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Welcome to Episode #363 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
While the S&P 500 continues to hit new all-time highs, not every stock has been soaring in 2024. In fact, there are some that are in the red year-to-date, including some former high-fliers.
The market is ignoring these stocks. They’ve gone on sale. But are they a value or are they a trap?
How to Tell if a Stock is a Value, or a Trap
Remember, the key to telling if a stock is a true value, or if it’s a trap, is to check out the analyst earnings estimates. Is the full year consensus expected to fall year-over-year? Is the earnings growth slowing?
That usually indicates there is something going on in the business which then can translate over to the stock price.
A true value will still have rising earnings growth for this year and next.
Finding Value in Fallen Growth Stocks
Not all value stocks are classic values with low P/E, P/B, P/S or PEG ratios. Some stocks may be values because they are trading at a discount to their industry peers or because a plunge in the shares has made the company historically cheap.
This week, Tracey looks at 5 stocks that have fallen from their former glory. They are on “sale”. But are they a true deal?
Palo Alto Networks is one of the popular cybersecurity stocks. But after its last earnings report, the shares dropped sharply. Year-to-date, shares of Palo Alto Networks are down 4.3%.
Earnings are expected to grow 23.6% this year while sales rise another 16%. Palo Alto Networks still trades with a forward P/E of 52, even as the shares have pulled back.
Lululemon is a specialty retailer famous for its popular yoga pants. Shares plunged 17% over the last month after the company guided for next year earnings below the Zacks Consensus.
Earnings of Lululemon are still expected to rise 10.8% this year on sales growth of 12%. It has gotten cheaper on a P/E basis since the sell-off. Lululemon now trades at 27x forward earnings.
Nike shares recently plunged after the company reported its fiscal third quarter 2024 earnings. Nike is down 10.5% over the last month and over the last year, is down 23.3%.
Analysts have been adjusting their earnings estimates over the last week. 8 are higher for fiscal 2024. Nike’s earnings are expected to rise 15.2% this year. But 9 estimates have been cut for fiscal 2025 as well.
Nike trades with a forward P/E of 25. It pays a dividend yielding 1.6%.
Starbucks shares have been under the weather for the last year. They’ve been ignored by the Street. Starbucks shares recently traded near 52-week lows, down 7.1% during that time.
Earnings of Starbucks are expected to rise 14.7% in fiscal 2024 on sales growth of 7.8%. Starbucks trades with a forward P/E of 22.5.
Is Starbucks a value or is it a trap?
What Else Do You Need to Know About Stocks on Sale?
Tune into this week’s podcast to find out.
[In full disclosure, Tracey owns shares of LULU and SBUX in her personal portfolio.]
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5 Popular Stocks on Sale: Values or Traps?
Welcome to Episode #363 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
While the S&P 500 continues to hit new all-time highs, not every stock has been soaring in 2024. In fact, there are some that are in the red year-to-date, including some former high-fliers.
The market is ignoring these stocks. They’ve gone on sale. But are they a value or are they a trap?
How to Tell if a Stock is a Value, or a Trap
Remember, the key to telling if a stock is a true value, or if it’s a trap, is to check out the analyst earnings estimates. Is the full year consensus expected to fall year-over-year? Is the earnings growth slowing?
That usually indicates there is something going on in the business which then can translate over to the stock price.
A true value will still have rising earnings growth for this year and next.
Finding Value in Fallen Growth Stocks
Not all value stocks are classic values with low P/E, P/B, P/S or PEG ratios. Some stocks may be values because they are trading at a discount to their industry peers or because a plunge in the shares has made the company historically cheap.
This week, Tracey looks at 5 stocks that have fallen from their former glory. They are on “sale”. But are they a true deal?
5 Growth Stocks That are on Sale
1. Palo Alto Networks, Inc. (PANW - Free Report)
Palo Alto Networks is one of the popular cybersecurity stocks. But after its last earnings report, the shares dropped sharply. Year-to-date, shares of Palo Alto Networks are down 4.3%.
Earnings are expected to grow 23.6% this year while sales rise another 16%. Palo Alto Networks still trades with a forward P/E of 52, even as the shares have pulled back.
Is Palo Alto Networks a value or a trap?
2. Lululemon Athletica Inc. (LULU - Free Report)
Lululemon is a specialty retailer famous for its popular yoga pants. Shares plunged 17% over the last month after the company guided for next year earnings below the Zacks Consensus.
Earnings of Lululemon are still expected to rise 10.8% this year on sales growth of 12%. It has gotten cheaper on a P/E basis since the sell-off. Lululemon now trades at 27x forward earnings.
Is Lululemon a value or a trap?
3. Tesla, Inc. (TSLA - Free Report)
EV sales are down and so are the shares of Tesla in 2024. Tesla shares have fallen 28.8% year-to-date.
Analysts are bearish on Tesla. In just the last week, one estimate has been cut for this year. Earnings are expected to fall 2.2% this year.
Shares aren’t cheap on a P/E basis at 59. But Tesla investors have never cared about the P/E.
Is Tesla a value or a trap?
4. Nike Inc. (NKE - Free Report)
Nike shares recently plunged after the company reported its fiscal third quarter 2024 earnings. Nike is down 10.5% over the last month and over the last year, is down 23.3%.
Analysts have been adjusting their earnings estimates over the last week. 8 are higher for fiscal 2024. Nike’s earnings are expected to rise 15.2% this year. But 9 estimates have been cut for fiscal 2025 as well.
Nike trades with a forward P/E of 25. It pays a dividend yielding 1.6%.
Is Nike a value or a trap after the sell-off?
5. Starbucks Corp. (SBUX - Free Report)
Starbucks shares have been under the weather for the last year. They’ve been ignored by the Street. Starbucks shares recently traded near 52-week lows, down 7.1% during that time.
Earnings of Starbucks are expected to rise 14.7% in fiscal 2024 on sales growth of 7.8%. Starbucks trades with a forward P/E of 22.5.
Is Starbucks a value or is it a trap?
What Else Do You Need to Know About Stocks on Sale?
Tune into this week’s podcast to find out.
[In full disclosure, Tracey owns shares of LULU and SBUX in her personal portfolio.]