For Immediate Release
Chicago, IL – November 22, 2021 – Zacks Equity Research Shares of Chevron Corporation
CVX
as the Bull of the Day, Shopify Inc.
SHOP
as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Uber Technologies, Inc.
UBER
, Alphabet Inc.
GOOGL
and Dropbox, Inc.
DBX
.
Here is a synopsis of all five stocks:
Bull of the Day
:
Energy prices have surged out of the medically induced global economic coma with a vengeance. However, the worldwide uptick in COVID cases has the market nervous, and the recently implemented pandemic restrictions in Europe have compressed energy prices. Now an excellent trading opportunity appears to be presenting itself in this sector.
Chevron
and its best-in-class operations provide the perfect way to buy the dip in this momentum-charged sector with the highest return potential. The blowout Q3 results that CVX unveiled at the end of October catalyzed a slew of analyst upgrades, driving up EPS estimates across time horizons and propelling CVX into a Zacks Rank #1 (Strong Buy).
Recent Events
WTI crude oil took a tumble in the wake of these latest COVID lockdowns in Austria (many believe it won’t end with Austria), as traders pull profits on this hot commodity after failing to break out above $85 a barrel last week. Coming off a 7-year high, crude traders are now using 2018’s highs around $76 a barrel as a support level.
Global demand outlooks are drying up a bit, but with OPEC sticking with its leisurely output revival, I expect oil prices to remain above the $70 handle into what’s expected to be a cold winter.
In the past few sessions, global concerns about a pandemic resurgence is impacting global crude demand outlooks putting pressure on Chevron’s stock. However, there has been a wave of momentum behind energy stocks since late August, and this marginal dip is an excellent opportunity to get a bit of exposure to the space.
Investors have been avoiding oil stocks like the plague, with the future of oil being so uncertain and years of disappointing returns. Yet, some of the best-positioned oil companies are poised to provide us with the high-yielding returns we are looking for.
The outlook for crude remains a subject of debate. Still, many analysts remain bullish, with Bank of America along with several other respected analysts citing a $100+ near-term price target for this lucrative commodity.
Why Chevron?
Chevron is an energy powerhouse. With its savvy purchases across the Permian and Marcellus basins, the enterprise has established itself as a leader in the US oil industry (2nd largest US energy company behind ExxonMobil). I dare to call CVX an oil growth stock, but it has all the makings of a long-term winner.
I can assure you that the world economy is far from kicking its oil addiction. Demand for natural gas and oil will continue to rise over the next decade with energy needs, and CVX is poised to drive substantial profits throughout the roaring 20s.
I deem that Chevron’s 4.7% dividend yield is almost as safe as US Treasury Note. The oil industry’s commitment to maintaining its dividend no matter the financial adversity (short of bankruptcy) is unprecedented. Chevron has proven to have the liquidity to support its endlessly growing yield in even the most devastating economic environments. Chevron maintained its dividend through the past 18-months of economic shutdowns and actually raised its quarterly payout in Q2, which none of its major competitors can boast of.
The firm has already returned to pre-pandemic profitability levels, remarkably faster than most of its competitors, yet its share price remains below its pre-COVID high in January 2020.
ESG Investments
Chevron is tripling its carbon curbing spending. This energy pioneer is investing $10 billion over the next 6 years to develop biofuels, hydrogen production, carbon capture, and other low-carbon technologies. The word sustainability has been lighting up the market ether like never before, with the existential threat the pandemic posed to the world causing market participants to think a little differently about where they are investing their money.
ESG investing has taken precedence in this new market, and virtually all energy companies fail to meet the prerequisites for this type of stock picking. Chevron is aware of this trend and is making an effort to come back into market favor with these investors. Not to mention sustainable practices can be very rewarding in the long run if appropriately executed.
Final Thoughts
The last time crude was trading north of $70 a barrel, CVX was a $125 stock, so what is causing this discount today? The escalating focus on ESG and sustainability has pushed money management away from this sector, which has developed a spreading taboo perception about investing in oil & gas companies. The pandemic only accelerated this investment inclination towards sustainability. Once crude prices materially break back above $80 a barrel, it will be impossible for traders to ignore the opportunity here.
CVX is looking ripe for a buy today as momentum begins to push this stock back into market favor. CVX is trading just above $110 a share, which appears to be a short-term support level. 12 out of 17 analysts rate CVX a buy today (no sell ratings), with recent targets sitting between $125 and $150, representing an upside between 12.5% and 35% from here.
Bear of the Day
:
Shopify
has been one of the hottest stocks in the e-commerce boom we’ve seen in recent years, with the pandemic proliferating this digital retail transformation. It might be time to pull some profits on this clear-cut COVID winner after reaching all-time highs on Friday (11/19). Analysts are beginning to rein in their overzealous EPS estimates after a disappointing Q3 report pushing the stock into a Zacks Rank #5 (Strong Sell).
SHOP failed to materially break above $1,700 a share after an over 400% 2-year rally on the back of a 3,800% 5-year moonshot. The stock is now trading at an excessive 35.4x price to sales multiple (nearly 500x P/E), which can’t be justified by the company’s decelerating growth, especially when coupled with this rising interest rate environment.
The Business
Let me start by saying that this is an incredible business model that has exhibited unbelievable operational performance with an amazing profitable growth narrative. However, it looks like euphoric investors have pushed SHOP a little too far too fast.
Shopify is the biggest threat to Amazon’s omnipresence in the e-com space as it digitalizes Main Street and breathes life into start-ups and dying brick-and-mortar retailers. Shopify’s expanding platform has become a one-stop cloud-based shop for all commerce needs for enterprises of every shape and size.
Shopify’s platform powers over 1.7 million businesses’ online and in-store commerce from fresh start-ups to household names like Kraft Heinz, General Mills and Logitech.
Final Thoughts
Last year, Shopify’s push into sudden profitability (initially thought to be years out) exhilarated market participants, and FOMO-ridden momentum has continued to propel this next-generation stock into the stratosphere. It’s only a matter of time until gravity inevitably brings this rocket ship back down to reality.
Its significant growth deceleration on top of the Fed’s move towards monetary tightening (rising interest rates) will inevitably compress SHOP’s excessive valuation multiple.
Consider pulling some profits here as SHOP soars past many analysts’ price targets. I like this stock, just not at this crazy valuation. I would be a buyer of this stock on a pullback. $1,300 or lower will be the re-entry price I am looking for with SHOP.
Additional content:
UBER
Launches Uber One, with Rides & Delivery Benefits
Uber Technologies
has launched a new membership program, Uber One, which offers combined benefits of both rides and deliveries. Discounts on rides and deliveries, zero delivery fee and priority service are some of the benefits being offered under this program. For $9.99 per month or $99.99 annually, Uber One membership could be highly rewarding for frequent Uber users.
With Uber One, members can enjoy 5% off on eligible rides and delivery orders on food, grocery and alcohol, among others. Members can avail delivery services free of cost for minimum orders of $15+ and grocery orders of $30+. Uber is also offering priority service with top-rated drivers on rides and elevated member support under its Uber One membership.
The membership offers Uber One Promise, under which members get back $5 in Uber Cash on deliveries in case the latest arrival estimate, shown after placing the order, is wrong. Members also have the privilege to enjoy special offers and promotions, besides invite-only experiences.
Uber, carrying a Zacks Rank #3 (Hold), is offering the membership at an introductory price of $49.99 annually from Nov 17 to Nov 29.
Key Picks
Here are some better-ranked stocks in the
Internet – Services
industry:
Alphabet
sports a Zacks Rank #1 (Strong Buy). The company has a stellar earnings surprise history having trumped the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 41.5%. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Shares of Alphabet have rallied more than 72% in a year’s time.
Dropbox
carries a Zacks Rank #2 (Buy). The company’s earnings have outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 16.3%.
Shares of Dropbox have gained more than 34% in a year’s time.
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