Chicago, IL –November 29, 2024 – Zacks Equity Research shares Gap Inc. GAP, as the Bull of the Day and AMN Healthcare Services, Inc. AMN, as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Fortinet Inc. FTNT, Datadog Inc. DDOG and Palantir Technologies Inc. PLTR.
Gap is the largest specialty apparel company in America. It operates brands such as Old Navy, Gap, Banana Republic and Athleta. Clothing, accessories, and lifestyle products are available through company-owned stores, franchise stores and e-commerce sites around the globe.
On Nov 21, 2024, Gap reported its third quarter fiscal 2024 results and beat on the Zacks Consensus Estimate by $0.16. Earnings were $0.72 versus the consensus of $0.56.
It was the seventh consecutive earnings surprise.
Net sales were up 2% to $3.8 billion. Online sales rose 7% and now make up 40% of total sales.
But more importantly, the comparable sales, which are the key metric in retail, were up 1% year-over year after falling 2% in the same quarter last year.
It saw improvement in 3 brands: Gap, Banana Republic and Athleta.
Gap comparables were up 3%, after declining 1% in 2023, on a strong product mix.
Banana Republic was down, but only 1% after it was down 8% last year. The quarter was boosted by the men’s business but it remains focused on turning around this brand. It is trying to move Banana Republic into a more upmarket, category.
Athleta, its athleisure brand, also turned it around with comparables up 5% after plunging 19% last year. Gap said new product and marketing were resonating with customers.
Old Navy had a flat comparable after comps rose 1% last year. But it faced tougher comparables from last year and had weather-related challenges.
Other fundamentals looked solid in the third quarter. Gross margins rose 140 basis points to 42.7% and inventory declined 2% to $2.3 billion.
Gap was bullish about the holiday season and the fourth quarter. It raised its full year sales, operating income growth and gross margin guidance.
The analysts are bullish too. 6 earnings estimates were revised higher in the last week for both fiscal 2024 and fiscal 2025.
The Zacks Consensus Estimate for fiscal 2024 jumped to $2.00 from $1.87. That’s earnings growth of 39.9% as it made only $1.43 last year.
The fiscal 2025 Zacks Consensus Estimate also moved higher in the last week, to $2.11. That’s further earnings growth of 5.7% but the analysts will be conservative about 2025 as it is looking for the retailers to get through the holiday season first.
While Gap shares are up 16.3% year-to-date, it is not yet back to its pandemic highs.
It’s cheap, on a price-to-earnings (P/E) basis. It has a forward P/E of just 12.1.
Because the earnings are on the rise, it has an attractive PEG ratio of just 1.09. A PEG ratio under 1.0 usually indicates that a company has both growth and value.
Gap is also shareholder friendly and pays a dividend of $0.60 a share. It is currently yielding 2.5%.
For investors looking for a turnaround play in specialty retail, Gap should be on your short list.
AMN Healthcare Services, Inc. still can’t find the bottom in the healthcare staffing market. This Zacks Rank #5 (Strong Sell) is expected to see earnings fall 62.4% this year with no rebound expected in 2025.
AMN Healthcare provides total talent solutions for healthcare organizations across the United States. Its services include direct staffing, vendor-neutral and managed services programs, clinical and interim healthcare leaders, temporary staffing, permanent placement, executive search, vendor management systems, recruitment process outsourcing, predictive modeling, language services, revenue cycle solutions and other services.
Clients include acute-care hospitals, community health centers and clinics, physician practice groups, retail and urgent care centers, home health facilities, schools and other healthcare settings.
On Nov 7, 2024, AMN Healthcare Services reported its third quarter 2024 results and beat on the Zacks Consensus Estimate by $0.03. Earnings were $0.61 versus the Consensus of $0.58.
It is especially impressive because AMN Healthcare Services has a perfect 5-year earnings surprise track record. Few companies made it through the COVID pandemic unscathed in the earnings beat category, especially one so intricately involved in healthcare.
But even thought it beat; the company still has not seen the bottom yet in the post-COVID correction. Demand for medical professionals, especially nurses, was at all time highs during the pandemic. But industry conditions remain challenging.
Revenue fell 19% to $687.5 million and was also down 7% compared to the prior quarter, but the company said this was better than expected.
A big hit came in the Nurse and Allied Solutions segment which fell 30% year-over-year to $399 million. It was also down 10% just from the prior quarter.
Travel nurse staffing, which boomed during the pandemic, fell 37% year-over-year and 12% sequentially. Allied division revenue also declined 16% year-over-year.
AMN Healthcare has $31 million in cash and cash equivalents as of Sep 30, 2024. It also had total debt of $1.135 billion.
The company’s fourth quarter guidance was not encouraging that a bottom was coming soon.
The analysts are bearish. 3 have cut for 2024 and 4 have cut their earnings estimates for 2025 in the last 30 days.
The 2024 Zacks Consensus Estimate has fallen to $3.09 from $3.15 in that period. That’s a decline of 62.4% as the company made $8.21 last year.
2025 is grim as well. The Zacks Consensus has fallen to $1.92 from $2.93 in the last month. That’s another earnings decline of 38.1%.
Shares of AMN Healthcare Services rallied big during the pandemic when the company was seeing record revenue. But they have plunged over the last few years and are now at new 5-year lows.
For the year, shares are down 66%.
AMN Healthcare Services appears to be cheap, with a forward price-to-earnings (P/E) ratio of 8.5.
But with those earnings estimates still being slashed, even for next year, and earnings growth still expected to take a dive, AMN Healthcare is not a value, but a trap.
For those investors interested in the staffing companies, it might be best to still be on the sidelines.
Cyber Monday is a major marketing event on the first Monday after Thanksgiving Day in the United States. Online retailers usually offer special promotions, discounts, and sales on this day as brick-and-mortar stores do on Black Friday.
In the United States, Cyber Monday is the second-biggest shopping day and the biggest day for online sales. This year, the event falls on Dec 2. However, an online network can run efficiently if its security measures remain rock solid.
In this regard, we recommend three cybersecurity behemoths for long-term investment purposes to reap maximum benefits. These are Fortinet Inc., Datadog Inc. and Palantir Technologies Inc.
Cybersecurity encompasses comprehensive security measures designed to protect systems, networks, and programs from digital attacks. These attacks often aim to access, alter, or destroy sensitive information, extort money from users through ransomware, or disrupt the integrity of normal business operations.
The widespread adoption of AI, IoT devices, and increased digitization across both public and private sectors has heightened vulnerabilities and expanded attack surfaces, necessitating the development of advanced security solutions. This space focuses on companies that offer integrated protection against evolving security threats while simplifying IT security infrastructure.
These firms provide solutions to safeguard applications, networks, and cloud computing environments. Their offerings include application-specific integrated circuits, hardware architecture, operating systems, and associated security and networking functions, ensuring robust defenses against cyberattacks.
These three stocks have strong growth potential for the rest of 2024 and 2025. They have seen positive earnings estimate revisions in the last 30 days. Each of our picks currently carries ether a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Fortinet’s third-quarter results reflect strength in demand from large enterprise customers and growth in its security subscriptions amid a slowdown in networking products, along with challenges in sales execution and marketing efficiency. Continued deal wins, especially those of high value, are a key driver for FTNT.
Higher IT spending on cybersecurity is further expected to aid FTNT in growing faster than the security market. The focus on enhancing FTNT’s unified threat management portfolio through product development and acquisitions is a tailwind.
Zacks Rank #1 Fortinet has an expected revenue and earnings growth rate of 11% and 33.7%, respectively, for the current year. For 2025, FTNT has an expected revenue and earnings growth rate of 12% and 6.1%, respectively. The Zacks Consensus Estimate for current-quarter, next-quarter, current-year and next-year earnings has improved over the last 30 days.
Datadog’s third-quarter 2024 top line benefited from strength in customer demand for offerings in modern observability, cloud security, software delivery and cloud service management. DDOG had 3,490 customers with an annual run rate of $100K or more at the end of the quarter.
DDOG’s dollar-based retention rate was in the mid-110s in the third quarter as customers increased their usage and adopted more products. Contributions from a solid cloud partner base, including Google Cloud, Microsoft Azure and Amazon Web Services, remain the key growth drivers for FTNT besides an expanding portfolio.
Zacks Rank #2 Datadog has an expected revenue and earnings growth rate of 24.9% and 32.6%, respectively, for the current year. For 2025, DDOG has an expected revenue and earnings growth rate of 20.1% and 10%, respectively. The Zacks Consensus Estimate for current-quarter, next-quarter, current-year and next-year earnings has improved over the last 30 days.
Palantir Technologies builds and deploys software platforms for the intelligence community to assist in counterterrorism investigations and operations in the United States, the United Kingdom, and internationally.
Of late, PLTR’s commercial business has gathered pace beside its traditional government contracts. This was primarily due to PLTR’s aggressive venture in the AI space. Last year, Palantir Technologies launched its Artificial Intelligence Platform (AIP), an AI-powered system that helps customers quickly concentrate and analyze data and discover how it can help advance their business goals.
AIP provides unified access to open-source, self-hosted, and commercial large language models that can transform structured and unstructured data into LLM-understandable objects and turn organizations' actions and processes into tools for humans and LLM-driven agents.
Zacks Rank #2 Palantir Technologies has an expected revenue and earnings growth rate of 26.6% and 52%, respectively, for the current year. For 2025, PLTR has an expected revenue and earnings growth rate of 24.5% and 24.6%, respectively. The Zacks Consensus Estimate for current-quarter, next-quarter, current-year and next-year earnings has improved over the last 30 days.
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