For Immediate Release
Chicago, IL – June 15, 2017 –Zacks Equity Research Radiant Logistics (NYSEMKT: RLGT – Free Report ) as the Bull of the Day, Actuant (NYSE: ATU – Free Report ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Facebook (NASDAQ:FB) (NASDAQ: FB – Free Report ) and Snapchat (NYSE: SNAP – Free Report ).
Here is a synopsis of all four stocks:
Radiant Logistics (NYSEMKT:RLGT – Free Report ) has been the Bull of the Day two times over the past few months, but a certain short seller decided to tweak their approach and shares of the stock were hit last week. Let’s take a look at the hit piece, some other recent calls from the short seller and then look at the macro environment that is supporting RLGT in today’s Bull of the Day.
Third Time Bull
The first time RLGT was the bull of the day was back in April, you can review that write up ( https://www.zacks.com/commentary/109517/bull-of-the-day-radiant-logistics-rlgt ) along with the second appearance ( https://www.zacks.com/commentary/116500/bull-of-the-day-radiant-logistics-rlgt ) here. Today marks the third time since April that the stock has been bestowed the honor of being the Bull of the Day. I cannot recall another stock being mentioned as much in a such a short period of time… it has to be some kind of record!
Description
Radiant Logistics, Inc. operates as a third-party logistics company, providing multi-modal transportation and logistics services.
Normally
When I normally write the Bull of the day, I focus on why the stock is a Zacks Rank #1 (Strong Buy). I talk to the recent earnings history and the estimate moves (which are the foundation of the Zacks Rank). There is generally a section on the valuation as well, but that won’t be in this write up today. Instead I am going to poke some holes in a report that caused this stock to tumble. If you want some background in the earnings history and estimates, please click the links above for the previous Bull of the Day articles.
I should also mention that I wrote this article ( https://www.zacks.com/commentary/117124/shorts-attack-nvda-tsla-and-rlgt ) on the day of the short seller attack. It clearly was a case of good timing as the NVDA and TSLA bear calls really spooked the market.
Follow Brian Bolan on Twitter: @BBolan1
Short Seller
Spruce Point Capital Management released a report that had an awkward title, to say the least. “A Critical Forensic Look At Radiant Logistics Strategy, Management, And Financial Accounting Strain Suggests 30-50% Downside Risk” – and boy was that a mouthful. By the third word, I am already wondering what is going on. A critical look alone is good enough, but a critical forensic look is adding in the buzz words for effect. The next red flag in the headline is “Financial Accounting Strain” – which is a brand new one for me. All accounting is financial related, so again the author is just trying to make it seem more complicated than it really is.
Before I go into the report, I need to tell you why a report like this carries less weight because of where it is published. Seeking Alpha shares the ad revenue from the pieces the authors write, so sensationalism is the backbone of the business model there. You write a hit piece with a stupendous headline designed to get more views and you will get a bigger reward. So that has to factor into how you look at anything from that site. If the merits of the piece alone are important enough to share (or sell), then this sort of thing would be free for all to see a Spruce Point’s website….which it is…but that should be the main source for it.
Missing the Mark
Once at the Spruce Point website you will see their last hit piece was on Wix.com and that stock is up 143% over the last year so that would be classified as a swing and a miss. The another hit piece on Burlington Store in November promised 20-40% downside risk… alas, the stock has just moved higher by 35% since that time frame burying the shorts. The track record at Spruce Point, the delivery (for $) and the title have all really shown that this hit piece is not on par with ones that I would take seriously… and I haven’t even read it yet.
Spruce Point suggests that a reverse merger is a questionable way to come to market. That is to say Radiant bought a shell company that was already public but not functioning as a business as a way of avoiding the traditional investment bank route. This presents challenges of getting research coverage, but they have overcome that issue.
The next item is GAAP and Non-GAAP. It is well understood throughout Wall Street that all companies publish both sets of numbers, so crying wolf over this issue is really just a scare tactic.
As I walk through this report, I am seeing issue after issue that are really non-issues. There is a flipside to nearly off of this… and then there is the events of 2004 and a completely different company that are discussed.
Scrolling down, I see the rest of the report coming in rather weak. Roll-ups of fragmented industries work… as small as RLGT is, the deals are even smaller so they generally are not the type that can be a life ending land mine. The report leaves out the idea of what the macro picture looks like for RLGT, which is pretty darn good.
Summary
Hit pieces like this are intended to scare you into selling your shares, which pushes the price lower. Often times, the producer of such a report is already short the stock, so benefit from your sales. To attract your action on the stock, a wild headline of impending doom tends to work better on the short side than a discussion about the macro environment that is pushing earnings estimates higher.
All I can say for this stock is that Spruce Capital has probably already covered their short and has moved on to another stock hoping to shake more weak hands of the stock that is probably slated for excellent growth in the future.
Actuant (NYSE:ATU – Free Report ) recently lowered guidance and that might cause Wall Street to lose faith in management. Let’s look at why that may be the case in the Bear of the Day.
Description
Actuant, headquartered in Milwaukee, Wisconsin, is a diversified industrial company with operations in 15 countries. Actuant offers products under such established brand names as Enerpac, Gardner Bender, Milwaukee Cylinder, Nielsen Sessions, Power-Packer, and Power Gear.
Guidance
On June 8, the company lowered guidance for 3Q17 to a range of $0.30-$-0.33. This was following earnings that were released on March 22, when the company offered guidance of $0.38 - $0.43 for the quarter.
The consensus estimate at the time of the most recent earnings report was $0.43, so the best case scenario was that Wall Street was going to see a meet in the coming quarter. The updated guidance suggests things were significantly worse than expected.
Estimates
When a accompany lowers guidance, analysts tend to move their estimates lower. That is the case for ATU and that has pushed the stock to a Zacks Rank #5 (Sell).
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Additional content:
SNAP Nears IPO Price: Should You Buy?
Shares of Snap Inc (NYSE:SNAP). (NYSE: SNAP – Free Report ) dipped nearly 1% in early morning trading Wednesday, signaling that it would be another volatile day for the trendy social media stock. Snap has been no stranger to volatility ever since its historic IPO earlier this year, but as the stock slips closer and closer to its initial offering price, some investors are rightfully starting to worry.
In the past week alone, Snap shares have slumped more than 10% and are now sitting just 5.5% higher than their IPO price of $17. The stock was hit by the recent industry-wide tech selloff, but the company has also failed to answer some of the key questions posed by investors as competition from the likes of Facebook (NASDAQ: FB – Free Report ) continues to increase.
Of course, there are plenty of investors who also feel that Snap’s recent slump has caused the stock to slip into “oversold” territory, which could mean that now is a good time to buy at a discount. But is this the case? Should you buy Snap on the dip? Let’s dig into the fundamental picture first:
First of all, let’s note that Snap’s VGM grade is relatively abysmal. In all fairness, the stock is hindered by its lack of year-over-year growth comparisons, and the fact that the company is not currently posting profits certainly drags its value-related metrics down. Nevertheless, momentum has been terrible and several key metrics are weak compared to Snap’s “Internet-Software” industry peers .
With that said, I did want to highlight the stock’s current P/S ratio, because that is a value metric that is often used for young tech companies that are not currently posting profits. Unfortunately, a 12.37 P/S ratio is not very impressive, especially considering that this is about 4 times the industry average. Sure, Snap’s revenue is growing very rapidly, but shares are still trading at a shocking premium.
It’s also important to look at user growth numbers when it comes to these young tech companies. In its first ever earnings report as a publicly-traded company, Snap said that daily active users (DAUs) were up 36% to 166 million. This is a growth rate that is probably encouraging to Snap investors, but it doesn’t necessarily sooth concerns that user growth could be hampered by the plethora of Snapchat clones that are becoming available.
Keeping all of this in mind, we should probably mention that most of the investors that are backing Snap right now are institutions and long-term holders. This is important to consider because in today’s bull market, many of these holders can forgive weak value metrics and possible short-term worries if there is a strong belief in company management and future potential.
Also, we should mentioned that SNAP is currently a Zacks Rank #3 (Hold). Remember, the Zacks Rank is heavily influenced by earnings estimate revisions.
Again, this reveals a relatively lackluster picture. Interestingly enough, we see some positive signs for the company’s more distant future, and it should encourage the previously mentioned long-term holders that we’ve seen 57% agreement on improving estimates for the company’s next-year earnings.
Nevertheless, that 57% agreement is on the downside for the current quarter and next quarter, which has helped drag Snap’s Zacks Rank down a bit. As we head closer to the company’s next earnings report, investors should keep their eyes on the latest analyst sentiment, but right now, that sentiment is not very strong.
Remember, the Zacks Rank is designed to be a 1-3 month indicator, and investors trying to decide whether Snap’s recent slump has forced the stock into “oversold” territory may be more interested in shorter term analysis.
Snap’s biggest dip came directly after its disappointing first earnings report. However, this dip may actually display some support, as the stock seemed to find its level at the $18 mark during this post-earnings slump. This is also revealing because it helped the stock resist the bearish signals that were appearing on both of these technical charts.
Nevertheless, we only have a small picture here because of how young this stock is. In the present, share prices are once again flirting with the $18 support line, and it will be interesting to see whether that support holds up again.
Also, SNAP is inching closer to the 30.00 mark that many consider to be the “oversold” threshold on the RSI chart, but the stock is also displaying what is typically considered a bearish signal—a move from “overbought” back down below the -50 level.
So to summarize, SNAP is a polarizing stock with an unclear short and long-term outlook. Any fundamental and technical analysis will depend on what you—the individual investor—prefers to use. Sure, there are plenty of bearish signals here, but are long-term holders necessarily wrong about the company’s future? It’s certainly too early to say.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
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Radiant Logistics, Inc. (RLGT): Free Stock Analysis Report
Actuant Corporation (ATU): Free Stock Analysis Report
Snap Inc. (SNAP): Free Stock Analysis Report
Facebook, Inc. (FB): Free Stock Analysis Report
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