, and apparel retailer geared toward teenagers and young adults. The firm is inspired by “West Coast fashion” and competes against the likes of Urban Outfitters (NASDAQ:URBN), Zumiez and American Eagle. Tilly’s sells products from Vans, Adidas (DE:ADSGN) and many other brands and closed the third quarter with roughly 230 total stores across 33 states.
As we mentioned at the outset, the Irvine, California-headquartered firm topped our Q3 estimates on both the top and bottom line. Management highlighted the fact that it posted its 14th straight quarter of flat to positive comp sales.
With this in mind, TLYS saw its third-quarter fiscal 2019 comps, including e-commerce sales, pop 3.1%, which marked continued strength from the year-ago period’s 4.3% growth in the vital retail metric. Meanwhile, overall sales jumped 5.4% to reach $154.8 million.
Overall, the retail industry looks to be in a solid position as the likes of Target (NYSE:TGT) and others continue to prove they can thrive in the Amazon (NASDAQ:AMZN) age. Plus, the U.S. and China have reportedly reached a phase one trade deal that will see the U.S. not roll out new tariffs on consumer-facing goods, which would have included apparel.
Perhaps more importantly, U.S. unemployment rests at 50-year lows and the holiday shopping period is projected to be strong. “Based on our results during Thanksgiving weekend through Cyber Monday, we believe we are well positioned to continue our momentum during the Holiday season,” Tilly’s CEO Ed Thomas said in prepared Q3 remarks.
Other Fundamentals
Investors can see in the chart above that Tilly’s revenues have climbed steadily since the firm went public in 2012. The company’s earnings have not been as steady and fell during its first few years as a public company. But this has changed over the last several years.
However, TLYS stock has also been on a wild ride, having climbed from under $6 per share in July of 2016 to as high as $23 a share in September 2018. With this in mind, Tilly’s stock has surged 55% in the last six months, which includes back-to-back bottom-line beats. And its post-Q3 release surge helped it quickly jump above its 50 and 200-day moving averages.
TLYS stock is currently trading at 13.3X forward 12-month Zacks earnings estimates. This marks a slight premium compared to the Retail-Apparel/Shoe Market’s—which has tumbled—11.5X average, as it has for much of the past three years. Despite its impressive climb over the last six months, TLYS is trading far below its three-year high of 33.4X and at a discount against its 17.5X median.
In fact, Tilly’s holds an “A” grade for Value in our Style Scores system at the moment to help it earn an overall “A” VGM score. And the Retail - Apparel and Shoes industry that it calls home also rests in the top 12% of our more than 250 Zacks industries.
Outlook
Tilly’s Q4 sales are projected to jump nearly 6%, which is expected to help lift its full-year fiscal 2019 sales by 4.8% to reach $627.6 million, based on our current Zacks estimates. Better yet, its first quarter sales are projected to pop 6.5% to help push 2020’s revenues 5.7% higher to $662.9 million.
Both of these figures would easily top the last three years of annual sales growth, of which 2018 clocked in at the highest, up 3.7% from 2017.
At the bottom end of the income statement, TLYS adjusted fourth quarter earnings are projected to pop 11.1% to hit $0.30 per share, with full-year fiscal 2019 expected to climb 10%. The firm’s Q1 FY 2020 EPS figure is then expected to pop from $0.02 in the prior-year quarter to $0.05 per share, with its full-year earnings projected to jump another 4.8%.
Bottom Line
Tilly’s has also received positive earnings estimate revisions recently, with the largest percentage changes coming for its current period and Q1 2020. This helps TLYS earn a Zacks Rank #1 (Strong Buy) at the moment.
TLYS is currently trading at around $12 per share and has been somewhat volatile. But Tilly’s certainly appears to present some intriguing fundamentals and might be worth taking a deeper look at.
Shares of Red Robin Gourmet Burgers, Inc. have plummeted since the firm posted a larger-than-expected Q3 loss early last month. The recent downturn is part of a much larger decline that comes as the burger chain’s sales slide, which even prompted an attempted takeover.
What’s Wrong?
Red Robin is a casual restaurant company best known for its burgers and fries and boasts roughly 560 mostly-suburban locations across the U.S. and Canada. The firm’s quarterly sales have fallen for six straight periods amid a quickly changing retail and restaurant landscape. Plus, chief executive Denny Marie Post retired abruptly in early April.
The recent downturn and leadership change saw private-equity firm Vintage Capital offer to pay $40 a share to buy Red Robin in June. Vintage also called on Red Robin to launch a review of strategic alternatives. The buyout price represented a nearly 60% premium compared to where RRGB stock was trading at the time.
Since then, Red Robin hired Paul J.B. Murphy III to take over as CEO, effective October 3. The company also in early September said it was focused on executing its own “strategic plan to restore growth and improve profitability.” Plus, Red Robin announced that it rejected Vintage’s proposal because it “undervalues” the firm “and is not in the best interests of all shareholders.”
With this in mind, Red Robin has increased its spending to help lower wait times. RRGB has also rolled out its new in-restaurant table management software to lower ticket times, improve tableside service, and handle larger volumes during peak hours. On top of that, Red Robin has tried to expand its online-ordering business and ramp up its carry-out, delivery, and catering sales.
Other Fundamentals
Investors can see in the chart above just how rough things have gotten for Red Robin recently. In fact, the stock has tumbled roughly 50% in the past two years, while its industry has surged 25%. Much of this downturn came in 2018, with RRGB down just 12% in the last 12 months, but it has been a wild ride in 2019, with massive swings.
RRGB is currently trading at roughly $27.50 per share, well off its 52-week highs of over $36. Despite the downturn, Red Robin’s valuation has actually soared to all-time highs. RRGB is currently trading at 36.6X forward 12-month earnings estimates, which marks a premium compared to its industry’s 24.2X average and its own three-year median of 19.9X.
Outlook
Our current Zacks Consensus Estimates call for Red Robin’s fourth-quarter revenues to slip 0.77%, with its full-year fiscal 2019 sales expected to fall 1.7% to $1.32 billion. Peeking further ahead, the company’s 2020 sales are projected to sink an additional 2.1%, which would represent three straight years of declining revenues.
At the bottom end, Red Robin’s adjusted Q4 earnings are expected to tumble from +$0.43 per share in the year-ago period to a loss of -$0.23 per share. This is expected to push its full-year earnings down by 55% to $0.78 a share. And 2020’s adjusted EPS figure is projected to dip another 1.5%.
Bottom Line
The chart above helps investors see just how bad things have turned for Red Robin’s bottom line recently, as part of a nearly four-year trend of declining earnings. Red Robin’s dismal earnings picture helps it hold a Zacks Rank #5 (Strong Sell) at the moment.
Good Entry Point for Zendesk (ZEN)
Enterprise solution software stocks took a hit last week following soft full-year guidance from the customer relationship management (CRM) king, Salesforce. This brought down one of my favorite customer service cloud company’s, Zendesk, to a level that I believe is a solid entry point. Below you can see how ZEN and CRM have been tracking with each other since the beginning of the year, ZEN tracking like a new high-beta growth stock and CRM’s steady, mature stock movements.
Zendesk is a cloud-based platform that helps businesses improve their customer experience. The company started as a customer support cloud, and now with Zendesk Sunshine, it has become a complete CRM platform. Zendesk initially catered to growing small-to-mid-sized businesses (SMB) who are just beginning to have significant customer relations issues. Today the company services an increasing number of Fortune 500 enterprises.
The platform provides businesses with omnichannel solutions so that they can meet their customers’ needs in a way that is most convenient to the customer. Zendesk has helped connect nearly 900 million customer queries with a solution in the past year.
Why ZEN?
In this digital age we the markets have seen a plethora of CRM platforms, so what makes Zendesk worth investing in?
Zendesk focusses on ease of implementation and use, with all the sophisticated software being handled on the backend. You don’t need a professional to help integrate like you would with Salesforce.
The platform is open and cloud-based, meaning that you can access it wherever and whenever you want. It also is easily integrated into other enterprise software.
Gartner has recognized Zendesk as the Magical Quadrant leader in CRM Customer Service Centers for 3 years running. In a press release regarding this award, the firm expressed its thoughts about this award means. “With one of the fastest-growing customer bases of any vendor, Zendesk believes it was recognized for its overall value proposition, ease of set-up, usability, API integration, and rapid adoption.”
The Level
ZEN is at a solid entry point right now, as it bounces off the 50-day moving average. You can see in the chart below that these shares have used the 50-day moving average (red line) as a support level. With this positive sentiment already going into this stock and the Zacks Rank #1 (Strong Buy) rating, I think right now is a perfect time to invest in this company of the future.
The company’s balance sheet is healthy, with $427 million in cash and positive cash flows from operations that have progressively grown. Zendesk is expected to continue growing its top line by more than 30% for the next couple of years.
14 out of 16 sell-side analysts are calling ZEN a buy right now (no sell ratings), with an average price target of $195 that would represent a 28% upside.
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Zendesk, Inc. (ZEN): Free Stock Analysis Report
salesforce.com, inc. (CRM): Free Stock Analysis Report
Tilly's, Inc. (TLYS): Free Stock Analysis Report
Red Robin Gourmet Burgers, Inc. (RRGB): Free Stock Analysis Report
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