Tag: Inc. (AMZN)

How Alibaba's 3% Reduction in Outstanding Shares Affects the Stock's Future

Posted on by The INO.com Team

During the 12 months ended December 31, 2023, Alibaba Group Holding Limited (BABA) repurchased a total of 897.9 million ordinary shares for $9.5 billion. This includes the purchase of 292.7 million ordinary shares for a total of $2.9 billion during the fourth quarter.

The shares were purchased in both the U.S. and Hong Kong markets under its share repurchase program, the company said in a filing.

The Chinese e-commerce giant said that it had 20 billion ordinary shares outstanding as of December 31, 2023, compared to 20.7 billion ordinary shares from December 31, 2022. This indicates a net reduction of 3.3% in its outstanding shares.

The remaining amount that the company’s Board had authorized for its share repurchase program, which is effective through March 2025, was $11.7 billion as of December 31, 2023.

When a company buys back its own shares from the marketplace, it reduces the total number of shares outstanding. As a result, the value of the remaining shares increases. The company’s Board may feel that its shares are undervalued, making it a favorable time to purchase them. Meanwhile, investors often perceive a buyback as an expression of confidence by the management.

Therefore, in the case of Alibaba, a more than 3% reduction in outstanding shares will positively impact its shareholder value and give a significant boost to the stock’s performance this year.

Now, let’s review several other factors that could influence BABA’s performance in the near term:

Strategic Reorganization

Last year in March, BABA announced plans to split its business into six independent units in a strategic move to unlock shareholder value and advance competitiveness.

“This transformation will empower all our businesses to become more agile, enhance decision-making, and enable faster responses to market changes,” said Daniel Zhang, former CEO and chairman of Alibaba Group.

Under the restructuring, Alibaba will be split up into six newly formed business units: Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics, International Digital Commerce Group, and Digital Media and Entertainment Group.

Each business unit will be overseen by its own chief executive and board of directors. Five of the new business clusters “will also have the flexibility to raise outside capital and potentially to seek its own IPO,” the company said.

As per the latest update on business group spin-offs and capital raisings, the recent expansion of U.S. restrictions on the export of advanced computing chips has created uncertainties for the Cloud Intelligence Group’s prospects.

The company believes that a complete spin-off of Cloud Intelligence Group may not achieve the intended effect of shareholder value enhancement. Correspondingly, it decided not to proceed with a full spin-off and instead will focus on developing a sustainable growth model for Cloud Intelligence Group under fluid circumstances.

In terms of Alibaba International Digital Commerce Group, it is in preparation for external fundraising. Further, Cainiao Smart Logistics Network Limited applied for an initial public offering in Hong Kong and submitted its AI filing to the Hong Kong Stock Exchange.

Capitalizing on the AI Boom

BABA’s newly appointed CEO, Eddie Wu, stressed putting AI and user experience at the top of the company’s priorities to reclaim customers and market share in an immensely competitive arena.

“Over the next decade, the most significant change agent will be the disruptions brought about by AI across all sectors,” Wu said in his note, reviewed by Bloomberg News. “If we don’t keep up with the changes of the AI era, we will be displaced.”

Wu added that Alibaba will reinforce strategic investments in the areas of AI-driven tech businesses, internet platforms, and its global commerce network.

On January 9, 2024, Alibaba.com, a leading platform for global B2B e-commerce and part of Alibaba International Digital Commerce Group, introduced its latest Smart Assistant features powered by AI at CES in Las Vegas, NV.

The Smart Assistant is an AI-powered sourcing tool that caters to newcomers and seasoned entrepreneurs in the dynamic world of global commerce, helping them discover new opportunities, stay up-to-date on trends, seamlessly track orders and more in a single, efficient touchpoint.

Also, in October 2023, Alibaba launched an upgraded version of its AI model as the Chinese tech giant looks to challenge its U.S. rivals, including Amazon.com, Inc. (AMZN) and Microsoft Corporation (MSFT).

BABA launched Tongyi Qianwen 2.0, its latest large language model (LLM). Tongyi Qianwen 2.0 “demonstrates remarkable capabilities in understanding complex instructions, copywriting, reasoning, memorizing, and preventing hallucinations,” the company said. 

Alibaba stated that Tongyi Qianwen 2.0 is a “substantial upgrade from its predecessor,” which was introduced in April. Also, the Hangzhou-based company announced the GenAI Service Platform, which allows companies to build their own generative AI applications using their own data.  

Solid Last Reported Financials

For the fiscal 2024 second quarter that ended September 30, 2023, BABA reported revenue of $31.04 billion, an increase of 8.5% year-over-year. The revenue slightly surpassed analysts’ estimate of $30.84 billion. Alibaba International Digital Commerce Group rose 53% year-over-year, while Cainiao Smart Logistics Network Limited and Local Services Group grew 25% and 16%, respectively.

Alibaba’s income from operations increased 33.6% from the year-ago value to $4.60 billion. The company’s adjusted EBITDA came in at $6.75 billion, up 13.7% from the prior year’s quarter. Also, its adjusted EBITA rose 18% year-over-year to $5.87 billion, primarily contributed by revenue growth and improved operating efficiency.

Furthermore, the Chinese tech giant’s non-GAAP net income for the quarter came in at $5.51 billion, an increase of 18.8% from the prior year’s period. It posted non-GAAP net income per share of $2.16, compared to the consensus estimate of $2.09, and up 21% year-over-year.

As of September 30, 2023, Alibaba’s cash and cash equivalents, short-term investments and other treasury investments, included in equity securities and other investments on the consolidated balance sheets, were $85.60 billion. During the quarter ended September 30, 2023, cash inflows from operating activities were $6.75 billion, up 4% from the same quarter of 2022.

Also, the company’s free cash flow was $6.20 billion, an increase of 27% year-over-year.

Impressive Historical Growth

Over the past five years, BABA’s revenue and EBITDA grew at CAGRs of 24.1% and 15.5%, respectively. The company’s net income and EPS rose at respective CAGRs of 17% and 17.3% over the same timeframe. Its levered free cash flow improved at 8.2% CAGR over the same period.

Moreover, the company’s tangible book value and total assets increased at CAGRs of 34.2% and 17% over the same timeframe, respectively.

Favorable Analyst Estimates

Analysts expect BABA’s revenue for the fiscal year (ending March 2024) to grow 8% year-over-year to $133.38 billion. The consensus EPS estimate of $9.20 for the ongoing year indicates an 18.6% year-over-year increase. Moreover, Alibaba has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.

For the fiscal year 2025, the company’s revenue and EPS are expected to increase 8.9% and 7.8% from the previous year to $145.27 billion and $9.92, respectively.

Low Valuation

In terms of forward non-GAAP P/E, BABA is currently trading at 7.83x, 50.1% lower than the industry average of 15.68x. The stock’s forward EV/Sales of 1.11x is 10.7% lower than the industry average of 1.24x. Likewise, its forward EV/EBITDA of 5.17x is 48.2% lower than the industry average of 9.99x.

In addition, the stock’s forward Price/Book multiple of 1.18 is 53.8% lower than the industry average of 2.55. Also, its forward Price/Cash Flow of 7.20x is 27.2% lower than the industry average of 9.88x.

Robust Profitability

BABA’s trailing-12-month EBIT margin of 14.66% is 92.9% higher than the 7.60% industry average. Moreover, the stock’s trailing-12-month levered FCF margin and net income margin of 14.17% and 56.87% are considerably higher than the industry averages of 5.37% and 4.52%, respectively.

Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 13.35%, 6.34% and 7.32% favorably compared to the respective industry averages of 11.40%, 6.05%, and 4%. Also, its trailing-12-month gross profit margin of 37.73% is 6.6% higher than the industry average of 35.38%.

Stock Upgrades

On November 24, 2023, Goldman Sachs analyst Ronald Keung maintained a Buy rating on BABA shares, with a price target of $134, suggesting that shares are anticipated to surge by nearly 73% over the coming year. The analyst stated that its FCF generation will fund ongoing buybacks and dividends. Also, he continues to view the stock’s valuation as attractive.

Bottom Line

BABA beat second-quarter analyst expectations for earnings and revenue. Revenue grew approximately 9% year-over-year in the last reported quarter, and the company posted expanded margins as its income from operations rose an impressive 24%. Also, the stock’s valuation is extremely attractive.

Alibaba further pleased its investors with last year’s announcement of plans to split its business into six separate units in a move to unlock more shareholder value and foster competitiveness. Also, the company continues to leverage AI across its operations. Its AI-powered systems optimize its pricing, marketing, and logistics, ultimately resulting in enhanced user experience.

As per Statista, the AI market in China is projected to reach a staggering $38.89 billion in 2024. In global comparison, the largest market will be in the U.S. ($106.50 billion this year). China’s AI market is further expected to show a CAGR of 18%, resulting in a market volume of $104.70 billion by 2030.

Alibaba’s AI leadership positions it to capitalize on the significant growth potential of the Chinese AI market. Also, the company has introduced its upgraded AI model to compete with its U.S. rivals, such as AMZN and MSFT.

“Through a more flexible organizational governance mechanism, we aim to capture brand new opportunities from the ongoing AI technological transformation and create more value for our customers,” said CEO Eddie Wu in BABA’s latest earnings release.

Notably, Alibaba’s 3.3% reduction in its outstanding shares because of a share buyback program will further create a greater value for its shareholders. Given BABA’s solid financials, accelerating profitability, attractive valuation, and bright growth prospects, this tech stock appears an ideal buy now.

Can Wayfair (W) Outpace Amazon.com (AMZN) With a Strategic Merger in 2024?

Posted on by The INO.com Team

Reports suggest that Chinese e-commerce companies Shein and Temu may be plausible merger candidates for American home goods retailer Wayfair Inc. (W). This conjecture emerges amid a challenging period for W, which has experienced a decline in active customers and a significant 76% plunge in share price over the last three years.

A strategic merger with W could present an opportunity for both Shein and Temu to elevate their brand image beyond the "bargain basement" stereotype. More importantly, it could empower them to compete more prominently against industry leader Amazon.com, Inc. (AMZN), especially as they navigate regulatory scrutiny.

Given the recent stringent regulatory oversight aimed at businesses founded in China, a merger with W might further solidify their standing in American marketplaces.

Shein, known for its high-velocity fashion production, privately filed an Initial Public Offering in the U.S. in 2023, projecting to become a publicly traded entity by 2024. This milestone stands to make Shein one of the most valuable Chinese start-ups listed on U.S. exchanges.

Conversely, Temu serves as a broad-spectrum online marketplace offering various products, from clothing and cosmetics to electronics and homewares. A possible merger prospect could exacerbate the already intense rivalry between Shein and Temu.

Among the two, PDD Holdings – the parent company of Temu – appears better positioned for acquisition due to its substantial $197 billion market cap as compared to Shein's $66 billion.

A potential amalgamation with W could permit Temu to diversify its product portfolio and leverage W's specialist home goods proficiency. Nonetheless, Shein is believed to be a more synergistic match for W, given that W's extensive domestic logistical capabilities are likely to enhance Shein's commitment toward optimizing distribution within the U.S.

Regulatory concerns in the U.S. pose potential challenges to the possible merger between Shein or Temu and W. This complexity is further intensified as the political landscape between China and the U.S. is becoming increasingly strained, fueled by escalating concerns over Chinese influence in American investment decisions. Such issues may impact the feasibility of the proposed union on a large scale.

Now let’s delve into a comparative analysis to assess whether Wayfair could outpace Amazon after the strategic merger in 2024…

Wayfair Inc. (W)

Reflecting on the aftermath of the pandemic, 2021 marked a successful year for retailers specializing in once-popular pandemic items like stationary bikes, used cars, furniture, and pet food sold online. This was largely attributed to consumers with surplus savings ready to spend while stuck at home and supported by advantageous financing conditions.

However, online furniture retailer W has witnessed a downturn from its height of sales, now selling less than it once did at its peak. This struggle has been somewhat mitigated through strategic cost-cutting measures and financial engineering practices in certain situations.

These cost-reduction efforts have been instrumental in limiting the company's cash burn rate. W plans to minimize costs by over $1 billion. In a bid to streamline operations and boost agility, the company trimmed its global workforce by 10% - roughly 1,750 employees – in January last year.

In November 2022, W set out another deficit reduction target of a half-billion dollars. At the same time, the company endeavored to bounce back from a quarter that saw declines in revenue, active customers, and overall orders.

This recovery plan included enhancements to wholesale economics, merchandising gains, and elevating mixed-supplier services. To encourage more suppliers to use its platform, W improved its logistics network by offering better delivery speeds and competitive pricing. Coupled with vendor-funded promotions, these steps buoyed W's overall gross margins. Wall Street predicts the company to generate positive free cash flow on an annual basis in 2024.

It seems unlikely that hefty discounts will entice consumers to purchase new furniture in the immediate future. W's revenue growth has been inconsistent in recent years, and this is projected to be their third consecutive year of declining top-line results.

On the brighter side, there are signs that W is making a recovery. After nine consecutive quarters of year-on-year top-line decreases, the company recently reported total net revenue of $2.94 billion – a 3.7% year-over-year increase. Its U.S. net income increased by $132 million, marking a 5.4% year-on-year increase. However, W's adjusted loss per share lingered at $0.13.

W's active customers totaled 22.3 million as of September 30, 2023, a decrease of 1.3% year-over-year. Its long-term debt, as of September 30, 2023, stood at $3.21 billion, with a net loss of $163 million in the last quarter. With continuous refinancing of convertible debt at lower conversion prices and a higher interest rate, coupled with equity-based compensation, there comes a significant question: What will the share count amount to if W starts reporting positive net income?

Foundational to W's business model was the thrilling potential of directly selling oversized, hefty household items. However, it soon became apparent that the more traditional approach, as modernized by W’s competitors, yielded more substantial profits. This revelation paints W’s innovative idea as not altogether successful, suggesting it may yield no better results for entities such as Temu or Shein.

W looks set to bolster its international footprint and customer base through a promising merger. Given Shein and Temu's considerable generated traction within China and further markets, this merger presents a viable opportunity. Moreover, W could potentially tap into advanced technology and innovation employed by Shein and Temu, significantly in the spheres of AI, data analytics, and social media, which could enrich its customer's shopping experiences.

Analysts project W's return to profitability by 2024, markedly sooner than previous expectations. The upgraded forecast comes following the favorable response to the company's third-quarter reports. In the face of likely declining interest rates and a generally more promising economic forecast in 2024, circumstances are slowly turning favorable for W's digital business platform.

For the fiscal fourth quarter of 2023 (ended December 2023), its revenue is expected to grow 1.7% year-over-year to $3.15 billion. EPS is expected to increase 92% year-over-year but remain negative at $0.14.

Amazon.com, Inc. (AMZN)

The forthcoming merger might intensify competition for AMZN within the online furniture and home decor sector. W boasts a notable brand image and customer allegiance in this industry, while Shein and Temu possess the potential to drive increased traffic and sales to the merged platform.

AMZN could be closely tracking this competitive scenario as it faces eroding market share. To counteract this trend, AMZN has been taking strategic measures like reducing certain vendor fees with the intention of attracting more businesses from China. However, this strategy might have been implemented too late to recover the lost market share effectively.

Furthermore, the merger could undermine AMZN's competitive pricing advantage. Firms like Shein and Temu are well-regarded for their competitive pricing and discount offerings, giving W a chance to capitalize on these economies of scale and strong supplier relationships.

The synergy also represents a challenge to AMZN’s customer experience. With Shein and Temu's curated and personalized shopping features, such as 3D visualization, augmented reality, and social sharing, W has the opportunity to boost its design inspiration and customer service capabilities.

On the bright side, over the past three and five years, its revenue grew at CAGRs of 16.8% and 20.2%, respectively. Its tangible book value grew at CAGRs of 33.2% and 45.5% over the respective timeframe.

AMZN's investment in faster delivery bore fruit just before the Christmas season. In the two weeks preceding the holiday, the tech giant reportedly claimed 29% of the worldwide volume of online orders, based on data from Route, a package-tracking application that recorded some 55 million orders. This percentage marked an increase from the 21% achieved during the week of Thanksgiving.

Furthermore, current easing inflationary pressures have resulted in positive shifts in consumer sentiments, setting the stage for a potential upswing in spending. Collectively considering these elements, the ensuing months could be exceptionally profitable for AMZN.

For the fiscal fourth quarter of 2023 (ended December 2023), its revenue is expected to grow 11.3% year-over-year to $166.07 billion, while EPS is expected to increase significantly year-over-year to $0.78.

Its revenue and EPS for the fiscal first quarter (ended March 2024) are expected to increase 11.6% and 116.5% year-over-year to $142.10 billion and $0.67, respectively.

Wall Street analysts expect the stock to reach $183.28 in the next 12 months, indicating a potential upside of about 26.8%. The price target ranges from a low of $145 to a high of $220.

In comparison to the last decade, AMZN today is neither the cheapest nor the only online shopping option, especially when accounting for burgeoning international competition. To meet projected growth, AMZN must exponentially expand its international reach. As a result, past performance cannot be the sole determinant of future success.

Despite being a remarkable enterprise, aligning investment with opportune timing is crucial to generating sizable returns.

Bottom Line

It might indeed be an opportune moment to invest in e-commerce stocks broadly, but the market hasn't presented the same favor for larger-scale furniture goods and additional home décor. Elevated mortgage rates are tempering real estate transactions, thereby making it more difficult for consumers to substantiate the acquisition of new domestic adornments. This could impact W.

Should W choose to engage in a merger with either Shein or Temu, it could potentially surpass AMZN in home furnishings and décor. A merger would pave the way for new customer bases, market opportunities, and access to innovative technologies. However, significant risks such as regulatory challenges, the likelihood of cultural discord, and potential brand dilution may also arise.

Consequently, it is imperative for W to carefully balance the pros and cons related to each merger possibility while formulating a strategic, clear, and potent approach to compete with established giants like AMZN.

Navigating the 2023 Santa Claus Rally: 3 Top Stock Picks for Year-End Gains

Posted on by The INO.com Team

Understanding the Santa Claus Rally

The Santa Claus rally refers to the sustained increase in the stock market indices that occurs during the last trading week of December and the first two trading days of the new year. It was first defined in The 1971 Stock Trader’s Almanac by Yale Hirsch.

Historically, major market indices, including the S&P 500, the Dow Jones, and the Nasdaq Composite, witnessed higher gains during these seven days compared to any other seven trading days of the year. Going back to 1950, the S&P 500 has gained nearly 80% times during this period.

In addition to marking a solid trading period, the Santa Claus rally is used as an early indicator by traders for what may happen in the new year. One of Yale Hirsch’s famous lines states: “If Santa Claus should fail to call, bears may come to Broad and Wall.”

Wall Street Awaits Santa Claus Rally This Year with Stocks Nearing Records

As we head into the last few days of 2023, Wall Street investors are counting on the Santa Claus rally to generate solid returns.

The S&P 500 climbed more than 4% in December alone and is up nearly 24% this year, bringing the index within 1% of a new all-time high. Also, the benchmark index is on track for its eighth consecutive positive week. The high optimism in the stock market is buoyed by solid earnings reports, several signs of strength in the economy, and a growing probability that interest rates will come down soon.

Earlier this month, the Federal Reserve left interest rates unchanged, and the central bank chief Jerome Powell said the historic monetary policy tightening is likely over as inflation falls faster than expected and signaled interest rate cuts into 2024.

Data released last Friday supported the trend of easing inflation, showing annual U.S. inflation, measured by the Personal Consumption Expenditures (PCE) price index, further dropped below 3% in November. The PCE index fell by 0.1% between October and November, the first monthly decline in over three and a half years.

Combined with other latest data indicating disposable personal income and consumer sentiment rising, the U.S. economy seems to be heading into the new year on a solid footing.

“The narrative will continue to be about the Fed making a dovish pivot,” stated Angelo Kourkafas, senior investment strategist at Edward Jones. “That provides support on markets and sentiment and that is unlikely to change next week,”

Investors have demonstrated a substantial appetite for stocks lately. BofA clients bought about $6.4 billion of U.S. equities on a net basis in the last week, the largest weekly net inflow since October last year, BofA Global Research said in a December 19 report.

At the same time, there has been a “sharp increase” in buying among retail investors over the past four to six weeks, Vanda Research said in a note last Wednesday.

“After having chased higher yields aggressively in the past months, the FOMC pivot and strengthening soft-landing narrative have had individuals redirecting their purchases toward riskier securities,” Vanda said in a note. “We expect this trend to continue into the new year as yields remain under pressure.”

3 Stocks to Bet on for Year-End Gains

With a market cap of $1.58 trillion, Amazon.com, Inc. (AMZN) is an e-commerce giant that has a history of performing well during the holiday season. It engages in the retail sale of consumer products and subscriptions through online and physical stores in North America and internationally. The company operates in North America; International; and Amazon Web Services (AWS) segments.

According to the National Retail Federal (NRF), the holiday spending during November and December is expected to rise to “record levels” of between 3% and 4% year-over-year to between $957.30 billion and $966.60 billion, respectively. The NRF projects that online and non-stores sales will grow between 7% and 9% to between $273.70 billion and $278.80 billion.

With NRF projected holiday spending to surge to record levels, Amazon is anticipated to witness significant growth in its total sales volume and profit levels. The e-commerce giant held its latest Prime Day sales event on October 10 and 11, featuring two days of epic deals ahead of the holiday season. Also, AMZN announced plans to hire about 250,000 additional workers across its operations globally for the busy year-end sales period.

The company’s biannual Prime Day events help to drive its revenue. Despite persistent inflation rate, Amazon boasted the biggest-ever Prime Day sale in July this year. U.S. online sales during Amazon’s Prime Day event grew 6.1% year-over-year to $12.70 billion, according to data by Adobe Analytics. The first 24 hours of the shopping event were touted as the “single-largest sales day in company history.”

In addition, AMZN gets a considerable lift from the Black Friday and Cyber Monday sales events held at the end of November and tied to Thanksgiving and Christmas.

After all, AMZN’s trailing-12-month gross profit margin of 46.24% is 30.4% higher than the 35.47% industry average. Its trailing-12-month EBITDA margin of 13.35% is 22.4% higher than the 10.91% industry average. Moreover, the stock’s trailing-12-month levered FCF margin of 5.57% is 25.9% higher than the 5.22% industry average.

For the third quarter that ended September 30, 2023, AMZN’s net sales increased 12.6% year-over-year to $143.08 billion. Its operating income rose 348% year-over-year to $11.19 billion. In addition, the company’s net income and EPS came in at $9.88 billion and $0.94, compared to $2.90 billion and $0.28 in the same quarter of 2022, respectively.

Analysts expect Amazon’s revenue and EPS for the fourth quarter (ending December 2023) to increase 11.2% and 2,510% year-over-year to $165.93 billion and $0.78, respectively. Moreover, the company topped the consensus revenue estimates in each of the trailing four quarters, which is impressive.

AMZN’s stock is already up nearly 78% year-to-date. Further gains could come with a Santa Claus rally.

Another stock that is primed for a holiday season rally is American Eagle Outfitters, Inc. (AEO). It operates as a specialty retailer that offers clothing, accessories, and personal care products under the American Eagle and Aerie brands worldwide. AEO sells its products through retail stores; digital channels, like www.ae.com, www.toddsnyder.com, and www.unsubscribed.com; and applications.

The solid performance of its key brands, such as American Eagle and Aerie, combined with strategic expansions into premium and activewear segments, indicates considerable potential for AEO’s growth. The company’s store designs, and online enhancements demonstrate its commitment to improving the customer experience.

During the third quarter that ended October 28, 2023, AEO’s net sales increased 4.9% year-over-year to $1.30 billion. Its gross profit was $543.80 million, up 13.3% from the prior year’s quarter. The company’s net income came in at $96.70 million, or $0.49 per share, compared to $81.27 million, or $0.42 per share, in the prior year’s period, respectively.

“I am pleased with our third quarter results which demonstrated the strength of our brands and reflected continued progress on our growth and profit improvement initiatives. Our strategic priorities, underpinned by our customer-first focus and commitment to operational excellence, are propelling us forward,” said Jay Schottenstein, AEO’s Executive Chairman of the Board of Directors and CEO.

“Momentum has continued across the business into the fourth quarter, driven by strong holiday assortments, engaging marketing campaigns and solid execution, supporting our improved outlook for the rest of the year,” Schottenstein added. “Looking ahead, we remain focused on advancing our long-term strategic priorities, as we seek to create consistent growth across our portfolio of brands and generate efficiencies for improved profit flow-through.”

For the full year, AEO’s management forecasts revenue to be up mid-single digits to last year, compared to the previous guidance for revenue up low single digits. Operating income is projected to be in the range of $340 to $350 million, at the high end of prior guidance of $325 to $350 million. This reflects strengthened demand and continued profit improvement. 

For the fourth quarter, the company’s outlook reflects revenue up high-single digits and operating income in the range of $105 to $115 million. The revenue outlook includes a four-point positive contribution from the 53rd week. 

Street expects AEO’s revenue and EPS for the fourth quarter (ending January 2024) to increase 8.5% and 17.8% year-over-year to $1.62 billion and $0.44, respectively. Also, the company has surpassed the consensus revenue and EPS estimates in all four trailing quarters.

Shares of AEO have surged more than 25% over the past month and approximately 45% over the past year.

The third stock, JAKKS Pacific, Inc. (JAKK), also tends to shine during the holiday season. With a market cap of $347.33 million, JAKK produces, markets, sells, and distributes toys and related products worldwide. The company operates through the Toys/Consumer Products and Costumes segments.

The company is primarily benefiting from the expansion of product offerings by strategizing business operations, coupled with the growing focus on partnerships. On November 1, JAKK announced entering a long-term agreement with Authentic Brands Group to design and distribute products inspired by iconic brands like Forever 21 and Sports Illustrated, aiming for a global retail debut in 2024.

The partnership aligns with JAKK’s strategy to expand into new product categories, targeting Millennials and Gen Z while leveraging Authentic’s platform to diversify its seasonal offerings and explore additional collaborations.

JAKK’s trailing-12-month net income margin of 12.18% is 169.5% higher than the 4.52% industry average. Likewise, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 56.52%, 17.03%, and 16.96% are significantly higher than the industry averages of 11.40%, 6.01%, and 3.99%, respectively.

For the third quarter that ended September 30, 2023, JAKK’s reported net sales from the Costumes segment increased 19% year-over-year to $63.70 million. Its gross profit grew 16.4% year-over-year to $106.99 million. The company’s income from operations rose 16.1% from the year-ago value to $62.40 million. Its adjusted EBITDA grew 12.9% year-over-year to $67.07 million.

In addition, the company’s adjusted net income attributable to common stockholders increased 28.4% year-over-year to $50.09 million, and its EPS came in at $4.75, up 25% year-over-year. 

After reporting outstanding fiscal 2023 third-quarter results, Stephen Berman, CEO of JAKKS Pacific, said, “We are looking forward to the holiday season and have recently finished great customer meetings previewing our Fall 2024 product line. We are exceeding our own internal expectations for the full-year and are carefully navigating towards the end of the year given the persistent uncertainty about consumer behavior.”

JAKK’s stock has climbed more than 14% over the past month and is up nearly 100% year-to-date.

Bottom Line

We are heading into the last few days of the year, which typically represents a favorable time for the stock market and investors. Known as the Santa Claus rally, the stock market tends to rise substantially in the last trading week of December and the first two trading days of the new year.

This year, the optimism is high, with the Federal Reserve surprising investors earlier this month by signaling that its historic monetary policy tightening is likely over and projecting interest rate cuts in 2024. Moreover, the latest robust data indicates strength in the U.S. economy.

Of course, year-end holiday shopping offers a considerable sales boost to retailers and other companies, which can help lift stock prices. AMZN, AEO, and JAKK are set to shine in the year-end Santa Claus rally.

While the Santa Claus Rally offers profitable investment opportunities, day traders should approach it with immense caution and implement an effective risk management strategy. Pre-setting position sizes, setting stop-loss orders, diversifying portfolios, and adhering to a well-defined trading plan are essential steps for managing risk during the rally.

Top 4 Christmas Stocks to Buy in 2023

Posted on by The INO.com Team

As the festive season ushers in, thoughts gravitate toward the traditions of exchanging gifts, feasting with family, and warming up by the fireside, all while the holiday shopping spree kick-starts with much vivacity.

The holiday period invariably translates to a considerable economic surge for retailers and related sectors, starting with "Black Friday" – a day marked in retail history for transfiguring from the “red” of losses into the “black” of profits. This year's consumer expenditure reached an unprecedented high, with $9.8 billion splurged on Black Friday deals and an outstanding $12.4 billion on Cyber Monday.

A record-breaking 200.4 million consumers shopped during the five-day holiday weekend, extending from Thanksgiving Day through Cyber Monday, outpacing last year's peak of 196.7 million. As per the National Retail Federation (NRF), the average spend was $321.41 on holiday-related purchases throughout the Thanksgiving weekend. Toys, electronics, and gift cards emerged as the most coveted items.

An unprecedented festive surge is projected this December as retailers anticipate record-breaking consumer expenditure. This period, often correlated with the 'Santa Rally,' generates a stock market surge during the concluding week of December, extending into the New Year. LPL Financial found that since 1950, a Santa Claus rally has occurred around 79% of the time.

These staggering statistics oppose the predictions of some economic analysts who warn of an imminent recession within the U.S. and expect the current equity rally to stumble as the year concludes.

The holiday period shopping traditionally elevates sales for retailers and associated businesses, resulting in potential stock price increases. The year-end rally boosts investors’ portfolios, whereas professional traders often regard it as crucial when calculating their end-of-year bonuses. There is no doubt that the Santa Claus rally this year would be broadly embraced, given the volatilities witnessed.

Investment focus is increasingly geared toward stocks providing substantial opportunities in the immediate future. Some stocks could be more profitable than others if secured before their price rise. Hence, many investors opt for Christmas stocks to capitalize on the bustling holiday shopping season.

Given this backdrop, let us delve into an in-depth analysis of Amazon.com, Inc. (AMZN), Visa Inc. (V), Walmart Inc. (WMT), and Etsy, Inc. (ETSY) now.

Amazon.com, Inc. (AMZN)

Amazon has established itself as a global behemoth, wielding substantial market dominance fostered by its vast network. As we approach the holiday season, there is strong anticipation that the retail stock will experience a considerable rise.

This prediction comes from AMZN’s record-breaking sales in November, with one billion items sold over 11 days of extended promotional deals. This impressive feat was achieved despite the "biggest ever global strike" orchestrated by Make Amazon Pay, an activist campaign that advocated for improved pay and better working conditions for laborers.

According to AMZN, customers purchased more than 500 million products via independent sellers during the holiday shopping festivities and an exponential growth in Prime membership signups throughout this period was witnessed.

The company has disclosed that shoppers saved nearly 70% more on their purchases than the previous year, with promises of "millions more deals" being made available until December 24.

The company attributes much of its success to a large, loyal customer base, who trust the brand and greatly value its services. AMZN's variety of client benefits during the festive season – expeditious delivery, discounts, enticing deals, streamlined return and refund policies, and rewards, enhance repeat purchases and encourage referrals.

With recent inflationary pressures easing, consumer sentiments are showing signs of improvement, bolstering the potential for increased spending. Combining these factors, December could be a highly profitable month for AMZN.

For the fiscal fourth quarter ending December, its revenue is expected to grow 11.2% year-over-year to $165.85 billion, while EPS is expected to increase significantly year-over-year to $0.76.

Wall Street analysts expect the stock to reach $177 in the next 12 months, indicating a potential upside of about 20%. The price target ranges from a low of $145 to a high of $210.

Visa Inc. (V)

V, a leading fintech corporation, is commanding in the global credit and debit card markets. Acting as an essential intermediary between purchasers and vendors, V conducted over 192 billion transactions in 2022 across 160 nations.

The company's significant role has generated substantial profits for V and its shareholders. For the fourth fiscal quarter of 2023, the firm reported revenues of $8.61 billion, a 10.6% year-over-year increase. Its income amounted to $4.68 billion, with earnings per share at $2.27.

V’s unique business model allows consumers desiring to postpone their holiday expenses with minimum risk and maximum benefit. V profits whenever individuals make higher charges on their cards, with both transaction value and quantity contributing to the income. As V does not offer direct loans to consumers, the impact of defaulting is substantially lower.

Expressing high hopes for the company's future, V's CEO Ryan McInerney stated, "There is tremendous opportunity ahead, and I am as optimistic as ever about Visa’s role in the future of payments.”

However, America faces a mounting credit card debt crisis. As of September 2023, the total card balance reached a record high of $1.08 trillion. Strikingly, the average credit card interest rate touched 27%, representing the highest figure in nearly three decades.

As we enter the holiday season, consumer spending on credit cards is expected to rise. Deloitte reports that the average holiday shopper anticipates expending $1,652 this year, the most considerable amount seen in the past three years. Much of this spending will be charged to cards. In an October survey of 1,036 consumers by CardRates.com, 38% indicated that they anticipated carrying holiday credit card debt into the new year.

Although increased consumer debt translates into more risks for V, the potential spending slowdown also threatens the company as it has fewer tools for growth. Despite the company's valuation not being as high as in the past, this could represent an excellent opportunity for those aiming to take advantage of the inevitable credit card spending surge over the festive season.

Analysts expect V’s revenue and EPS for the quarter ending December 2023 to increase 7.7% and 7.3% year-over-year to $8.54 billion and $2.34, respectively. Moreover, Wall Street analysts expect the stock to reach $277.47 in the next 12 months, indicating a potential upside of 8.9%. The price target ranges from a low of $243 to a high of $295.

Walmart Inc. (WMT)

WMT has evolved into a powerful force within the omnichannel market. Strategic acquisitions of companies like Bonobos, Moosejaw, and Parcel and collaborative partnerships with industry heavyweights like Shopify and Goldman Sachs bolstered this transformation. Further expansion efforts, including implementing delivery systems Walmart + and Express Delivery, and investing in Flipkart – a renowned e-commerce platform – are a testament to this ongoing evolution.

The innovative strategies have consolidated WMT's position within the turbulent retail market, enabling it to remain resilient and competitive in an ever-changing industry landscape. WMT ensures its sustainability and competitiveness in this evolving ecosystem by continually adapting and initiating changes.

The retail giant experienced increased customer footfall and elevated spending throughout the third quarter, alongside improvements in operating margin and cash flow. These constructive developments in WMT’s performance indicate ample liquidity to invest in growth and reinforce its dominating market presence.

As WMT approaches the holiday season with substantial customer traffic, it stands poised to generate profitable returns. For the quarter ending January 2024, its revenue is expected to increase 3.9% year-over-year to $169.09 billion, while EPS is anticipated to reach $1.64. Further enhancing its appeal, the company currently offers a dividend yield of 1.49%, making its stock a more attractive option to potential investors.

Wall Street analysts expect the stock to reach $180.79 in the next 12 months, indicating a potential upside of about 18%. The price target ranges from a low of $163 to a high of $210.

Etsy, Inc. (ETSY)

Esteemed as an online destination for unique handcrafted and vintage goods, ETSY is the perfect marketplace for customers searching for original gift ideas, especially during the active winter holiday season. The extensive assortment of products on ETSY – encompassing everything from jewelry and apparel to toys and home décor – caters to its impressive 97.3 million active users through 8.8 million dynamic sellers.

Operating under a distinctive business model that leverages network effects and switching costs generates intrigue. However, sustained growth is crucial in maintaining investor enthusiasm. Despite firmly standing by its unique market position within a vast potential landscape, ETSY's obstacles in augmenting gross merchandise sales (GMS) post-pandemic suggest a potential limitation in product demand.

For the fiscal fourth quarter ending December, its revenue and EPS are expected to increase 1.8% and 17.1% year-over-year to $821.75 million and $1.34, respectively.

With a focus on unique gifts and crafts, ETSY is well-positioned to experience significant stock elevation during the seasonal gifting period, complimented by the ongoing market recuperation and declining inflation trends.

7 Historically High Performing Thanksgiving Stocks

Posted on by The INO.com Team

Amid mounting global challenges, it's essential to savor the lighter aspects of life. History shows a bullish trend during the holiday-shortened Thanksgiving week, fueled by increased consumer spending, the surge in holiday travel, and a lower cost of Thanksgiving spread.

Retailers anticipate robust sales during the festive week to turn over a profit for the year. Consequently, they offer discounts and attractive deals on overstocked items, seasonal goods, high-priced commodities, and holiday decor and gifts. Over the past decade, the retail sector has consistently surpassed the S&P 500 during this time frame.

2023 is predicted to witness a record-breaking holiday expenditure during November and December, indicating growth between 3% and 4% over 2022, snowballing the total spent from $957.3 billion to an estimated $966.6 billion. A 2023 Deloitte holiday survey suggests consumers are projected to spend an average of $1,652 during this holiday season, exceeding the pre-pandemic spending levels.

Despite witnessing a dip in October – its first in seven months – U.S. retail sales are expected to rebound. Despite economic uncertainties pressurizing customers, they prioritize holiday expenses during this year's shopping season and are looking for attractive deals and promotions to guide their expenditures.

Approximately 90% of shoppers planning to shop during the Thanksgiving break aim to visit a store to make purchases or collect an online order, with 84% planning to shop online.

Auto manufacturers were grappling amid the United Auto Workers strike. After successful negotiations with General Motors, October 30, 2023 marked the end of the strike. Kelley Blue Book reports that many car dealerships hoarding new vehicles due to fears of scarcity are currently dealing with an oversupply. The average dealership now boasts a 67-day supply of vehicles, although certain brands are still coping with undersupply. The swing in supply could generate lucrative deals for the holiday season.

The airline industry is bracing for the imminent holiday season, expecting record passenger volumes. The Transportation Security Administration projects a staggering 30 million passengers to be screened, potentially setting a new travel record. The pinnacle of this busy stretch is expected to be the Sunday following Thanksgiving, with approximately 2.9 million air travelers anticipated.

According to the Federal Aviation Administration, Thanksgiving flights could peak at 49,606 on the preceding Wednesday – a significant rise compared to last year's all-time high of 48,192. Many airlines are adequately prepared for severe weather conditions, having learned lessons from the previous year when they were compelled to cancel thousands of flights across the country due to adverse weather.

Thanksgiving continues to defy economic headwinds like rising inflation and dwindling consumer savings. Understanding the holiday's implications goes beyond recognizing it as a time for feasting and expressing gratitude; it is also crucial to comprehend its effects on stock market trends.

In the weeks leading up to Thanksgiving, the stock market traditionally experiences more substantial activity as traders recalibrate their strategies. Historically, the S&P 500 has closed the week on an optimistic note three-quarters of the time since 1961, with a median gain of 0.3%.

Furthermore, the S&P 500 has posted positive figures for the week two-thirds of the time, presenting investors with a median gain of 0.75%. Notably, amid the 2008 Global Financial Crisis, the S&P 500 reported an impressive 12% profit during Thanksgiving week.

This article will delve into the influence of Thanksgiving on various sectors like food, beverage, auto, e-commerce, and travel stocks. The seven stocks that could benefit from the holiday week are discussed below:

Amazon.com, Inc. (AMZN)

E-commerce behemoth AMZN is primed to reshuffle the deck of the festive commerce landscape. With a soaring 71.3% year-to-date gain, the company's performance deserves praise. The most recent earnings report depicts an impressive 12.6% revenue surge, hitting a staggering $143.08 billion. AMZN's efforts have been focused on more than just following the market trend, but indeed establishing it.

Market murmurs reflect the awe inspired by the company. Its impressive market cap exceeding $1.48 trillion, coupled with an energetic average volume of 52.49 million, reveals the momentum of AMZN this Thanksgiving.

In a period blossoming with high consumer activity, hundreds of millions of goods are purchased from AMZN. Thus, the company’s fourth-quarter results will provide Wall Street with a comprehensive snapshot of the festive shopping season.

Analysts expect AMZN’s revenue to increase 11.2% year-over-year to $165.85 billion, while EPS is expected to be $0.76, up significantly year-over-year.

Monster Beverage Corporation (MNST)

The Corona, California-based energy drink provider MNST maintains a consistent demand for its beverages, unfazed by frequent price uplifts. The third quarter’s profit surpassed expectations, catalyzed by increased energy drinks and hard seltzers prices.

A decrease in freight and aluminum can costs from the peaks experienced during COVID-19 has inadvertently facilitated the elevation of previously pressured margins.

As of May 2022, MNST beverages have reached the list of top-selling energy drinks in America. The company's momentum will likely persist as a dynamic array of product launches is forecasted to encourage stable growth. A profound distribution network across international markets and a focus on expanding opportunities bode well for future gains.

Bolstered by robust demand trends, sound pricing strategies, and continuous product development, MNST's resilience stands firm. Net sales for the 2023 third quarter increased 14.3% to $1.86 billion. Analysts expect MNST’s revenue and EPS to increase 16.3% and 36% year-over-year to $1.76 billion and $0.39, respectively.

General Motors Company (GM)

2023 is shaping to be a benchmark year for car consumers seeking year-end deals. An unprecedented converging scenario involving elevated inventory levels, significantly increasing interest rates, and traditional holiday discounts is navigating toward big discounts.

Annually, the holiday season witnesses an eruption of optimum offers from car dealerships. Conscious that consumers are more inclined to spend during the festive season, automakers and dealerships deliver enthralling promotions, markdowns, and exclusive deals.

Consequently, after years of observing these seasonal conventions, buyers expect bountiful year-end car discounts, often holding back on purchases until December to avail of them.

For November, GM offers notable cash rebates on various 2023 models. Buyers can expect up to $4,000 off the GMC Sierra 1500 and $3,500 off the Silverado 1500. On average, a rebate of around $1,500 is currently on offer across all GM models.

This tactic could pivotally steer the Detroit-based auto giant's fortunes upward as we enter the holiday season. Amid these developments, for the fiscal quarter ending December 2023, analysts expect GM’s revenue and EPS to be $39.58 billion and $0.97, respectively.

Delta Air Lines, Inc. (DAL)

As Americans traverse the nation to unite with their families during the Thanksgiving season, the holiday is anticipated to act as a definitive marker for the aviation industry's capacity to navigate the year-end festivity period despite facing hurdles of sustained deficit of air traffic controllers.

DAL, bolstered by its strong position, is primed to capture a sizable share of this travel surge. Boasting one of the most comprehensive domestic route networks within the continental U.S., DAL is optimally set up to accommodate these customers.

Being one of the four major carriers dominating over 60% of the U.S. aviation market, DAL persistently demonstrates robust bookings – a trend spearheaded by its premium offerings, which significantly eclipsed the main cabin reservations in recent quarters. Catering to premium passengers has successfully insulated DAL from some of the financial strains budget airlines have faced recently.

DAL projects to witness between 6.2 million to 6.4 million passengers this Thanksgiving, an increase of 5.7 million passengers the airline accommodated last year and is anticipated to surpass the 6.25 million passengers transported in 2019.

DAL emerges as a promising prospect for investors weighted towards capitalizing on dwindling oil prices and the future supply chain improvement. These factors stand to positively impact profit margins within the aerospace industry down the line.

For the fiscal quarter ending December 2023, analysts expect DAL’s revenue is expected to increase 3.9% year-over-year to $13.96 billion, while EPS is expected to be $1.14.

eBay Inc. (EBAY)

With over $20 billion in market cap, EBAY, an established e-commerce heavyweight, is tirelessly striving to attract its consumers' interest and spending power. Customers seeking automotive necessities, smartwatches, and Apple products can reap the benefits of up to 75% discount by commencing their shopping endeavors with EBAY this holiday season.

EBAY constantly refines its strategies to uphold its preeminence in an industry characterized by relentless evolution and revolution. As the holiday season looms, its performance is under intense scrutiny as never before, making its sales forecast a widely watched indicator in the e-commerce landscape.

For the fiscal quarter ending December 2023, analysts expect EBAY’s revenue and EPS to be $2.51 billion and $1.02, respectively.

Conagra Brands, Inc. (CAG)

CAG, a leading North American food company, stands to gain as the anticipated cost of this year's Thanksgiving meal is set to decrease.

American Farm Bureau Federation survey has revealed that the average expense of a conventional Thanksgiving dinner for 10 people in 2023 will be roughly $61.17, or under $6.20 per individual. This reduction is largely attributed to a 5.6% year-over-year decrease in turkey prices and notable reductions in the whipping cream and cranberries prices by 22.8% and 18.3%, respectively.

The declining grocery costs could lead to a sales uptick for CAG this festive season.

Moreover, preparing a Thanksgiving dinner also encompasses multiple stressors, including shopping, planning, and the actual cooking process. However, CAG's sophisticated meal-kit delivery service can eliminate two primary pressure points.

By delivering all the necessary pre-portioned and prepared ingredients required to prepare a mouthwatering meal directly to the customer's doorstep, CAG offers a solution for consumers to enjoy a stress-free holiday season.

For the fiscal quarter ending November 2023, analysts expect CAG’s revenue and EPS to be $3.25 billion and $0.68, respectively.

United Airlines Holdings, Inc. (UAL)

UAL anticipates a record-breaking surge in travelers this Thanksgiving holiday season, projecting significant revenue growth. The holiday travel period, defined as November 17 to November 29, sees the airline expecting to serve over 5.9 million passengers. This indicates a roughly 5% rise compared to 2019 and a significant 13% increment from last year's figures.

UAL plans to operate an average of over 3,900 daily flights to manage the increased traffic, translating to approximately three departures per minute. Therefore, the airline has introduced over 550,000 seats to accommodate high passenger volumes.

UAL attributes its heightened demand to the success of its basic economy pricing option. This economical ticket option allows UAL to compete effectively against rival ultra-low-cost carriers.

UAL’s third-quarter revenue from its basic economy rose 50% annually. UAL’s CEO Scott Kirby credits this substantial gain to the company’s “improved product.”

For the fiscal quarter ending December 2023, analysts expect UAL’s revenue is expected to increase 9.5% year-over-year to $13.58 billion, while EPS is expected to be $1.69.