Table of Contents
For Immediate Release
Chicago, IL – April 28, 2022 – Zacks Equity Research shares SeaWorld SEAS as the Bull of the Day and Cracker Barrel CBRL as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon AMZN, Jabil JBL and Broadcom AVGO.
Here is a synopsis of all five stocks:
Bull of the Day:
SeaWorld, a leading aquatic-based theme park and entertainment company, is coming out of the pandemic downturn with a vengeance. SEAS has soared 850% out of the ashes of its pandemic lows and is now trading over 90% above its pre-pandemic levels with more room to run.
I originally pitched SEAS as my bull of the day in late August of last year when the stock was trading at less than $50 a share (over 40% returns since). Nevertheless, this stock’s recent ability to buck the broader market’s declines leads me to conclude that SEAS’s 25-month bullish uptrend is far from over as the US economy finally emerges from the medically induced recession mask-free.
SeaWorld proved its operational superiority in the amusement park space this past year, demonstrating an unparalleled return to profitability with record annual results as in 2021 (something no other travel & leisure business can claim).
The awe-inspiring rally SEAS exhibited from its pandemic lows can be attributed to the company’s savvy leadership team, led by Marc Swanson, who has captured more revenue (& market share) from excitement-seeking customers than any of its peers, and yet the stock still trades at a relative valuation discount.
Analysts have become more bullish on SEAS than I ever thought was possible, with many expecting its upcoming earnings report (May 5th) to be a catalyst for this leading travel & leisure stock’s ostensibly inhibited price.
Analysts have cited that consensus expectations for SeaWorld’s Q1 earnings underestimate foot traffic and in-park spending, which is driving aggressive upward EPS revisions, propelling SEAS into a Zacks #1 (Strong Buy).
The Blackfish Stigma
SeaWorld went public in April of 2013, just three months before the release of the critically acclaimed documentary, Blackfish, which was a black eye for the theme park’s main attraction. The killer whale (aka orca) exhibit and the fantastic aquatic acrobatics demonstrated by both the brilliant whales and their trainers had viewers in awe and is what brought people to the amusement park until this whistle-blowing documentary shed light on the inhumane practices.
Blackfish revealed the controversy surrounding an orca named Tilikum who was involved in the death of three people and the consequences involved in keeping these kings of the ocean in captivity. The documentary focused on the ignored intellect of orcas and how the unnaturally confined aquariums in which they existed caused them anxiety and claustrophobia, leading to the devastating death of three trainers.
Despite the enormous controversy surrounding this documentary and the level of truth behind it, it still led to a steep decline in attendance across parks due to the reach that Blackfish was able to attain. This stigma plagued the theme park’s financials and stock price for nearly 5 years and even drove its CEO to step down.
From the movie’s release in 2013 to November of 2017, SEAS lost over -70% of its value, but the business and its management team have made operational pivots that have swung this stock from a falling knife to a moon-targeting growth-focused rocketship.
SeaWorld stopped breeding orcas in 2016 and has been focusing on investing heavily in sentiment-reversing animal rescue along with other foot-traffic driving attractions across its 12 theme parks with 4 of the 9 most anticipated new 2022 rides opening from this enterprise’s rollercoaster pipeline (with its latest park, Sesame Place San Diego, opening in March). Management has proven an aptitude for high return investments as the entertainment enterprise disassociates its brand from the Blackfish taboo.
SEAS pre-pandemic performance reflected the company’s attendance inspiring new verticals, driving up its share price up over 250% from its lows in November of 2017 to its Feb 2020 high, compared to the S&P 500’s only 32% increase over the same period.
The COVID lockdowns threw a wrench in its near-term operations like the rest of the amusement park space, but the speed at which SeaWorld has been able to bounce back is unmatched by both its direct competitors and the broader travel & leisure space.
SEAS is soaring out of this pandemic with more momentum behind it than any of its peers, taking market share on its way up. The company’s “re-opening” tailwind will continue to gain momentum through the summer months as society’s yearning to escape the confines of their homes and find an exciting escape drives demand for SeaWorld’s now best-in-class Park services (winning USA Today’s “Best” amusement park, water park, and rollercoaster of 2021).
Recent fears of an economic slowdown from the increasingly hawkish Fed positioning have hindered SEAS upside in the past couple of months. Still, SEAS has been one of the few US equities with a positive year-to-date return.
This stock’s unique buoyancy amid this market correction leads me to deduce that SEAS has some room to breakout in post-earnings price action next Thursday morning (5/5).
After an outstanding showing of astonishingly swift recovery this past quarter, analysts have been shooting up their 12-18 months price targets as high as $93 a share. I wouldn’t hesitate to buy these shares at their current fear-induced discount.
Bear of the Day:
The road trip stops at Cracker Barrel and its “Old Country Store” may be a relic of the past and the stock’s 30% decline from the highs it reached last year reflects a societal shift away from Grandma’s favorite rocking chair rest-stop.
The war in Eastern Europe has catalyzed extended global supply-chain back-ups which have adversely impacted Cracker Barrel’s costs and paper-thin margins in the near term, while its longer-term outlook remains ambiguous with an aging target customer base (average customer age is over 60).
Now that the federal mask mandate is off the table, more people than ever are turning to air travel (and away from road trips), which is rapidly returning to pre-pandemic levels with the latest bookings hitting record levels.
The reduction in road travel coupled with margin-crushing inflation/supply chain issues has Cracker Barrel analysts reeling in EPS estimates and driving CBRL down into a Zacks Rank #5 (Strong Sell).
Cracker Barrel Old Country Store offers an on-the-go (aka highway pit-stop) southern homestyle food menu and a unique in-store shopping experience with more than 660 company-owned Cracker Barrel and Maple Street Biscuit Company (late-2019 acquisition for $36 million) locations across 45 states.
The company has been around for over half a century now, having started on Highway 109 in Lebanon, Tennessee, a small town outside of Nashville, in 1969. However, its southern charm is beginning to lose its luster in the post-pandemic world as the next generation of consumers rejects the restaurant’s old southern values (which are beginning to look a lot more like discrimination).
The biggest issue with Cracker Barrel is its lack of material development beyond just another highway pit spot. Now I may not be the target customer, but I can anecdotally say that I’m not a fan of Cracker Barrel’s aesthetic, which is unpleasing to my senses (to say the least), and as a Millennial I know I’m not alone in this thinking.
The now largest consuming generation is very future-focused and not sentimental in the same manner as previous generations (which make up a large portion of this company’s patrons), leaving this aging business with similarly aging customers.
Cracker Barrel’s Maple Street Biscuit Company deal is an attempt to revitalize demand from younger generations who aren’t a fan of the old southern “aesthetic value” that the original restaurant was capturing.
CBRL has been in a clear-cut down spell for over a year now, having broken below its 200-day MA in July 2021, and has since been unable to break above this now declining trendline.
Plane & train travel is becoming the preferred method for vacationing, with the notion of discovering new cultures and discovering oneself (solo-traveling) being primary themes for Millennials. These next-gen values do not coincide with Cracker Barrel’s antiquated big family road trip consumer base of the past. Millennials are having babies like there is no tomorrow as of late, so we will see if they follow the old family road trip tradition of going to Cracker Barrel, but I see it as unlikely.
Inflation and an aging customer base represent the short and long-term concerns (respectively) plaguing CBRL shares. I wouldn’t hesitate to sell out of this losing hand, while it’s still trading above $100 a share.
Will Solid AWS Momentum Aid Amazon’s (AMZN) Q1 Earnings?
Amazon‘s first-quarter 2022 results, which are scheduled to be released on Apr 28, are likely to reflect gains from its strengthening cloud service offerings.
The cloud computing division, Amazon Web Services (“AWS”), dominates the cloud market on the back of its growing adoption and popularity. This is anticipated to get reflected in the company’s first-quarter results.
We note that the solid momentum across AWS has been aiding Amazon in generating high margins from the cloud business. The trend is expected to have continued in the to-be-reported quarter.
AWS revenues were $17.8 billion in fourth-quarter 2021, accounting for 13% of net sales, rising 40% year over year. AWS’s operating income improved 48.5% from the year-ago quarter to $5.3 billion.
We believe that an expanding customer base and a strong discount offering for long-term deals are likely to have driven the AWS top line in the quarter under review.
The Zacks Consensus Estimate for first-quarter 2022 AWS net sales is pegged at $18.5 billion, indicating an improvement of 37.2% from the year-ago quarter’s reported figure.
Click here to know how the company’s overall first-quarter performance is likely to have been.
Amazon.com, Inc. price-eps-surprise | Amazon.com, Inc. Quote
Factors to Consider
The expanding data center network, and an increasing number of AWS regions and availability zones are likely to have acted as tailwinds.
Strength across the AWS cloud services portfolio is expected to have continued benefiting the segment’s performance in the first quarter.
Both factors are expected to have aided Amazon in sustaining momentum among existing customers as well as attracting new ones.
In the first quarter, AWS got selected by Maple Leaf Sports & Entertainment as the official provider of AI, ML and deep learning cloud services. Maple Leaf will leverage AWS’s robust cloud capabilities to support its teams and lines of business.
Also, Best Buy picked AWS as its preferred cloud provider for cloud infrastructure services and its strategic partner for developing cloud engineering talent.
One of the existing clients, Bundesliga, the professional association football (soccer) league of Germany, debuted its two new AWS-powered match facts, Set Piece Threat and Skill.
Another client, National Hockey League (NHL), introduced its new ML-driven stat called Face-off Probability, backed by AWS.
The impacts of the strengthening customer base are likely to have driven AWS’s top-line growth in the first quarter.
Zacks Rank & Stocks to Consider
Currently, Amazon carries a Zacks Rank #3 (Hold).
Investors interested in the broader technology sector can consider stocks like Jabil and Broadcom. While Jabil currently sports a Zacks Rank #1 (Strong Buy), Broadcom carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Jabil has gained 4.3% in the past year. The long-term earnings growth rate for JBL is currently projected at 12%.
Jack Henry & Associates has gained 18.4% in the past year. The long-term earnings growth rate for JKHY is currently projected at 17%.
Broadcom has gained 22% in the past year. AVGO’s long-term earnings growth rate is currently projected at 14.5%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Why Haven’t You Looked at Zacks’ Top Stocks?
Our 5 best-performing strategies have blown away the S&P’s impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks “Terms and Conditions of Service” disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Cracker Barrel Old Country Store, Inc. (CBRL) : Free Stock Analysis Report
Jabil, Inc. (JBL) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
SeaWorld Entertainment, Inc. (SEAS) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research