For Immediate Release
Chicago, IL – March 30, 2021 – Zacks Equity Research Shares of RH
RH
as the Bull of the Day, Thryv Holdings, Inc.
THRY
as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Netflix, Inc.
NFLX
, The Walt Disney Company
DIS
and AT&T Inc.
T
.
Here is a synopsis of all five stocks:
Bull of the Day
:
RH
, formally known as Restoration Hardware, posted blowout Q4 fiscal 2020 financial results on March 24. The stock has soared 17% since then and it touched brand new records Monday. The big post-earnings release climb is part of a much longer and bigger run that has seen the high-end retailer soar nearly 500% in the past three years.
Growing Luxury Portfolio
RH is a high-end furniture and home décor powerhouse that has thrived in a changing retail landscape by keeping it old-school. The company still has 2,500-page catalogs and it has opened large, luxury-centered stores, many with accompanying bars and restaurants in major cities from Chicago to New York. RH is also trying to expand its international business.
RH clearly understands what its affluent clientele wants in the Amazon era. And Wall Street was pleased to hear about its huge expansion efforts.
Chief executive Gary Friedman teased RH’s plans to enter the housing and hotel market in a letter to shareholders in the summer of 2020. “Our Hospitality efforts will continue to elevate the RH brand as we move beyond the four walls of our Galleries into RH Guesthouses where our goal is to create a new market for travelers seeking privacy and luxury in the $200 billion hotel industry,” Friedman wrote.
“Our ecosystem will come full circle as we begin to conceptualize and sell spaces, moving the brand beyond the $200 billion home furnishings market into the $1.7 trillion North American housing market by offering beautifully designed and furnished turnkey homes and condominiums with the introduction of RH Residences.”
RH provided updates about its plans to push beyond traditional brick-and-mortar retail on March 24. The company said its first RH Guesthouse is set to open in New York City in the fall of 2021, with a location in Aspen to follow.
The Colorado location is set to feature its first RH Bath House & Spa as well. RH also noted that it plans to expand its international footprint with “the openings of RH England and RH Paris in 2022.”
Other Fundamentals
RH has grown its revenue at a solid clip since its debut on the public markets in 2012, with its FY20 sales up 8% to $2.85 billion. The firm has also expanded its gross margins, with its 2020 gross margin at 46.5%, up from 41.4% in the year-ago period.
The company is also far more confident about its ability to grow this year. RH said when it reported its Q4 results that its FY21 revenue should grow by between 15% to 20%. This comes in well above the 10% growth analysts projected prior to its recent release and it would represent its strongest top-line expansion since FY15. Meanwhile, Zacks estimates call for its adjusted FY21 earnings to climb 16%.
RH executives are more positive based on the growth of the housing market and the continued ability for wealthy people and families to buy larger homes and spend on various home upgrades. The idea is relatively straightforward: larger homes require far more furniture and home décor.
Last year, home sales hit their highest levels since 2006. Better yet, the housing growth/update spending is likely to continue since millennials are now driving the housing market. And the pandemic has had far less impact on higher-income Americans, which bodes well for RH.
These conditions have helped elevate the Zacks Retail-Home Furnishings space that also includes Ethan Allen and others. The space now sits in the top 1% of our over 250 Zacks industries.
The luxury furniture firm’s shares have skyrocketed nearly 400% in the last year to destroy fellow coronavirus stars such as Shopify. And the recent success is part of a larger run that has seen RH soar nearly 1,300% in the past five years.
Bottom Line
As we mentioned at the outset, RH has surged around 16% since its March 24 release and it touched new highs of $610 a share Monday, before slipping over 2% during regular hours to $565.90 a share.
Despite its outperformance, the stock has continually traded at a discount to its industry in terms of forward earnings. And at 27.5X forward 12-month EPS, RH trades at a 10% discount to its own year-long high.
Investors should know that Warren Buffett’s Berkshire Hathaway took a position in RH last year and 11 of the 14 broker ratings Zacks has for the stock are “Strong Buys.” Plus, RH’s positive earnings revisions help it grab a Zacks Rank #1 (Strong Buy), alongside its “A” grade for Momentum and its “B” for Growth in our Style Score system.
Bear of the Day
:
Thryv Holdings
is a firm that’s focused on connecting buyers with sellers. The stock is up significantly since its direct listing on the Nasdaq in the fall of 2020, but its outlook appears tough.
What’s going On?
Thryv Holdings, once known as Dex Media, is a restructured marketing services provider. The company’s flagship offering, Thryv, is an “end-to-end customer experience software built for growing small to medium sized businesses that helps over 40,000 SaaS clients with the daily demands of running a business.”
Thryv’s portfolio also includes Superpages.com, DexKnows.com, Yellowpages.com, and many others that connect businesses with customers. The company aims to be a leader in local search and it tries to make “sure customers can find all the business information they need to make a purchase decision, wherever they are looking.”
The company faces tough business conditions and a quickly-changing digital landscape, and many smaller firms have struggled during the coronavirus. THRY reported its Q4 and fiscal 2020 results on March 25. The firm’s SaaS revenue popped 8% in the fourth quarter, but its overall revenue fell.
Meanwhile, if full-year 2020 sales fell from $1.42 billion to $1.11 billion. And Zacks estimates call for its FY21 revenue to slip another 21%, with its fiscal 2022 sales projected to dip 17% lower. At the bottom end, its adjusted earnings are projected to sink 32% this year.
Bottom Line
Thryv’s recent earnings revisions activity helps it land a Zacks Rank #5 (Strong Sell), alongside its “F” grade for Momentum in our Style Scores system. The company’s industry also rests in the bottom 25% of our over 250 Zacks industries right now.
The thinly-traded stock fell over 5% during regular trading hours Monday to $23.27 a share. In the end, investors might want to avoid the stock at the moment, while also keeping their eye on THRY for possible opportunities down the road.
Additional content:
Here’s How the Media Industry Can Adjust to the New Normal
The media and entertainment industry took a hit last year due to the COVID-19 pandemic. As the virus spread, location-based entertainment venues like movie theatres, stadiums, live concerts, and so on had to be shut down to curb the risk of exposure. This led to a slump in the global media and entertainment industry with revenues falling 6% in 2020, as quoted in a
World Economic Forum article
.
Nonetheless, this shutdown of entertainment venues led to a shift to digital consumption of content as people had to resort to at-home entertainment. In any case, this phenomenon has been gaining steam over the past few years as digital streaming services offer consumers a plethora of content to choose from and watch at their convenience. However, the pandemic allowed this shift to accelerate.
Reflective of this shift, streaming giant
Netflix
closed last year with a record number of subscriber additions. Notably, the company added 36.6 million customers last year, allowing it for the first time, to pass the 200 million-subscriber mark, as mentioned in a
Bloomberg article
.
Markedly, this rising popularity of streaming services also arrived as a blessing in disguise for movies which were not released exclusively in theatres last year due to the pandemic. Notably,
The Walt Disney Company
released their movie “Mulan” on both their streaming service Disney+ as well as in theatres in 2020.
However, the trend seems set to continue even as 2021 sees a pick up in the vaccination drive, especially in the United States, as studio executives seem reluctant to take the risk of releasing their movies in theatres exclusively.
Notably,
AT&T’s
Warner Bros. announced last year that they were going to release their big-budget movie “Wonder Woman 1984” on both the streaming service HBO Max and in theatres, simultaneously. Moreover, the company decided to release their slate of 2021 movies in the same manner. While the move was met with apprehension at the time, this seems to have become the way forward, even for big-budget movies, until at least the situation normalizes completely.
Following in the footsteps of Warner Bros., Disney also released “Raya and the Last Dragon” on Mar 5, on both their streaming service Disney+ as well as in theatres. Moreover, the company announced that they will release their much-anticipated film “Black Widow,” which got delayed due to the pandemic, on both Disney+ as well as in theatres, along with another film titled “Cruella.”
This goes on to show how beneficial streaming services have become in recent times, allowing even big-budget and highly-anticipated movies to be released on them. In fact, a
report
by Grand View Research stated that the global video streaming market is expected to witness a CAGR of 21% from 2021 to 2028.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
Media Contact
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
