Chicago, IL – December 2, 2024 – Zacks Equity Research shares Garmin GRMN as the Bull of the Day and TreeHouse Foods THS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon AMZN, Meta Platforms META and Microsoft MSFT.
Here is a synopsis of all five stocks.
If you're an outdoor enthusiast, angler, runner, or golfer, you’re likely familiar with Garmin, the industry leader renowned for producing high-quality navigation and communication equipment. Garmin offers an extensive portfolio of GPS-enabled devices across five key segments: Outdoor, Fitness, Marine, Auto, and Aviation. These segments contributed 32.5%, 25.8%, 17.4%, 8.1%, and 16.2% of the company’s revenue, respectively, showcasing its diversified and resilient business model.
Garmin’s stock has been on an impressive run in 2024, surging 65% year-to-date (YTD) and significantly outperforming the broader market. This stellar performance is underpinned by a top Zacks Rank, reflecting upward-trending earnings revisions. Coupled with an attractive technical chart setup, Garmin is positioned as a standout stock in the current market environment.
Driving its recent and continued strong performance in GRMN stock is the significant upgrades to its earnings estimates, giving it a Zacks Rank #1 (Strong Buy) rating. Over the last two months, analysts have nearly unanimously revised earnings projections higher, with FY24 climbing by 15.9% and FY25 by 15.7%.
One standout driver of Garmin’s growth is its Fitness segment, which accounts for 25% of total sales. The company dominates the market for wearable devices used by runners, cyclists, and fitness enthusiasts, making its products nearly ubiquitous among those who track their performance. With a reputation for high-quality, data-rich devices, Garmin continues to strengthen its leadership in the fast-growing fitness space, complementing its success across other segments.
The technical setup on Garmin stock really caught my eye, especially heading into the holiday season. After gapping massively higher following its most recent earnings report, the stock has been consolidating into a bull flag.
If the price action can clear the upper level of resistance at $215, it would signal a breakout and potentially draw in more buyers and send the stock on another bull run.
For investors looking to capitalize on a momentum stock with both solid fundamentals and a technical setup, Garmin presents a compelling opportunity. Its leadership across multiple markets, strong financial trajectory, and promising chart setup make it a standout choice in today’s market.
TreeHouse Foods is a leading producer of private-label packaged foods and beverages in North America, serving major retail grocery chains, foodservice distributors, and other branded food manufacturers. The company specializes in providing a wide array of private-label offerings, allowing retailers to offer cost-effective, high-quality alternatives to national brands.
TreeHouse Foods has been a very poor performing stock over the last decade, more than halving investors’ money in that time. This severe underperformance has been driven by several factors, but most notably, annual sales have fallen from a high of $6 billion in 2016 to just $3.3 billion today.
Further muddying TreeHouse Foods’ near-term future is its low Zacks Rank, which indicates that analysts have been cutting earnings estimates. Based on this setup, I think investors should avoid TreeHouse stock until there is a material turnaround in its business fundamentals or earnings revision trend.
TreeHouse Foods is expected to see a further decline in sales this year, with analysts forecasting a 4.3% drop. Earnings too have been revised significantly lower, giving it a Zacks Rank #5 (Strong Sell) rating, which does not bode well for the near-term expectations of the stock.
Current quarter earnings estimates have been lowered by 27.6%, while FY24 projections have fallen by 12.2% and FY25 by 18.2%.
TreeHouse is trading at a one year forward earnings multiple of 16.7x, which is below the market average and just below its five-year median of 17.8x. While this is below its historical average and is not quite a premium valuation, it still seems high for a business that has such poor growth prospects.
TreeHouse Foods has faced significant headwinds over the last year, and it does not seem they will subside any time soon. The food business is especially difficult as there is tremendous competition, and the industry lives on razor thin margins.
Until THS can show a marked improvement in growth or other business fundamentals, I would advise investors to avoid the stock and seek opportunities elsewhere.
Amazon has demonstrated remarkable resilience and growth in the third quarter of 2024, with its stock jumping 10.4% to date since its earnings announcement. The e-commerce giant's impressive performance across key segments and strategic initiatives suggests this could be an opportune time for investors to consider adding AMZN to their portfolios.
The company delivered outstanding financial results, with earnings per share of $1.43, representing a dramatic 52.1% increase year over year. Revenues climbed to $158.9 billion, marking 11% growth compared to the previous year, while operating income reached a record $17.4 billion, surging 56% year over year. These strong numbers underscore Amazon's ability to execute effectively while maintaining profitability.
Amazon Web Services (“AWS”) continues to be a primary growth driver, achieving a significant 19.1% year-over-year revenue increase to reach $27.5 billion, with an impressive $110 billion annualized run rate. The company's AI initiatives are particularly noteworthy, with AWS' AI business growing at a triple-digit rate year over year. The introduction of new foundation models through Amazon Bedrock, including partnerships with Anthropic, Meta Platforms and Mistral, positions Amazon at the forefront of the AI revolution.
Despite being the dominant player in the cloud market, the company faces strong competition from cloud giants like Microsoft andGoogle, which are also making concerted efforts to power their cloud solutions with GenAI.
The company's core retail business shows strong momentum, with the North America segment’s revenues increasing 9% to $95.5 billion and the International segment’s revenue growing 12% to $35.9 billion. Amazon's focus on operational efficiency is evident in its improved delivery speeds, with more than 40 million customers receiving same-day delivery in the past quarter. The successful Prime Big Deal Days event and enhanced Prime benefits, including fuel savings programs, demonstrate the company's commitment to customer value.
Amazon's advertising services continue to impress, generating $14.3 billion in revenues, with an 18.8% year-over-year growth. The company's entry into the broadcast season for Prime Video advertising and implementation of AI-powered creative tools showcase its innovation in this high-margin business segment.
Looking ahead, Amazon's planned $75 billion capital expenditure for 2024 signals confidence in future growth opportunities. The company's expansion of Amazon Pharmacy to cover nearly half of the United States by 2025 and significant investments in AI infrastructure demonstrate its commitment to long-term value creation.
Amazon presents a compelling investment opportunity, driven by its demonstrated operational excellence through consistent margin improvements across major segments. The company's strong position in AI technology and cloud services, coupled with its successful diversification across e-commerce, advertising and healthcare, creates multiple growth vectors. Amazon's robust financial health, evidenced by a 57% increase in operating cash flow to $112.7 billion and free cash flow growth to $47.7 billion, provides ample resources for future innovations and market expansion, making it an attractive option for growth-focused investors.
While Amazon's forward 12-month Price-to-Sales (P/S) ratio of 3.09X appears higher than the Zacks Internet - Commerce industry average of 1.8X, this premium valuation is well justified by the company's exceptional market position and growth prospects. The slightly elevated multiple compared to its historical median of 2.8X reflects investors' confidence in Amazon's robust ecosystem and diverse revenue streams.
The premium valuation is supported by Amazon's significant competitive advantages, including its dominant position in e-commerce, rapidly growing cloud computing business and expanding advertising segment. When considering the company's strong execution, impressive margin improvements and substantial investments in future growth areas like AI, the current valuation offers an attractive entry point for investors seeking exposure to a market leader with multiple growth catalysts.
For the fourth quarter of 2024, Amazon projects net sales between $181.5 billion and $188.5 billion, representing a 7-11% growth rate. The company's operating income is expected to range between $16 billion and $20 billion, showing continued strength in profitability.
The Zacks Consensus Estimate for net sales is pegged at $187.07 billion, indicating growth of 10.06% from the prior-year quarter’s reported figure.
The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.49 per share, which indicates a jump of 47.52% from the year-ago quarter. The figure has moved north by 8.8% over the past 30 days.
Given Amazon's strong financial performance, leadership in key growth areas like AI and cloud computing, operational improvements and healthy future outlook, the recent stock price increase appears justified and may represent just the beginning of a longer-term upward trend. The company's robust ecosystem, diverse revenue streams and strategic investments in future growth areas make it an attractive option for investors looking for both growth and stability in their portfolios.
For investors seeking exposure to technology, e-commerce and AI sectors, Amazon's current position and forward-looking strategy make it a compelling buy, particularly for those with a long-term investment horizon. AMZN currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Garmin Ltd. (GRMN) : Free Stock Analysis Report
TreeHouse Foods, Inc. (THS) : Free Stock Analysis Report
Meta Platforms, Inc. (META) : Free Stock Analysis Report
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