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Generac, and Hertz Global have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL –July 19, 2024 – Zacks Equity Research shares Generac (GNRC - Free Report) , as the Bull of the Day and Hertz Global Holdings (HTZ - Free Report) , asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on NVIDIA Corp. (NVDA - Free Report) , Advanced Micro Devices, Inc. (AMD - Free Report) and Marvell Technology, Inc. (MRVL - Free Report) .
Zacks Rank #1 (Strong Buy) stock Generac is a company that designs and manufactures power generation equipment and other engine-powered products. Its primary focus is on backup power solutions, including residential, commercial and industrial generators. Generac also produces portable generators, pressure washers, transfer switches, and other power-related products. The company’s offerings ensure reliable power during outages and serve various energy needs across different sectors, emphasizing innovation, reliability, and efficiency in power management.
Unusually Active Hurricane Season Predicted
Hurricane experts are forecasting an abnormally strong hurricane season with more than twenty named storms likely to form from now until end of the year. Warm ocean temperatures are the main ingredient needed for devastating hurricanes. Forecasters believe that out of the named storms up to seven will be classified as “major hurricanes.”
Stronger hurricanes spurred on by climate change are contributing to Generac’s bottom line and are likely to do so well into the future. Beyond hurricanes, the United States power grid has displayed in vulnerability in recent years. For example, Houston, Texas residents recently lost power for several days. More and more these multi-day outages are becoming common place in states like Florida, Texas, and California. Fortunately for investors, GNRC has the remedy.
Relative Price Strength
On Wall Street, strength tends to beget strength. Said alternatively, the trend is your friend until the end when it bends. That’s good news for GNRC shareholders. The stock has doubled the performance of the S&P 500 Index over the past six months and the momentum is only likely to continue as hurricane season arrives.
A Stealth AI Energy Play
The proliferation of artificial intelligence (AI) applications has caused a spurt in the construction of energy-intensive data centers. This is likely to spur demand for power consumption/backup power in the near future, which is expected to put pressure on the aging power grids.
Bottom Line
Hurricanes seem to be more prevalent than ever before. Backup power generation firm Generac is set to cash in.
Zacks Rank #5 (Strong Sell) stock Hertz Global Holdings is a multinational company primarily engaged in the car rental industry. As one of the world’s largest car rental providers, Hertz operates in over 150 countries, offering rental services for a wide range of vehicles, including cars, trucks, and SUVs.
The company caters to both leisure and business travelers, providing short-term and long-term rental solutions. In addition to car rentals, Hertz has expanded its services to include equipment rental and fleet management solutions. Hertz is known for its extensive fleet of vehicles and a global network of rental locations, making it a prominent player in the transportation sector.
Poor Fleet Allocation
Recently, Hertz announced it would cut its TeslaEV fleet by 20,000 vehicles, or roughly 33%. Surprisingly, Hertz could not turn a profit renting out the wildly popular TSLA EVs. The failed EV fleet acquisition underscores car rental industry issues, including, poor visibility, weak economics, and tight margins.
Earnings Growth is Moving in the Wrong Direction
In bull markets (and any market for that matter), investors gravitate towards companies with strong and positive earnings growth. Unfortunately for Hertz investors, HTZ EPS has been declining for several quarters.
To make matters worse, Zacks Consensus Estimates suggest -184.62% earnings growth for the current quarter and -24% for full-year 2024.
Industry Disruption
Blockbuster Video’s management team famously scoffed at the idea of sending DVDs in the mail (and later streaming) and refused to acquire Netflix. The rest is history – Blockbuster went bust, and NFLX went on to have a meteoric rise and become a Wall Street darling.
Unfortunately for Hertz, innovation is beginning to disrupt the industry. Turo is a peer-to-peer car-sharing platform that allows individuals to rent out their personal vehicles to others. The platform connects car owners with people in need of short-term rentals, providing a diverse selection of cars to choose from. Turo offers an alternative to traditional car rental services, allowing for a more varied and unique selection of vehicles.
Both car owners and renters can benefit from the flexibility and convenience provided by Turo’s platform, often offering users a more personalized and local experience. I like to think of it as Airbnb, but for cars. While Turo may not be in a position to put HTZ out of business, the platform is beginning to disrupt the industry and acts as a negative tailwind.
Relative Weakness
Hertz price action matches its sinking fundamental picture. While most stocks uptrend and soar to new heights, HTZ shares are stuck in the mud. Investors should avoid relatively weak stocks such as HTZ.
Bottom Line
Hertz is struggling from poor economics, industry disruption, and low visibility. Avoid laggards such as HTZ.
Additional content:
Chip Stocks Tumble as U.S. Plans to Tighten China Restrictions
In a significant development for the semiconductor industry, the Biden administration is reportedly planning to tighten restrictions on chip exports to China. This news, first reported by Bloomberg citing people familiar with the matter, has sent shockwaves through the market.
Following the Bloomberg report, shares of major semiconductor companies took a nosedive, with NVIDIA Corp., Advanced Micro Devices, Inc. and Marvell Technology, Inc.
The Biden Administration's Plan
The proposed measures are part of a broader strategy to curb China's access to advanced semiconductor technology, which is deemed critical for both commercial and military applications. The U.S. government aims to maintain technological superiority and safeguard national security interests by tightening export controls.
Citing the sources, Bloomberg revealed that a key component of this plan involves the Foreign Direct Product Rule (“FDPR”), a regulation first introduced in 1959 that allows the United States to control the sale of products made using American technology, regardless of where they are manufactured.
This provision could be applied to companies such as Tokyo Electron and ASML Holding NV, which play crucial roles in the global semiconductor supply chain. According to the Bloomberg report, the Biden administration has been discussing this measure with allies in Tokyo and The Hague, emphasizing the potential for its implementation if these countries do not tighten their restrictions on China.
Impact on US Chip Makers
The restrictions under discussion could have far-reaching implications for the U.S. semiconductor industry. Companies like NVIDIA, Advanced Micro Devices and Marvell, which have significant exposure to the Chinese market, are likely to feel a significant impact. China is a major consumer of semiconductors, accounting for a substantial portion of global demand. Any disruption in this market can lead to substantial revenue losses for these companies.
NVIDIA is already witnessing the heat of earlier bans on selling its advanced artificial intelligence (AI) chips to China. The country usually accounted for more than 20% of its total revenues. However, from the fourth quarter of fiscal 2024 onward, China’s contribution to NVIDIA’s total revenues has dropped to the high-single-digit range.
Marvell has a larger exposure to the Chinese market from where it generates around 45% of its total revenues. For Advanced Micro Devices, China accounted for 15% of its 2023 total revenues.
The broader implications of these restrictions extend beyond individual companies. The semiconductor industry is highly interconnected, with complex global supply chains. Any disruption in one part of the chain can have cascading effects on the entire industry. The heightened restrictions could lead to supply-chain disruptions, increased production costs, and delays in product development and delivery.
Moreover, these restrictions could accelerate China's efforts to achieve semiconductor self-sufficiency. The Chinese government has been investing heavily in its domestic semiconductor industry to reduce dependence on foreign technology. While this transition will take time, the new restrictions could provide additional impetus for China to expedite its semiconductor development initiatives.
Conclusion
The tightening of chip access restrictions on China is set to have profound implications for U.S. chip makers' long-term growth prospects. Companies like NVIDIA, Advanced Micro Devices and Marvell have seen their valuations skyrocket over the past year, driven by the booming demand for AI and advanced computing technologies. These optimistic projections have fueled significant investor enthusiasm, with expectations of explosive growth in revenues and market share.
However, the recent plunge in these chip stocks, spurred by the Biden administration's plans to impose stricter export controls, highlights the fragility of this optimism. Investors now seem to be increasingly concerned that these companies may face substantial headwinds due to the enhanced restrictions on chip exports to China, a critical market for their products. The potential disruption in supply chains, coupled with limited access to a lucrative market, poses a significant risk to the growth trajectories of these semiconductor giants.
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
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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Generac, and Hertz Global have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL –July 19, 2024 – Zacks Equity Research shares Generac (GNRC - Free Report) , as the Bull of the Day and Hertz Global Holdings (HTZ - Free Report) , asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on NVIDIA Corp. (NVDA - Free Report) , Advanced Micro Devices, Inc. (AMD - Free Report) and Marvell Technology, Inc. (MRVL - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Zacks Rank #1 (Strong Buy) stock Generac is a company that designs and manufactures power generation equipment and other engine-powered products. Its primary focus is on backup power solutions, including residential, commercial and industrial generators. Generac also produces portable generators, pressure washers, transfer switches, and other power-related products. The company’s offerings ensure reliable power during outages and serve various energy needs across different sectors, emphasizing innovation, reliability, and efficiency in power management.
Unusually Active Hurricane Season Predicted
Hurricane experts are forecasting an abnormally strong hurricane season with more than twenty named storms likely to form from now until end of the year. Warm ocean temperatures are the main ingredient needed for devastating hurricanes. Forecasters believe that out of the named storms up to seven will be classified as “major hurricanes.”
Stronger hurricanes spurred on by climate change are contributing to Generac’s bottom line and are likely to do so well into the future. Beyond hurricanes, the United States power grid has displayed in vulnerability in recent years. For example, Houston, Texas residents recently lost power for several days. More and more these multi-day outages are becoming common place in states like Florida, Texas, and California. Fortunately for investors, GNRC has the remedy.
Relative Price Strength
On Wall Street, strength tends to beget strength. Said alternatively, the trend is your friend until the end when it bends. That’s good news for GNRC shareholders. The stock has doubled the performance of the S&P 500 Index over the past six months and the momentum is only likely to continue as hurricane season arrives.
A Stealth AI Energy Play
The proliferation of artificial intelligence (AI) applications has caused a spurt in the construction of energy-intensive data centers. This is likely to spur demand for power consumption/backup power in the near future, which is expected to put pressure on the aging power grids.
Bottom Line
Hurricanes seem to be more prevalent than ever before. Backup power generation firm Generac is set to cash in.
Bear of the Day:
Zacks Rank #5 (Strong Sell) stock Hertz Global Holdings is a multinational company primarily engaged in the car rental industry. As one of the world’s largest car rental providers, Hertz operates in over 150 countries, offering rental services for a wide range of vehicles, including cars, trucks, and SUVs.
The company caters to both leisure and business travelers, providing short-term and long-term rental solutions. In addition to car rentals, Hertz has expanded its services to include equipment rental and fleet management solutions. Hertz is known for its extensive fleet of vehicles and a global network of rental locations, making it a prominent player in the transportation sector.
Poor Fleet Allocation
Recently, Hertz announced it would cut its TeslaEV fleet by 20,000 vehicles, or roughly 33%. Surprisingly, Hertz could not turn a profit renting out the wildly popular TSLA EVs. The failed EV fleet acquisition underscores car rental industry issues, including, poor visibility, weak economics, and tight margins.
Earnings Growth is Moving in the Wrong Direction
In bull markets (and any market for that matter), investors gravitate towards companies with strong and positive earnings growth. Unfortunately for Hertz investors, HTZ EPS has been declining for several quarters.
To make matters worse, Zacks Consensus Estimates suggest -184.62% earnings growth for the current quarter and -24% for full-year 2024.
Industry Disruption
Blockbuster Video’s management team famously scoffed at the idea of sending DVDs in the mail (and later streaming) and refused to acquire Netflix. The rest is history – Blockbuster went bust, and NFLX went on to have a meteoric rise and become a Wall Street darling.
Unfortunately for Hertz, innovation is beginning to disrupt the industry. Turo is a peer-to-peer car-sharing platform that allows individuals to rent out their personal vehicles to others. The platform connects car owners with people in need of short-term rentals, providing a diverse selection of cars to choose from. Turo offers an alternative to traditional car rental services, allowing for a more varied and unique selection of vehicles.
Both car owners and renters can benefit from the flexibility and convenience provided by Turo’s platform, often offering users a more personalized and local experience. I like to think of it as Airbnb, but for cars. While Turo may not be in a position to put HTZ out of business, the platform is beginning to disrupt the industry and acts as a negative tailwind.
Relative Weakness
Hertz price action matches its sinking fundamental picture. While most stocks uptrend and soar to new heights, HTZ shares are stuck in the mud. Investors should avoid relatively weak stocks such as HTZ.
Bottom Line
Hertz is struggling from poor economics, industry disruption, and low visibility. Avoid laggards such as HTZ.
Additional content:
Chip Stocks Tumble as U.S. Plans to Tighten China Restrictions
In a significant development for the semiconductor industry, the Biden administration is reportedly planning to tighten restrictions on chip exports to China. This news, first reported by Bloomberg citing people familiar with the matter, has sent shockwaves through the market.
Following the Bloomberg report, shares of major semiconductor companies took a nosedive, with NVIDIA Corp., Advanced Micro Devices, Inc. and Marvell Technology, Inc.
The Biden Administration's Plan
The proposed measures are part of a broader strategy to curb China's access to advanced semiconductor technology, which is deemed critical for both commercial and military applications. The U.S. government aims to maintain technological superiority and safeguard national security interests by tightening export controls.
Citing the sources, Bloomberg revealed that a key component of this plan involves the Foreign Direct Product Rule (“FDPR”), a regulation first introduced in 1959 that allows the United States to control the sale of products made using American technology, regardless of where they are manufactured.
This provision could be applied to companies such as Tokyo Electron and ASML Holding NV, which play crucial roles in the global semiconductor supply chain. According to the Bloomberg report, the Biden administration has been discussing this measure with allies in Tokyo and The Hague, emphasizing the potential for its implementation if these countries do not tighten their restrictions on China.
Impact on US Chip Makers
The restrictions under discussion could have far-reaching implications for the U.S. semiconductor industry. Companies like NVIDIA, Advanced Micro Devices and Marvell, which have significant exposure to the Chinese market, are likely to feel a significant impact. China is a major consumer of semiconductors, accounting for a substantial portion of global demand. Any disruption in this market can lead to substantial revenue losses for these companies.
NVIDIA is already witnessing the heat of earlier bans on selling its advanced artificial intelligence (AI) chips to China. The country usually accounted for more than 20% of its total revenues. However, from the fourth quarter of fiscal 2024 onward, China’s contribution to NVIDIA’s total revenues has dropped to the high-single-digit range.
Marvell has a larger exposure to the Chinese market from where it generates around 45% of its total revenues. For Advanced Micro Devices, China accounted for 15% of its 2023 total revenues.
The broader implications of these restrictions extend beyond individual companies. The semiconductor industry is highly interconnected, with complex global supply chains. Any disruption in one part of the chain can have cascading effects on the entire industry. The heightened restrictions could lead to supply-chain disruptions, increased production costs, and delays in product development and delivery.
Moreover, these restrictions could accelerate China's efforts to achieve semiconductor self-sufficiency. The Chinese government has been investing heavily in its domestic semiconductor industry to reduce dependence on foreign technology. While this transition will take time, the new restrictions could provide additional impetus for China to expedite its semiconductor development initiatives.
Conclusion
The tightening of chip access restrictions on China is set to have profound implications for U.S. chip makers' long-term growth prospects. Companies like NVIDIA, Advanced Micro Devices and Marvell have seen their valuations skyrocket over the past year, driven by the booming demand for AI and advanced computing technologies. These optimistic projections have fueled significant investor enthusiasm, with expectations of explosive growth in revenues and market share.
However, the recent plunge in these chip stocks, spurred by the Biden administration's plans to impose stricter export controls, highlights the fragility of this optimism. Investors now seem to be increasingly concerned that these companies may face substantial headwinds due to the enhanced restrictions on chip exports to China, a critical market for their products. The potential disruption in supply chains, coupled with limited access to a lucrative market, poses a significant risk to the growth trajectories of these semiconductor giants.
Currently, NVIDIA sports a Zacks Rank #1 (Strong Buy). Meanwhile, Advanced Micro Devices and Marvell each carry a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
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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.