News

For Immediate Release

Chicago, IL – December 6, 2024 – Zacks Equity Research shares Carvana CVNA as the Bull of the Day and Starbucks SBUX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on C3.ai AI, Microsoft MSFT and Amazon AMZN.

Here is a synopsis of all five stocks.

Carvana is a leading e-commerce platform for buying and selling used cars.

The company’s earnings outlook melted higher following its latest set of better-than-expected results, helping land the stock into the highly-coveted Zacks Rank #1 (Strong Buy).

In addition to favorable earnings estimate revisions, the stock resides in the Zacks Internet – Commerce Foundry currently ranked in the top 27% of all Zacks industries. Let’s take a closer look at how the company stacks up.

Carvana Outpaces Mag 7

Carvana benefited nicely during the COVID era when consumers were unsure of leaving their homes and facing lockdowns. The stock was entirely forgotten about for years before shocking investors in 2024, up a staggering 380% year-to-date and crushing the general market.

The performance has been seemingly ignored by many investors amid the AI frenzy we’ve become accustomed to, with the gains widely outpacing all Mag 7 members. It’s worth noting here that short squeezes have also added fuel to the fire, with a current short interest of 6% nowhere near the 17.5% mark in just December of 2023.

Concerning headline figures in its latest print, CVNA delivered a sizable 180% beat relative to the Zacks Consensus EPS estimate and reported sales 5% ahead of expectations, reflecting growth rates of 178% and 31%, respectively.

The company overall enjoyed a robust quarter, with retail units of 108.6k growing a sizable 34% year-over-year alongside reaching new profitability milestones. Further, the company’s adjusted EBITDA margin of 11.7% reflected a new all-time best for public automotive retailers.

The adjusted EBITDA margin performance is quite commendable, reflecting that the company has been effectively managing costs related to operations, inventory, and labor, which do fluctuate quite a bit in the automotive industry.

Putting Everything Together

Investors can implement a stellar strategy to find expected winners by taking advantage of the Zacks Rank – one of the most powerful market tools that provides a massive edge.

The top 5% of all stocks receive the highly coveted Zacks Rank #1 (Strong Buy). These stocks should outperform the market more than any other rank.

Carvana would be an excellent stock for investors to consider, as displayed by its Zack Rank #1 (Strong Buy).

Starbucks is a roaster and retailer of specialty coffee globally. Besides its fresh, rich-brewed coffees, the company's offerings include many complimentary food items and a selection of premium teas and other beverages, sold mainly through its retail stores.

Analysts have taken their earnings expectations lower, landing the stock into an unfavorable Zacks Rank #5 (Strong Sell).

Let’s take a closer look at how the company currently stacks up.

Starbucks Hires New CEO

Starbucks shares faced pressure to start the year, up roughly 6% overall and widely underperforming relative to the S&P 500. Quarterly results have been a source of volatility, though a recent CEO swap perked shares up in a big way near the end of August.

Former Chipotle Mexican Grill CEO Brian Niccol replaced Laxman Narasimhan back in August. Investors remain hopeful that the swap will bring some positivity, particularly after the several-year-long patch of rough price action. Over the last three years, SBUX shares are down -6%.

The company’s latest set of quarterly results was a bit rough, with global comparable store sales declining 7% but getting a slight boost from a 2% increase in average ticket. As has been the case, China continues to be a thorn in the side for SBUX, with comparable store sales in China falling 14% alongside an 8% decline in average ticket price.

The China story has been a big deal for obvious reasons – the region accounts for 30% of the company’s stores overall. Below is a chart illustrating the company’s sales on a quarterly basis over the last five years.

But new CEO Brian Niccol remains positive, stating:

‘It is clear we need to fundamentally change our strategy to win back customers. ‘Back to Starbucks’ is that fundamental change,’

He continued -

‘My experience tells me that when we get back to our core identity and consistently deliver a great experience, our customers will come back. We have a clear plan and are moving quickly to return Starbucks to growth.’

Bottom Line

Analysts’ negative revisions rolled in following the release of its latest quarterly results, with weak China sales continuing to be a thorn in the company’s side.

Starbucks is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company’s earnings outlook.

For those seeking strong stocks, a great idea would be to focus on stocks carrying a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy). These stocks sport a notably stronger earnings outlook and the potential to deliver explosive gains in the near term.

Additional content:

Buy, Sell or Hold C3.ai Stock Ahead of Earnings?

C3.ai is scheduled to report its second-quarter fiscal 2025 results on Dec. 9.

AI expects revenues between $88.6 million and $93.6 million for the fiscal second quarter. The Zacks Consensus Estimate for revenues is pegged at $91.01 billion, suggesting 24.28% growth from the figure reported in the year-ago quarter.

The consensus mark for quarterly loss is pegged at 16 cents per share, unchanged in the past 30 days. AI reported a loss of 13 cents per share in the year-ago quarter.

C3.ai’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average earnings surprise of 52.80%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Advanced Micro Devices, Inc. price-eps-surprise | Advanced Micro Devices, Inc. Quote

Let us see how things have shaped up for AI shares prior to this announcement.

Factors to Note for AI

C3.ai’s fiscal second-quarter performance is likely to have gained from the strong adoption of C3 Generative AI solutions and increased demand for its Enterprise AI software.

C3.ai’s efforts to diversify its customer base and engage with clients across various industries, such as manufacturing, agriculture, construction, automotive and pharmaceuticals, are expected to have contributed significantly to revenue growth.

In the first quarter of fiscal 2025, C3.ai secured 71 agreements (including 52 pilots), marking a 122% year-over-year increase. Partner-supported bookings also surged 94% year over year. This momentum is expected to have continued in the fiscal second quarter.

In the first quarter of fiscal 2025, Google Cloud and C3.ai closed 40 agreements, representing a 300% year-over-year increase, driven by a joint campaign promoting the C3 AI State and Local Government Suite of applications. This has led to higher adoption, with C3.ai securing 24 agreements in the sector in the first quarter.

C3.ai’s federal business is anticipated to have sustained its strength, driving top-line growth in the to-be-reported quarter. In the first quarter of fiscal 2025, AI entered into new and expanded agreements with key entities, including the U.S. Air Force, Navy, Marine Corps and Intelligence Community, further solidifying its leadership in the government sector.

The U.S. Marine Corps is leveraging the C3 AI Defense & Intelligence Suite to modernize legacy systems and enhance operational efficiency. This collaboration is a part of USMC’s Manpower IT Systems Modernization Program and supports its goal of becoming a more agile and tech-driven force.

AI Shares Outperform Sector

Year to date, shares of AI have gained 30.9%, outperforming the broader Zacks Computer & Technology sector’s return of 32.4% and the Zacks IT Services industry’s appreciation of 19.4%.

However, AI stock is not so cheap, as suggested by the Value Score of F.

C3.ai stock is currently trading at a premium with a forward 12-month Price/Sales (P/S) of 10.99X compared with the sector’s 6.33X.

C3.ai’s Prospects Ride on Strong Portfolio

C3.ai’s expanding clientele and growing adoption of its Enterprise AI software are notable developments for investors.

C3 Generative AI is being used by manufacturing, industrial and military industries. It improves safety standards on production floors and equipment operations and analyzes technical information, contracts and financial data.

The strong portfolio is helping in the growing use of AI solutions. In first-quarter fiscal 2025, C3.ai closed 17 C3 Generative AI pilots with major firms like Eletrobras, Cargill, Dolce & Gabbana and Tractor Supply. Eletrobras, Latin America’s largest power company, has partnered with C3.ai to enhance grid resilience and availability.

Beyond innovation and product capability, C3.ai has leveraged strong sales capabilities through strategic partnerships with tech giants like Booz Allen Hamilton, Microsoft, Amazon and Alphabet.

Conclusion

C3.ai’s expanding customer base, strong portfolio of AI solutions and strategic partnerships position it well for sustained growth. With increasing adoption across industries and robust momentum in the federal sector, C3.ai is poised to benefit significantly in the near term.

C3.ai currently has a Zacks Rank #2 (Buy) and a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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