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Yahoo
23-05-2025
- Business
- Yahoo
How to play retail stocks: 3 winners vs. 3 losers in the space
After a busy week of retail earnings, with Target (TGT) and Home Depot (HD) reporting results, Zacks Investment Management client portfolio manager Brian Mulberry comes on Market Domination to talk retailer stocks and designating three winners of the sector. To watch more expert insights and analysis on the latest market action, check out more Market Domination here. All right. Big box stores, meanwhile, are reporting quarterly earnings this week, and while it's been a mixed bag for retailers, some names are rising above the competition in the tariff landscape. We're now figuring out how to play the retail sector with the Yahoo Finance playbook, and joining us now is Brian Mulberry, client portfolio manager at Zacks Investment Management. Brian, it is always great to see you. So let's, let's compare and contrast some of the big names in this space, Brian. Get your take on how you kind of see them. One of the first ones would be the obvious one, Walmart and Target. Now, you might throw up those stock charts, Brian, and you can see how that kind of tells the story. Uh, we did recently, this week, Brian, we had a target bull on the show, and I think his argument was more valuation. He just thought a lot of the bad news had been priced into Target. I'm curious how you see it. Yeah, I certainly understand the argument. I mean, Target's down close to 40% on a year-to-date basis. There is a point where the valuation starts to become a little bit more attractive, but for us, it has to start with some type of earnings growth, and we're just not seeing it, at least in the near term, for Target. They're still continuing to struggle with some legacy issues from COVID, in terms of getting their inventory timing down properly. And now you throw, on top of that, the issue that they still have around 30% of their goods directly sourced from China. So they're really struggling to get things right, to turn the corner, and look better from an earnings growth that profitability picture just isn't clear enough for us to like the name. On the other side, you've got Walmart. They've got a little bit more diversity in their product lineup, and that's showing in the sales growth that they have. You know, April retail sales, I think, came in as a surprise for all of us, and that just, it was positive. It was up 0.1%, but that's $721 billion out there for grabs for these big box retailers, at this moment in time. And what we found in Walmart's earnings is their average ticket size is going up. So foot traffic is roughly flat, maybe slightly lower, but they're getting more wallet share from consumers. And that's the biggest difference between the two stocks right now. You have consistent revenue growth, and consistent profit growth from Walmart, and Target is almost the other side of the coin, almost the complete opposite. All right. We need a little, like, ding ding ding to talk about the second round here. Um, so let's talk about two other retailers. So clearly you think Walmart has the advantage between Walmart and Target. What about Home Depot and Lowe's, two other retailers we heard from this week, um, and you know, taking a different approach in a number of different areas, including on tariffs. Yeah, absolutely. And I mean, the news that we got from Home Depot is that here, very soon, their overall exposure to China, and the reason we keep bringing up China is it's the worst-case scenario. The maximum level of tariffs that we know about in this point in time, coming out of China. That's where it impacts earnings over a long period of time. Home Depot says, "Very quickly, we're going to have less than 10% exposure." And that adds a lot more durability to their long-term profit structure. Home Depot has also made a lot of investments linking customers to contractors, getting jobs done. And in that retail sales number from April, building materials were up 0.8%. It was one of the bigger drivers in there. And so we saw that reflected in a little bit stronger, I think, than expected numbers from Home Depot coming out of Q1, and they're doing a really good job of managing that long-term profit structure, mitigating the cost of tariffs. And so it's a name that we like more than Lowe's, for similar reasons. Lowe's has more of a DIY type of a feel. And unfortunately, the customers at this point don't want to do it themselves. They want to be connected to that pro segment. Now, Lowe's is growing there. It's one of the faster-growing segments of their business, but they're just really far behind the curve when it comes to those types of projects. And Home Depot's really built a whole system around that pro experience for contractors and bulk orders, and also connecting them to consumers to get jobs done. So we're just finding the integration and the money already spent on that growth is paying off for Home Depot. And how would you characterize valuation, Brian? I mean, you must find it compelling here. Yeah, absolutely. I mean, I think there's a really good story here. I mean, there's a lot of people out there that are going to be anchored to their properties because they have a 2 or 2.5, 3% mortgage rate. So they're going to continue to stay with those properties, but want to improve them over time. So given the current valuation and the long-term revenue growth, this is a very strong company that has a commitment to returning capital to shareholders, and they also want to make sure that they're staying in line with that strong balance sheet directive that they've had over the last three years. It's really paying off well for them because they have low levels of debt. Lowe's, on the other hand, is very leveraged. They have a lot of debt on their balance sheet. And so again, just in terms of where you're assessing risk versus reward over this period of time, Home Depot definitely seems more attractive. All right. Advantage Home Depot in that round. Round three, we got TJX versus Kohl's. You know, I don't know if this one's quite a fair fight, to be honest, Brian, but talk me through your thinking on these two. Yeah. So I mean they're almost not even in the same ballpark. If tariffs are your main concern, and we could understand why, TJ Maxx has a variety of ways to source inventory, and sometimes they can buy directly from unsold department store inventories that have already paid tariffs, if there were any, to begin with. So they have a way of getting goods on shelves that are in demand. We all love the name brands that you can find at TJ Maxx and HomeGoods, and pay, obviously, discount prices. There is a model there where TJ Maxx has some exposure to direct manufacturers that come from the Pacific Rim regions, and China being part of that, but they have a way to mitigate that through multiple levels of sourcing. Whereas Kohl's, again, they're still too dependent on China directly to get products on shelves. It's roughly 20 to 25% of anything that you find inside a Kohl's store is going to be subject to those maximum levels of tariffs right now. Again, just putting a lot of pressure on the near-term profit structure that is also weighing down long-term growth. So it really comes down to, know what you own, know why you own it. And at this point, if you're just paying attention to some of those finer details, higher quality balance sheets are winning the day. At the same time, Brian, you look at that Kohl's stock chart, and this stock has been shelled, Brian. I mean, how much, you obviously just don't think all the bad news is priced in there. No, I think that they're just not getting things right in terms of sourcing and controlling costs at this moment in time. Unfortunately, I think there's more volatility to come because they just simply can't right the ship and turn a corner to profitability. They're having to continue to further discount goods, weighing on margins. Their average ticket sales is going down at this point in time. So they're having to find different ways to incentivize customers. Adding too many incentives means you're weighing on that profitability. So they can still have a certain amount of top-line sales that keeps the business running, but they're still squeezing that overall profitability, quarter after quarter after quarter. I don't think all the bad news is quite priced in just yet. Brian, always great to see you. Appreciate your time and those picks, sir. Have a great weekend. You too. 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Reuters
13-05-2025
- Business
- Reuters
No reason for Fed to lower rates, portfolio manager says
Brian Mulberry, client portfolio manager at Zacks Investment Management, said that despite President Donald Trump's continued demands that the U.S. Federal Reserve lower interest rates, the latest economic data does not support such a move.
Yahoo
06-05-2025
- Automotive
- Yahoo
Elon Musk makes bold promise after Tesla profits plummet: '[Will] move the financial needle in a significant way'
After missing multiple self-imposed deadlines for scaling up commercial robotaxi operations, Tesla has made a new pledge. CEO Elon Musk promised to "move the financial needle in a significant way" by late next year, as Reuters reported. Investors are understandably enthused but skeptical. "I predict that there will be millions of Teslas operating fully autonomously in the second half of next year," Musk said in the latest earnings call, per Reuters. Musk previously predicted to have one million robotaxis in operation by 2020. He was quoted in 2019 as saying, "Next year, for sure, we'll have over 1 million robotaxis on the road," according to the publication. Brian Mulberry, client portfolio manager at Tesla investor Zacks Investment Management, has confidence in the most recent commitment based on the safety record and technology advancements. Tesla committed to launching a robotaxi service in Austin, Texas, by June and is currently poised to begin testing stages. However, the company's method of gathering testing data is uncertain. The plan for the Austin launch is to start with 10 or 20 Model Y vehicles, and as long as all goes well, it intends to expand rapidly after that. Teslas and Tesla charging stations have recently become targets of vandalism for EV skeptics and those who oppose Musk's appointment as a Special Government Employee for the Department of Government Efficiency (DOGE) under the current administration, as well as his activities within it. This is thought to be the cause of a 13% decline in Tesla's vehicle sales in the first quarter of 2025, compared to Q1 2024. In contrast, overall EV sales have been on the rise, up 11% in the first quarter of 2025. When drivers switch from a gas-powered vehicle to an EV, they reduce their carbon footprint substantially since EV operation does not produce the air pollution that a traditional vehicle does. It is an environmentally friendly option that reduces the negative impact of transportation on the planet. EVs also save consumers money over time, as they cost less to run and require less maintenance. It may be possible for Tesla to regain some of its market share if the company can stay committed to the robotaxi expansion timeline. Reuters confirmed that Tesla stuck to its June timeline in Austin, which is inspiring confidence in investors that Musk's time in the White House is not causing delays, as previously theorized. Blake Anderson, associate portfolio manager at Tesla investor Carson Group, was quoted as saying that "the fundamental inflection" that "we're all hoping for" is imminent. Join our free newsletter for good news and useful tips, and don't miss this cool list of easy ways to help yourself while helping the planet.
Zawya
25-04-2025
- Automotive
- Zawya
Tesla doubles down on robotaxi timeline; investors enthused
Tesla peppered its latest earnings call with pledges to launch commercial robotaxi operations soon, with CEO Elon Musk promising that autonomous vehicles will "move the financial needle in a significant way" by late next year. While the U.S. electric vehicle maker has missed targets many times before, its reiteration on Tuesday of a previously announced launch target has investors believing that its self-driving future is close. As its core automotive business struggles, with vehicle sales down 13% in the first quarter, expectations are high for Tesla to prove it can overcome the technological hurdles of autonomous driving and demonstrate a sound business model for driverless car services. Most bullish investors and analysts tie the bulk of Tesla's stock value to its plans for a massive robotaxi and autonomous-driving subscription business. Now is the time for "the fundamental inflection" that "we're all hoping for," said Blake Anderson, associate portfolio manager at Carson Group, a Tesla investor. Tesla stuck to its previously announced June timeline for launching a paid robotaxi service in Austin, Texas, providing investors confidence that Musk's time spent as a government cost-cutting adviser to President Donald Trump had not caused delays. On Tuesday's call, Musk said Tesla will first use existing Model Y vehicles outfitted with self-driving software. The automaker is also developing a dedicated autonomous model, dubbed the Cybercab, with production starting next year. Musk said he expects autonomous driving technology will begin to "affect the bottom line of the company, and start to be fundamental" by the second half of 2026. "I predict that there will be millions of Teslas operating fully autonomously in the second half of next year," he said. Musk made a similar prediction six years ago, in 2019, saying "next year, for sure, we'll have over one million robotaxis on the road." Still, Brian Mulberry, client portfolio manager at Tesla investor Zacks Investment Management, said he felt "this is happening, this is coming soon. They have the miles, the safety record and the technology they need." Investors and analysts in the next few months will be looking for concrete signs that Tesla can scale the robotaxi business and navigate technical challenges. Anderson said in the coming months he wants to see specifics such as how much Tesla will charge per mile in Austin, and whether that can be profitable. He also wants more detail on Tesla's safety record and how frequently its vehicles in Austin have to disengage from autonomous driving mode. "Safety is the thing they control the most, so I want proof that what they do control is ironed out," Anderson said. "Then I have a much greater line of sight into the national rollout." Others are less convinced on Musk's timeline that robotaxis will play a material role in earnings by the second half of next year. Musk on Tuesday's call said the Austin robotaxi launch would start with 10 or 20 Model Y vehicles, and that Tesla would "scale it up rapidly after that," expanding to other U.S. markets later in the year. During earnings calls in January and October, Musk said he expected to launch robotaxis in California by the end of this year. He did not mention California during Tuesday's call. Tesla this year received a preliminary permit in California but needs several more permits from state agencies before it can launch a paid robotaxi service. Seth Goldstein, equity strategist at Morningstar, said Musk's timeline of profitability next year sounded like "a very quick pace" for a technology that has taken competitors such as Alphabet's Waymo nearly a decade to work out. Musk said on Tuesday's call that Tesla's current self-driving technology, being tested in Austin, would require driving 10,000 miles on average "before you get in an accident or an intervention." He did not elaborate on how he arrived at that number, and Tesla as of last year had not submitted data on interventions to regulators in California like other autonomous vehicle companies such as Waymo and Amazon's Zoox. Goldstein still said he believes Tesla can fine-tune its testing by the end of next year and launch a wider robotaxi system that can compete with Waymo by 2028. But he said he expects investors will be disappointed if Musk's predictions of revenue and profit generation by next year do not materialize.
CNA
24-04-2025
- Automotive
- CNA
Analysis:Tesla doubles down on robotaxi timeline; investors enthused
Tesla peppered its latest earnings call with pledges to launch commercial robotaxi operations soon, with CEO Elon Musk promising that autonomous vehicles will "move the financial needle in a significant way" by late next year. While the U.S. electric vehicle maker has missed targets many times before, its reiteration on Tuesday of a previously announced launch target has investors believing that its self-driving future is close. As its core automotive business struggles, with vehicle sales down 13 per cent in the first quarter, expectations are high for Tesla to prove it can overcome the technological hurdles of autonomous driving and demonstrate a sound business model for driverless car services. Most bullish investors and analysts tie the bulk of Tesla's stock value to its plans for a massive robotaxi and autonomous-driving subscription business. Now is the time for "the fundamental inflection" that "we're all hoping for," said Blake Anderson, associate portfolio manager at Carson Group, a Tesla investor. Tesla stuck to its previously announced June timeline for launching a paid robotaxi service in Austin, Texas, providing investors confidence that Musk's time spent as a government cost-cutting adviser to President Donald Trump had not caused delays. On Tuesday's call, Musk said Tesla will first use existing Model Y vehicles outfitted with self-driving software. The automaker is also developing a dedicated autonomous model, dubbed the Cybercab, with production starting next year. Musk said he expects autonomous driving technology will begin to "affect the bottom line of the company, and start to be fundamental" by the second half of 2026. "I predict that there will be millions of Teslas operating fully autonomously in the second half of next year," he said. Musk made a similar prediction six years ago, in 2019, saying "next year, for sure, we'll have over one million robotaxis on the road." Still, Brian Mulberry, client portfolio manager at Tesla investor Zacks Investment Management, said he felt "this is happening, this is coming soon. They have the miles, the safety record and the technology they need." Investors and analysts in the next few months will be looking for concrete signs that Tesla can scale the robotaxi business and navigate technical challenges. Anderson said in the coming months he wants to see specifics such as how much Tesla will charge per mile in Austin, and whether that can be profitable. He also wants more detail on Tesla's safety record and how frequently its vehicles in Austin have to disengage from autonomous driving mode. "Safety is the thing they control the most, so I want proof that what they do control is ironed out," Anderson said. "Then I have a much greater line of sight into the national rollout." Others are less convinced on Musk's timeline that robotaxis will play a material role in earnings by the second half of next year. Musk on Tuesday's call said the Austin robotaxi launch would start with 10 or 20 Model Y vehicles, and that Tesla would "scale it up rapidly after that," expanding to other U.S. markets later in the year. During earnings calls in January and October, Musk said he expected to launch robotaxis in California by the end of this year. He did not mention California during Tuesday's call. Tesla this year received a preliminary permit in California but needs several more permits from state agencies before it can launch a paid robotaxi service. Seth Goldstein, equity strategist at Morningstar, said Musk's timeline of profitability next year sounded like "a very quick pace" for a technology that has taken competitors such as Alphabet's Waymo nearly a decade to work out. Musk said on Tuesday's call that Tesla's current self-driving technology, being tested in Austin, would require driving 10,000 miles on average "before you get in an accident or an intervention." He did not elaborate on how he arrived at that number, and Tesla as of last year had not submitted data on interventions to regulators in California like other autonomous vehicle companies such as Waymo and Amazon's Zoox. Goldstein still said he believes Tesla can fine-tune its testing by the end of next year and launch a wider robotaxi system that can compete with Waymo by 2028. But he said he expects investors will be disappointed if Musk's predictions of revenue and profit generation by next year do not materialize. "Now that they've guided to an actual timeline for revenue, that's a point they'll be held to," Goldstein said.
