For Immediate Release
Chicago, IL – January 31, 2024 – Zacks Equity Research shares Duolingo, Inc. DUOL as the Bull of the Day and MarineMax, Inc. HZO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Disney DIS, Paramount Global PARA and Warner Bros. Discovery WBD.
Here is a synopsis of all five stocks:
Bull of the Day:
Duolingo, Inc. is expected to see its earnings jump in 2024 as more people take to its app to learn a new language. This Zacks Rank #1 (Strong Buy) is forecast to grow sales by the double digits this year.
Duolingo is an education app which is popular with those trying to learn a new language. It offers over 100 courses across 42 distinct languages, from Spanish, French, German and Japanese to Navajo and Yiddish.
However, in 2023, it also launched Music and Math courses on its flagship app, adding to its offerings.
Another Earnings Beat in the Third Quarter
On Nov 8, 2023, Duolingo reported its third quarter results and easily beat the Zacks Consensus. It reported earnings of $0.06 versus the Zacks Consensus of a loss of $0.06. That's a $0.12 beat.
Paid subscribers rose 60% to 5.8 million from 3.7 million in the third quarter of 2022.
Total bookings rose 49% to $153.6 million year-over-year led by subscription bookings which also rose 54% to $121.3 million.
Monthly active users (MAUs) were 83.1 million, up 47% from the prior year quarter. Daily active users (DAUs) jumped 63% to 24.2 million.
Total revenue also surge 43% to $137.6 million.
Raised Full Year Guidance
For the second quarter in a row, Duolingo raised its full year revenue guidance. It expects to be in a range of $525 million to $528 million, up from its second quarter guidance of $510 million to $516 million.
The Zacks Consensus is at the high end of the range at $527.07 million. Analysts are also bullish on 2024 with sales expected to jump 29.3% to $681.5 million.
Analysts are also bullish on earnings for 2024. 1 estimate has been revised higher in the last 30 days. This has pushed the Zacks Consensus up to $0.81 from $0.79 in the last month.
That's earnings growth of 210.8% as the company is expected to make just $0.26 in 2023. It will report fourth quarter and full year results at the end of Feb 2024.
Shares Soar in the Last Year
Duolingo has been on a ride since its July 2021 IPO. The shares sold off in the 2022 growth stock sell-off but have rebounded in the last year, gaining 104% versus the 46.5% gain in the Invesco QQQ ETF during that same time.
If you're looking for a growth stock, Duolingo is for you. Analysts expect big growth in sales and earnings in 2024. However, it's not cheap. It trades with a forward P/E of 238.
For investors looking for a top ranked growth stock, Duolingo should be on your short list.
Bear of the Day:
MarineMax, Inc. is facing headwinds in fiscal 2024 as the market for recreational boats and yachts remains challenging. This Zacks Rank #5 (Strong Sell) recently lowered its full year earnings guidance.
MarineMax is the largest lifestyle retailer of recreational boats and yachts, as well as yacht concierge and superyacht services. It has 130 locations worldwide, including 81 dealerships and 66 marina and storage facilities.
The business includes IGY Marinas, which operates luxury marinas in yachting and sport fishing destinations around the world; Fraser Yachts Group and Northrop & Johnson, leading superyacht brokerage and luxury yacht services companies; Cruisers Yachts, one of the world's premier manufacturers of premium sport yachts and motor yachts; and Intrepid Powerboats, a premier manufacturer of powerboats.
An Earnings Miss in the Fiscal First Quarter of 2024
On Jan 25, 2024, MarineMax announced its fiscal first quarter 2024 results and missed on the Zacks Consensus Estimate by 66%. Earnings were just $0.19 compared to the Zacks Consensus of $0.56.
However, it saw record revenue for the first quarter of $527.3 million, up 4% year-over-year, as same-store sales rose 4% driven by higher new and used boat sales.
MarineMax's gross profit margin declined 350 basis points to 33.3% from 36.8% last year due to a more aggressive promotional environment. It had to discount certain boat models and it also sold a greater mix of larger boats, which normally have lower gross profit margins.
However, it's still looking for growth in fiscal 2024.
"This month, we announced the planned acquisition of Williams Tenders USA, the exclusive distributor in the United States and the Caribbean for the premier brand of rigid inflatable jet tenders for the luxury yacht market," said Brett McGill, CEO.
"The growth of the yacht and luxury yacht markets represents a tailwind for our business as we advance our strategic priorities," he added.
Lowered Earnings Guidance for Fiscal 2024
MarineMax has grown bearish due to the market challenges. It lowered its full year fiscal 2024 earnings guidance to a range of $3.20 to $3.70 from its prior guidance range of $4.50 to $5.00 provided when it reported fourth quarter and full year fiscal 2023 results on Oct 26, 2023.
As a result, the analysts have cut their estimates too. 2 estimates have been cut for fiscal 2024 in the last 7 days, pushing down the Zacks Consensus Estimate to $3.96 from $4.56. That's still above the guidance range, however.
But it's a decline of 24% from last fiscal year, which saw earnings of $5.21.
Shares Plunge on the Guidance Cut
MarineMax shares have been on a roller coaster over the prior year, but got hit hard when the guidance was cut. Over the last month, shares fell 28.2%.
It's cheap, with a forward P/E of just 7.2.
But will the boat market slow further in 2024? Investors might want to stay on the sidelines until there is a turnaround in earnings estimates.
Additional content:
2 Media Stocks Set to Beat Estimates This Earnings Season
Media companies' results this earnings season are likely to reflect consumers' growing preference for over-the-top (OTT) content consumption. The rise of streaming platforms has resulted in audiences moving away from traditional cable and satellite subscriptions.
The decline in ratings for broadcast television and the reduced demand for theatrical content sales pose significant challenges for industry participants. Advertisers' hesitant spending, driven by concerns over inflation and higher interest rates, has added to the industry's woes amid an increasing rate of cord-cutting and stiff competition from subscription video-on-demand and virtual Multichannel Video Programming Distributor services.
Despite stiff competition, industry players are benefiting from the spike in the demand for high-speed broadband. Strong demand for WiFi devices and wireless Internet has been a boon.
Diversified content offerings, which are original, regional, short and suitable for small screens (smartphones and tablets), improved Internet speed and penetration, and technological advancement are benefiting the industry participants. As monetization and revenues in terms of ad-spend continue to be subdued, profit protection and cash management with greater technology integration have gained strategic significance and are expected to have driven the top lines of industry participants like Disney and Paramount Global in the soon-to-be-reported quarter.
Industry Trends to Drive Growth
Investing in media companies at the forefront of the digital transformation, leveraging original content creation and the wave of high-speed Internet demand, presents a compelling opportunity. The convergence of these factors positions such companies to capture new revenue streams, expand internationally and navigate the evolving media landscape successfully.
The industry's pivot toward digital platforms is driving a surge in original content creation. Media companies like Warner Bros. Discovery are investing heavily in producing high-quality, exclusive content to meet the demands of a discerning audience. This shift is not only a response to changing consumption patterns but also a proactive strategy to differentiate and compete in a crowded digital space. Successful content creation not only enhances subscriber loyalty but also opens avenues for additional revenue streams through licensing and syndication deals.
Media companies are also experiencing a paradigm shift in revenue generation, moving beyond traditional TV platforms. The ability to harness ad revenues from diverse digital channels, including websites and other digital platforms, presents a significant growth opportunity. Target-based advertising, facilitated by the data-rich digital environment, is becoming a cornerstone for revenue diversification.
The growing preference for digital and subscription services over linear pay television has compelled media companies to alter their business models. Acknowledging the shift in consumer behavior, industry players are adopting alternative business models, such as skinny bundles, to provide more cost-effective options to consumers. These bundles, delivered at lower costs than traditional offerings, aim to attract a wider audience and enhance the industry's competitiveness.
The surge in demand for high-speed Internet, including broadband, is a pivotal catalyst propelling the growth of industry participants like Rogers Communications and Charter. Faster Internet speeds are fostering a preference for high-quality video content and the trend of binge-watching. The strengthening broadband ecosystem on a global scale, coupled with the proliferation of smart TVs, creates a conducive environment for media companies to thrive. As consumers seek seamless, high-quality content delivery, companies providing engaging digital experiences stand to benefit from the expanding market.
Continuous investment in technology, content innovation and strategic partnerships will be crucial to staying ahead in this dynamic landscape.
How to Make the Right Pick?
With the existence of a number of industry players, finding media stocks that have the potential to beat earnings estimates can be daunting. Our proprietary methodology, however, makes it fairly simple.
You could narrow down your choices by looking at stocks that have the perfect combination of two key elements: a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Earnings ESP is our proprietary methodology for determining stocks that have maximum chances of beating estimates at their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this favorable mix of ingredients, the odds of an earnings surprise are as high as 70%.
Best Bets
Given below are two media stocks that have the favorable combination to beat on earnings this reporting cycle:
Disney is slated to report first-quarter fiscal 2024 results on Feb 7. The company currently has an Earnings ESP of +0.13% and carries a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here.
Disney has been benefiting from a solid revival in the domestic and international theme park businesses. Latest attractions like the Frozen theme land at Hong Kong Disneyland and Walt Disney Park in Paris, as well as the Zootopia theme land at Shanghai Disney, are expected to have aided the theme park business.
The company's focus on sports streaming, particularly Live Sports on ESPN+, remains a key catalyst in driving viewership. The renewal of the MLB sports rights deal through 2028 and the agreement with Spanish club football's first division, La Liga, further strengthened the portfolio of its sports content.
The Zacks Consensus Estimate for earnings has moved south by 1% to $1 per share in the past 30 days.
Paramount Global is slated to report fourth-quarter 2023 results on Feb 28. The company currently has an Earnings ESP of +144.95% and carries a Zacks Rank #3.
Paramount Global has been benefiting from a spike in viewership for its streaming services, boosted by the strong adoption of Paramount+. An expanding content catalog of live sporting events and a solid portfolio of streaming services (both advertising and subscription-based offerings), including CBS All Access, Showtime OTT, Pluto TV, Noggin, and BET+, are expected to have boosted viewership in the to-be-reported quarter.
Moreover, subscriber growth is expected to have been boosted by the launch of Paramount+ with SHOWTIME plan, a cornerstone integration that makes Paramount+ the new streaming home for SHOWTIME.
The Zacks Consensus Estimate has remained steady at a loss of 4 cents per share in the past 30 days.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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