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SeaWorld, JD.com, Wells Fargo, JP Morgan and Morgan Stanley highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – August 23, 2021 – Zacks Equity Research Shares of SeaWorld Entertainment, Inc. as the Bull of the Day, JD.com, Inc. (JD - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wells Fargo & Company (WFC - Free Report) , JP Morgan Chase & Co. (JPM - Free Report) and Morgan Stanley (MS - Free Report) .
SeaWorld, a leading aquatic-based theme park and entertainment company, is coming out of the pandemic downturn with a vengeance. SEAS is trading 458% off its pandemic lows, over 30% higher than its pre-pandemic levels, and it still has massive upside potential from here after bouncing off a critical technical support level last week.
SeaWorld proved its operational superiority in the amusement park space this past quarter, demonstrating record earnings that soared past estimates. Now analysts are getting more bullish on SEAS than I ever thought was possible, with the full-year 2021 EPS estimates tripling in just the past 2 months, driving this stock 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 devasting 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 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 rocket ship growth.
The Comeback
SeaWorld stopped breeding orca's in 2016 and has been focusing on investing heavily in other foot-traffic driving attractions across its 8 theme parks and 5 waterparks. Management has proven an aptitude for high return investments as the entertainment enterprise disassociates its brand from the Blackfish taboo. Its share price has reflected these attendance inspiring new verticals, driving up over 250% from its lows in November of 2017 to its pre-pandemic high, compared to the S&P 500's only 32% increase over the same period.
The COVID lockdowns threw a wrench in its operations like the rest of the amusement park space, but the speed at which SeaWorld has been able to bounce back is unparalleled. SEAS is soaring out of this pandemic with more momentum behind it than any competitors like Cedar Fair and Six Flags (who are trading at comparable valuation multiples), and there is so much more room for this stock to run. The economic recovery will be a tailwind for the company for the next few quarters as society resumes a growing level of normality.
Technical Break Down
Since February, SEAS has been consolidating around $50 a share, but after an exceptional Q2 earnings report released earlier this month (8/5), I think this stock is ready for its next leg higher. You can see from the chart below that SEAS bounced off a Fib-derived support level around $46.50 on Thursday of last week (8/19).
Final Thoughts
Recent fears of an economic slowdown from the Delta-dent have hindered SEAS upside in the past few weeks. Still, this market angst is beginning to subside, with this recent COVID resurgence appearing to have a negligible impact on our highly vaccinated economy.
SEAS saw some resistance at its 50-day moving average (which happened to line up with another resistance level) just south of $50 a share on Friday, but once these shares materially break above $50, I am looking at $60 as my next price target (over 20% upside from here).
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 $79 a share (over 60% upside from where it closed on Friday). I wouldn't hesitate to buy these shares at their current fear-induced discount.
I am pitching JD.com, one of China's largest digital retailers, as Zacks' 'Bear of the Day' due to the enormous and highly uncertain regulatory overhang that has caused Chinese tech to be a (nearly) uninvestable class of public equities. Despite JD's unbelievably profitable growth acceleration that consistently impresses analysts quarter after quarter, the risk surrounding Xi's recent crackdown on tech has investors running for the hills.
Analysts have been downwardly revising EPS estimates on JD over the next few years as they price in the potential regulatory blow that Xi's increasingly autocratic regime will have on this digital powerhouse moving forward. JD.com has fallen to a Zacks Rank #5 (Strong Sell), and its shares are currently a falling knife that I wouldn't want to catch.
JD.com is releasing its Q2 earnings before the bell today, and analysts are looking for record sales. JD has seen wild post-earnings price action, with an average move of 8.6% over the past 6 quarters (4 up, 2 down). This past quarter's results will likely be overlooked (outside of a highly unlikely miss). The focus will be on management's outlook and sentiment about the regulatory overhang and how it could impact its future profitability/growth.
The share's recent decline may catalyze a jump, but I will not be making any bets here.
Bear Market for Chinese Tech
Hong Kong officially entered a bear market as its innovation-powered Hang Seng Index experienced another regulation catalyzed sell-off in its Friday session (8.20). Beijing has been busy releasing a flood of value-killing regulations that have brought Chinese tech stocks to their knees.
Chinese legislators just approved one of the world's strictest data privacy laws, which would curb tech enterprises' ability to collect consumer data (a precious asset to these businesses). These new privacy laws are similar to that of the EU. The key difference is that the communist state will still be able to collect as much of its citizens' data as it wants utilizing its already comprehensive surveillance programs. This was just another dagger to the already beaten-down tech sector in the region.
The new privacy laws will be put into place on November 1st and require businesses to collect minimum data, obtain consent for sensitive information, offer easy opt-out options, and direct government approval to transfer data overseas.
The leading US traded innovators in the region: Alibaba, Tencent, JD.com and Baidu, are off their 52-week highs by between 40% and 61%, as investors dump Chinese tech like there is no tomorrow. There is a thick cloud of uncertainty surrounding this group of public equities. Tencent came out yesterday and announced that they expect to continue seeing a slew of new regulations over the next few months, but how much of this is already priced into these stocks?
I wouldn't be trying to catch these falling knives because we have no idea what Xi's end game is here. Whether it is to rid China of US investors, demonstrate to the private tech space who is really in charge, or maybe it is just Xi's administration attempting to match regulations used in countries abroad. The latter is doubtfully considering the 'convenient' timing of these various restrictions, but I still cling to the hope that Xi will eventually loosen his grip on tech.
Eccentric tech tycoon, Jack Ma, seems to have catalyzed this endless flow of tech-focused regulation in China.
Xi's regime impeded Ma's fintech giant Ant Group's nearly half a trillion-dollar IPO last year. It wiped out more than $100 billion of its market value with a fresh regulatory overhaul aimed at Ant Group's unique micro-lending methods. This move by Chinese officials appeared to be in retaliation to Jack Ma's (founder and owner of the business) public criticism of the republic's financial system. Jack Ma's denouncement of China's economic practices seems to have triggered this fresh wave of tech regulation in the region. Xi fears that he could lose control of the masses to ostentatious billionaires like Ma.
Another 'timely' restriction came just 2 days after DiDi, the Uber of China, released its shares to US investors, the Cyberspace Administration in China announced a data-security review of the company that would require them to temporarily halt user growth. DIDI shares have since lost over $50 of their value. In fact, every publicly traded Chinese tech stock has taken a sizable dip since these restrictive announcements became a systemic issue earlier this year.
The progressing Chinese communist regime seemingly headed towards capitalism is now reeling back towards what looks like a government-controlled autocratic economy.
That being said, it is not unusual for the Chinese stock market to see these 20%+ stock market sell-off in any given year. In the past decade, the Hang Seng Index has experienced an over 15% market downturn in all but 2 of those years, entered a bear market (20%+ decline) in 4 of the last 6 years. The volatility that we are seeing in the Chinese market today is not unusual, but the mounting regulatory overhang causing this bear market is definitely unique to 2021. As I said, the unusual uncertainty here is what continues to compress JD's and its cohorts' valuations.
Final Thoughts
There is nothing systemic about JD.com that I dislike, in fact, the business has a very healthy-looking balance sheet, and its accelerating profitable growth remains attractive. The geopolitical risk in the region is just too high for most US investors. The trade war between the US and China has me and many other analysts concerned that Beijing is attempting to rid its GDP growth powering tech giants of US investors by making these companies uninvestable.
If Xi's administration shows signs of backing off its crackdown on tech, I won't hesitate to buy up shares of JD and the rest of Chinese tech, but as of now, I am staying clear.
Additional content:
Wells Fargo, JPMorgan File for Bitcoin Fund
Wells Fargoand JP Morgan are penetrating the $2-trillion worth Bitcoin arena as both companies recently registered a Bitcoin fund with the Securities and Exchange Commission.
Wells Fargo and JPMorgan are partnering with the New York Digital Investment Group (NYDIG), a pioneering technology and financial services firm. Both firms will get an undisclosed percentage of sales via its subsidiaries. Wells Fargo will get the sales through Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network.
In case of JPMorgan, NYDIG will hold the cryptocurrency while the bank will be represented as a sales agent. In Wells Fargo's case, the bank will also be functioning with FS Investments on the offering. Both funds were registered as passive funds despite initially expected to be actively managed.
The move follows the May 2021 news when Wells Fargo Investment Institute president Darrell Cronk had informed about the bank's likely offering as a "professionally managed solution" to its wealthiest clients in the future, according to an Insider interview. Even JP Morgan had enabled its advisors to take orders to purchase and sell five cryptocurrency products, four from Grayscale Investments and one from Osprey Funds, per an internal memo in July 2021.
Our Take
Until July 2020, the Office of the Comptroller of the Currency did not grant permission to banks to hold cryptocurrencies. The amendment post July gave banks the go-ahead to begin exploring cryptocurrency operations.
Thus, such an effort by both banks will likely boost the world's most popular cryptocurrency asset's prospects further, at least on the grounds that Wells Fargo and JP Morgan are enabling cryptocurrency access to their clients. The banks' move follow their peer Morgan Stanley's endeavor to start offering clients access to three bitcoin funds as reported in March 2021.
Shares of JP Morgan have gained 3.3% in the past six months while the Wells Fargo stock has rallied 26.8%.
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.
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SeaWorld, JD.com, Wells Fargo, JP Morgan and Morgan Stanley highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – August 23, 2021 – Zacks Equity Research Shares of SeaWorld Entertainment, Inc. as the Bull of the Day, JD.com, Inc. (JD - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wells Fargo & Company (WFC - Free Report) , JP Morgan Chase & Co. (JPM - Free Report) and Morgan Stanley (MS - Free Report) .
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 is trading 458% off its pandemic lows, over 30% higher than its pre-pandemic levels, and it still has massive upside potential from here after bouncing off a critical technical support level last week.
SeaWorld proved its operational superiority in the amusement park space this past quarter, demonstrating record earnings that soared past estimates. Now analysts are getting more bullish on SEAS than I ever thought was possible, with the full-year 2021 EPS estimates tripling in just the past 2 months, driving this stock 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 devasting 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 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 rocket ship growth.
The Comeback
SeaWorld stopped breeding orca's in 2016 and has been focusing on investing heavily in other foot-traffic driving attractions across its 8 theme parks and 5 waterparks. Management has proven an aptitude for high return investments as the entertainment enterprise disassociates its brand from the Blackfish taboo. Its share price has reflected these attendance inspiring new verticals, driving up over 250% from its lows in November of 2017 to its pre-pandemic high, compared to the S&P 500's only 32% increase over the same period.
The COVID lockdowns threw a wrench in its operations like the rest of the amusement park space, but the speed at which SeaWorld has been able to bounce back is unparalleled. SEAS is soaring out of this pandemic with more momentum behind it than any competitors like Cedar Fair and Six Flags (who are trading at comparable valuation multiples), and there is so much more room for this stock to run. The economic recovery will be a tailwind for the company for the next few quarters as society resumes a growing level of normality.
Technical Break Down
Since February, SEAS has been consolidating around $50 a share, but after an exceptional Q2 earnings report released earlier this month (8/5), I think this stock is ready for its next leg higher. You can see from the chart below that SEAS bounced off a Fib-derived support level around $46.50 on Thursday of last week (8/19).
Final Thoughts
Recent fears of an economic slowdown from the Delta-dent have hindered SEAS upside in the past few weeks. Still, this market angst is beginning to subside, with this recent COVID resurgence appearing to have a negligible impact on our highly vaccinated economy.
SEAS saw some resistance at its 50-day moving average (which happened to line up with another resistance level) just south of $50 a share on Friday, but once these shares materially break above $50, I am looking at $60 as my next price target (over 20% upside from here).
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 $79 a share (over 60% upside from where it closed on Friday). I wouldn't hesitate to buy these shares at their current fear-induced discount.
Bear of the Day:
I am pitching JD.com, one of China's largest digital retailers, as Zacks' 'Bear of the Day' due to the enormous and highly uncertain regulatory overhang that has caused Chinese tech to be a (nearly) uninvestable class of public equities. Despite JD's unbelievably profitable growth acceleration that consistently impresses analysts quarter after quarter, the risk surrounding Xi's recent crackdown on tech has investors running for the hills.
Analysts have been downwardly revising EPS estimates on JD over the next few years as they price in the potential regulatory blow that Xi's increasingly autocratic regime will have on this digital powerhouse moving forward. JD.com has fallen to a Zacks Rank #5 (Strong Sell), and its shares are currently a falling knife that I wouldn't want to catch.
JD.com is releasing its Q2 earnings before the bell today, and analysts are looking for record sales. JD has seen wild post-earnings price action, with an average move of 8.6% over the past 6 quarters (4 up, 2 down). This past quarter's results will likely be overlooked (outside of a highly unlikely miss). The focus will be on management's outlook and sentiment about the regulatory overhang and how it could impact its future profitability/growth.
The share's recent decline may catalyze a jump, but I will not be making any bets here.
Bear Market for Chinese Tech
Hong Kong officially entered a bear market as its innovation-powered Hang Seng Index experienced another regulation catalyzed sell-off in its Friday session (8.20). Beijing has been busy releasing a flood of value-killing regulations that have brought Chinese tech stocks to their knees.
Chinese legislators just approved one of the world's strictest data privacy laws, which would curb tech enterprises' ability to collect consumer data (a precious asset to these businesses). These new privacy laws are similar to that of the EU. The key difference is that the communist state will still be able to collect as much of its citizens' data as it wants utilizing its already comprehensive surveillance programs. This was just another dagger to the already beaten-down tech sector in the region.
The new privacy laws will be put into place on November 1st and require businesses to collect minimum data, obtain consent for sensitive information, offer easy opt-out options, and direct government approval to transfer data overseas.
The leading US traded innovators in the region: Alibaba, Tencent, JD.com and Baidu, are off their 52-week highs by between 40% and 61%, as investors dump Chinese tech like there is no tomorrow. There is a thick cloud of uncertainty surrounding this group of public equities. Tencent came out yesterday and announced that they expect to continue seeing a slew of new regulations over the next few months, but how much of this is already priced into these stocks?
I wouldn't be trying to catch these falling knives because we have no idea what Xi's end game is here. Whether it is to rid China of US investors, demonstrate to the private tech space who is really in charge, or maybe it is just Xi's administration attempting to match regulations used in countries abroad. The latter is doubtfully considering the 'convenient' timing of these various restrictions, but I still cling to the hope that Xi will eventually loosen his grip on tech.
Eccentric tech tycoon, Jack Ma, seems to have catalyzed this endless flow of tech-focused regulation in China.
Xi's regime impeded Ma's fintech giant Ant Group's nearly half a trillion-dollar IPO last year. It wiped out more than $100 billion of its market value with a fresh regulatory overhaul aimed at Ant Group's unique micro-lending methods. This move by Chinese officials appeared to be in retaliation to Jack Ma's (founder and owner of the business) public criticism of the republic's financial system. Jack Ma's denouncement of China's economic practices seems to have triggered this fresh wave of tech regulation in the region. Xi fears that he could lose control of the masses to ostentatious billionaires like Ma.
Another 'timely' restriction came just 2 days after DiDi, the Uber of China, released its shares to US investors, the Cyberspace Administration in China announced a data-security review of the company that would require them to temporarily halt user growth. DIDI shares have since lost over $50 of their value. In fact, every publicly traded Chinese tech stock has taken a sizable dip since these restrictive announcements became a systemic issue earlier this year.
The progressing Chinese communist regime seemingly headed towards capitalism is now reeling back towards what looks like a government-controlled autocratic economy.
That being said, it is not unusual for the Chinese stock market to see these 20%+ stock market sell-off in any given year. In the past decade, the Hang Seng Index has experienced an over 15% market downturn in all but 2 of those years, entered a bear market (20%+ decline) in 4 of the last 6 years. The volatility that we are seeing in the Chinese market today is not unusual, but the mounting regulatory overhang causing this bear market is definitely unique to 2021. As I said, the unusual uncertainty here is what continues to compress JD's and its cohorts' valuations.
Final Thoughts
There is nothing systemic about JD.com that I dislike, in fact, the business has a very healthy-looking balance sheet, and its accelerating profitable growth remains attractive. The geopolitical risk in the region is just too high for most US investors. The trade war between the US and China has me and many other analysts concerned that Beijing is attempting to rid its GDP growth powering tech giants of US investors by making these companies uninvestable.
If Xi's administration shows signs of backing off its crackdown on tech, I won't hesitate to buy up shares of JD and the rest of Chinese tech, but as of now, I am staying clear.
Additional content:
Wells Fargo, JPMorgan File for Bitcoin Fund
Wells Fargoand JP Morgan are penetrating the $2-trillion worth Bitcoin arena as both companies recently registered a Bitcoin fund with the Securities and Exchange Commission.
Wells Fargo and JPMorgan are partnering with the New York Digital Investment Group (NYDIG), a pioneering technology and financial services firm. Both firms will get an undisclosed percentage of sales via its subsidiaries. Wells Fargo will get the sales through Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network.
In case of JPMorgan, NYDIG will hold the cryptocurrency while the bank will be represented as a sales agent. In Wells Fargo's case, the bank will also be functioning with FS Investments on the offering. Both funds were registered as passive funds despite initially expected to be actively managed.
The move follows the May 2021 news when Wells Fargo Investment Institute president Darrell Cronk had informed about the bank's likely offering as a "professionally managed solution" to its wealthiest clients in the future, according to an Insider interview. Even JP Morgan had enabled its advisors to take orders to purchase and sell five cryptocurrency products, four from Grayscale Investments and one from Osprey Funds, per an internal memo in July 2021.
Our Take
Until July 2020, the Office of the Comptroller of the Currency did not grant permission to banks to hold cryptocurrencies. The amendment post July gave banks the go-ahead to begin exploring cryptocurrency operations.
Thus, such an effort by both banks will likely boost the world's most popular cryptocurrency asset's prospects further, at least on the grounds that Wells Fargo and JP Morgan are enabling cryptocurrency access to their clients.
The banks' move follow their peer Morgan Stanley's endeavor to start offering clients access to three bitcoin funds as reported in March 2021.
Shares of JP Morgan have gained 3.3% in the past six months while the Wells Fargo stock has rallied 26.8%.
Both stocks presently carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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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.