Chicago, IL – October 23, 2024 – Zacks Equity Research shares Alibaba Group BABA as the Bull of the Day and Ally Financial ALLY as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ford F, Tesla TSLA and General Motors GM.
Here is a synopsis of all five stocks.
Launched in 2009, the cloud business is one of the biggest in China and has ballooned to the second-largest revenue source for the company. Alibaba also benefits from strong momentum in its international wholesale, digital payments, and logistics businesses.
The Chinese government completed a full 180 degree turn in 2024 and delivered a massive stimulus package. As if slashing interest rates and loosening restrictions weren’t enough, Chinese government officials promise to do more moving forward. People’s Bank of China Governor Pan said that the reserve requirement ratio could be reduced again this year and that the loan prime rate will likely be lowered on Monday.
Meanwhile, China recently reported more robust growth numbers, and retail sales impressed investors. A flood of liquidity and a more robust economy bode well for Chinese stocks like BABA. Also, understand that the Chinese economy is coming from such a trough that even a reversion to the mean would result in a massive move for these stocks.
Though BABA shares have gained a healthy 34% year-to-date, its valuation remains at bargain basement lows. For instance, BABA’s price-to-sales ratio of 1.88x is close to all-time lows and is well off the all-time high of 18x in 2018.
Alibaba is in the middle of a massive share repurchase program. The company bought back shares on almost every trading day in September. On October 17th, BABA bought back more than $17 million worth of shares. Share buybacks can be bullish because they reduce the number of shares outstanding. Apple is an excellent precedent of this phenomenon. AAPL shares stagnated for years before Carl Icahn and other institutional investors urged the company to repurchase shares.
The 13F disclosure requires institutional investors with more than $100 million in assets under management to divulge their positions. The most recent 13F disclosures revealed that BABA was a top holding for some savvy investors such as Michael Burry and David Tepper.
Millions of investors will gain access to BABA shares through a Hong Kong listing and China’s “Stock Connect” program. Goldman Sachsand Morgan Stanleyexpect $10-$20 billion inflows into the stock.
BABA shares are retreating towards their 50-day moving average for the first time since the massive stimulus-induced breakout. Though there is room for more downside, the first pullback of this nature after a major breakout is typically buyable.
China’s dominant e-commerce player is making a comeback driven by strength in its international business. BABA enjoys a dirt-cheap valuation, increased investor access, and institutional sponsorship.
Zacks Rank #5 (Strong Sell) stock Ally Financial is a player in the online financial services sector that provides customers a range of banking and loan offerings. The company mainly focuses on auto loans, but its business extends to banking facilities, mortgages, investment options, and insurance coverage. ALLY is best known for providing top-notch service and cutting-edge technology solutions.
The macroeconomic climate is a causing an issue for ALLY Financial, and the company anticipates that delinquencies will increase significantly (+7.4%) in the short term. Debt levels are reaching record highs in the United States, with the average consumer debt soaring to ~$37k.
Mounting operating expenses will likely hurt Ally’s bottom-line growth. Over the past five years, the company’s expenses have recorded a compound annual growth rate (CAGR) of nearly 10%, driven by higher compensation and benefit costs.
With several analysts tracked by Zacks revising earnings estimates lower for 2025, investors want to see costs dropping or at least staying relatively stagnant.
With the company launching products and expanding into newer areas of operation, expenses are expected to remain elevated. Our estimate for total non-interest expenses reflects a CAGR of 2.4% by 2026.
Zacks Earnings ESP (Expected Surprise Prediction) tracks the history of recent earnings revisions. A negative ESP score reveals the company has experienced negative recent analyst revisions. When a company has a negative ESP score and a Zacks Rank #3 or worse (like ALLY), it tends to miss earnings expectations and underperform its peers.
ALLY shares are exhibiting relative weakness compared to the S&P 500 Index. Year-to-date, the S&P has gained 24%, while ALLY shares have gained a futile 1.7%. Meanwhile, shares are carving out a classic bear flag chart pattern.
Increasing expenses and macro headwinds are reasons to avoid Ally Financial.
Ford is slated to release third-quarter 2024 results on Oct. 28, after market close. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings and automotive revenues is pegged at 49 cents per share and $41.2 billion, respectively.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The earnings estimate for the to-be-reported quarter has moved south by 1 cent over the past seven days. The bottom-line projection indicates year-over-year growth of 25.6%. The Zacks Consensus Estimate for quarterly revenues suggests almost no change from the year-ago quarter’s figure.
For the current year, the Zacks Consensus Estimate for F’s automotive revenues is pegged at $170.7 billion, suggesting an uptick of 2.8% year over year. The consensus mark for full-year EPS is $1.86, calling for a 7.5% year-over-year contraction.
In the trailing four quarters, this U.S. legacy automaker surpassed EPS estimates on two occasions for as many misses, with the average earnings surprise being 32.32%.
Ford Motor Company price-eps-surprise | Ford Motor Company Quote
Our proven model does not conclusively predict an earnings beat for Ford this time around. The combination of a positiveEarnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Ford has an Earnings ESP of +1.22% and a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Ford’s U.S. sales rose roughly 1% year over year to 504,039 units in the third quarter of 2024. Retail sales increased 4% from the year-ago quarter, thanks to Ford and Lincoln's strategy of offering powertrain options. While internal combustion engine vehicles declined 2.8% year over year, electric and hybrid vehicles witnessed an uptick of 38% and 12%, respectively.
Ford was the #3 EV brand in the country in the third quarter, behind Tesla and General Motors. Ford sold 23,509 EVs in the third quarter of 2024 in the United States.
Here’s a rundown of the estimates for Ford’s revenues and EBIT for key segments for the three months ended Sept. 30.
The Zacks Consensus Estimate for revenues from the Ford Blue unit (comprising ICE and hybrid models) is pegged at $23.78 billion, implying a decrease of 7% year over year. The consensus mark for the segment’s EBIT is $1.87 billion, suggesting an uptick from $1.72 billion recorded in the third quarter of 2023.
The Zacks Consensus Estimate for revenues from Ford model e unit (comprising of electric vehicles) is pegged at $1.39 million, implying a decline from $1.75 billion in the corresponding period in 2023. The consensus mark for the segment’s loss before interest and taxes is $1.18 billion, narrower than $1.33 billion in the year-ago quarter.
The Zacks Consensus Estimate for revenues from the Ford Pro unit (encompassing commercial vehicles and services) is pegged at $16.6 billion, implying growth of 19.9% year over year. The consensus mark for the segment’s EBIT is $2.1 billion, suggesting an improvement from $1.65 billion recorded in the third quarter of 2023.
Over the past six months, Ford has underperformed the industry, sector, S&P 500 and its key competitor, GM.
From a valuation perspective, Ford is trading relatively cheap. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.26, below its median of 0.31 over the last five years. It is also trading at a discount compared to the industry’s 1.57.
While Ford's Pro business is thriving, the company’s overall outlook is clouded by significant challenges in its other segments, particularly in its EV business. Ford's Model e unit has been a major drag on its financials. The segment’s revenues dropped nearly 50% year over year in the first half of 2024, with an operating loss of roughly $2.5 billion. After having incurred losses of $4.7 billion in its EV business in 2023, Ford anticipates loss to widen to $5-$5.5 billion this year, exacerbated by ongoing pricing pressure and increased investments in next-generation EVs.
Ford’s Blue unit is also showing signs of slowing down. Additionally, high warranty costs present a persistent issue, with the company incurring $2.3 billion in warranty and recall expenses in the second quarter of 2024. While Ford is working on improving quality in newer models, it may take up to 18 months before these efforts begin to meaningfully reduce costs. Unfortunately, this means that Ford could continue to face elevated warranty expenses for some time.
Although Ford appears undervalued and offers a high dividend yield, these factors do not outweigh the growing financial pressures and operational headwinds the company is facing. Amid mounting losses in its EV segment, ongoing warranty costs and competitive challenges, especially in the EV business, the stock remains unattractive in the near term. Investors are better off avoiding Ford for now as the company works through these issues.
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index.Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Ford Motor Company (F) : Free Stock Analysis Report
General Motors Company (GM) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
Ally Financial Inc. (ALLY) : Free Stock Analysis Report
Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
