For Immediate Release
Chicago, IL – December 5, 2022 – Zacks Equity Research shares Cboe Global Markets CBOE as the Bull of the Day and Vipshop Holdings VIPS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wyndham Hotels & Resorts, Inc. WH, Hyatt Hotels Corp. H and Hilton Grand Vacations Inc. HGV.
Here is a synopsis of all five stocks.
Cboe Global Markets is the $13.6 billion center of U.S. equity options trading, averaging over 11.4 million contracts per day.
And the value of its U.S. stock transactions exceeds $61 billion per day.
CBOE is also the home of the Volatility Index, aka “the VIX.” This calculation of “the price of risk” for the market is derived from the implied volatility of S&P 500 (SPX) options, which are still traded in a giant, raucous “pit” there.
Where Does the VIX Come From?
SPX options were designed as an institutional hedging product in the early 1980s. While much volume has moved to electronic platforms in the past few years, the pit still provides important liquidity and price discovery in an “open outcry” auction market.
There, numerous “local” traders all compete to buy and sell calls and puts as large and often sophisticated, multi-leg hedging orders come to the trading floor during regular stock market hours.
Since put options are like proxies for buying insurance on the stock market, when worry and fear among institutional portfolio managers are increasing, puts are in high demand and this raises their prices.
By asking the Black-Scholes options pricing model what a basket of SPX options prices is implying about expected moves in the market (usually downward), it can reverse engineer a future volatility estimate.
Thus the continuously calculated VIX becomes labeled the “fear gauge” for short.
EPS Bumps Push CBOE to a Zacks #1
CBOE shares moved to the upper tiers of the Zacks Rank after the company reported strong results and a solid outlook in early November.
After that report and optimistic guidance, analysts raised full-year EPS estimates 4.5% from $6.49 to a consensus of $6.78.
More impressively, the 2023 EPS consensus jumped 5.6% from $6.62 to $6.99.
Third-quarter 2022 adjusted earnings of $1.74 per share beat the Zacks Consensus Estimate by 6.8%. This result saw the bottom line increase 20% year over year.
The quarter witnessed record net revenues and adjusted earnings, courtesy of a robust derivatives franchise, supported by sizable contributions from data and access solutions, and cash and spot markets.
Net revenues from derivatives markets grew 31%, data and access solutions improved 15%, and cash and spot markets grew 5%.
Total revenues came in at $442 million, also representing a 20% yoy improvement for the top line. The surge was driven by increases in net transaction and clearing fees and access and capacity fees.
Options revenues increased 33% year over year to $255.5 million, boosted by double-digit increases in net transaction and clearing fees, access and capacity fees, and market data.
North American Equities revenues increased 13% year over year to $96.7 million, bumped by higher transaction and clearing fees and access and capacity fees.
Futures revenues of $28.4 million were down 2% year over year, attributable to a decline in net transaction and clearing fees, offset slightly by an increase in access and capacity fees and market data fees.
Europe and Asia Pacific revenues declined 8% year over year to $44.5 million, reflecting softer transaction and non-transaction revenues.
Global FX revenues increased 21% to $17.3 million, driven by higher net transaction and clearing fees.
Total adjusted operating expenses increased 23% year over year to $172.8 million, primarily due to the acquisitions of Cboe Digital (formerly ErisX) and NEO, as well as an increase in salaries, wages, and bonuses resulting in higher compensation and benefits expense.
Adjusted operating income increased 18% year over year to $269.9 million. Adjusted operating margin in the quarter under review contracted 110 basis points (bps) to 60.9%.
2022 Guidance Revised Upward
Cboe Global expects total organic net revenue growth in the range of 14% to 16%, up from 9% to 11% guided earlier. It lowered the adjusted operating expense guidance to $651-659 million from $659-667 million.
CBOE expects organic net revenues from Data and Access Solutions to increase approximately 10% to 13%.
Cboe Global expects capital expenditures in the range of $43-48 million, down from $47-52 million.
Bottom line on CBOE: With volatility expectations and hedging levels poised for sharp spikes during this bear market, CBOE options, volatility products, and market data access will remain in high demand, and sustain top and bottom line growth.
Vipshop Holdings is an online discount retailer for brands in China. The company offers branded products to consumers in China through flash sales on its website.
Vipshop offers a wide selection of various famous branded discount products including apparel for women, men and children, fashion goods, cosmetics, home goods and other lifestyle products.
The reason that VIPS has fallen into the cellar of the Zacks Rank — despite beating EPS in the Sep quarter by 33% — is that estimates for next year were revised 12.7% lower by analysts from $1.34 to $1.17 in the past few weeks.
VIPS is also dealing with a 20% drop in revenues this year and that result is certainly impacting investor and analyst views.
Here was one major bank perspective from late October…
Vipshop price target lowered to $8.50 from $10 at Morgan Stanley
Analyst Eddy Wang lowered the firm’s price target on Vipshop to $8.50 from $10 and kept an Equal Weight rating on the shares.
Although September online retail sales of goods in China came in better than market expectations, e-commerce is becoming a more mature industry with “industry growth to inevitably slow down in 2023 and onwards” and he believes the new valuation consensus for Chinese e-commerce stocks “could be significantly lower than their historical levels.”
This is both a commentary on the “e-comm” revolution and the impact of the global slowdown on China.
Investors who like Vipshop as a long-run China opportunity in the largest consumer market on the planet could wait this out and be buying new shares at even lower levels.
The Zacks Rank will let you know.
3 Stocks to Buy on Rise in Personal Income and Spending
Inflation is still at multi-year highs but the good sign is that it has been cooling lately. As a result, there has been a slight relief, which has allowed people to spend more freely. At the same time, higher demand for goods has so far helped some major sectors from collapsing under inflationary pressures.
A rise in personal income is aiding spending, although consumer confidence is still low. Also, people are spending more freely on travel, vacations and outdoor entertainment due to an increase in personal income.
Given this situation, investing in consumer discretionary stocks like Wyndham Hotels & Resorts, Inc., Hyatt Hotels Corp. and Hilton Grand Vacations Inc. would be ideal.
Personal Income, Personal Spending Increase
The Commerce Department said on Dec 1 that personal spending increased a solid 0.8% in October after rising 0.6%the month before. This came as data showed the personal consumption expenditure (PCE) index rising 0.3% for the month, beating expectations of an increase of 0.4%.
The Fed has been increasing interest rates quite aggressively, but that hasn’t stopped people from spending. The board said that people continued to spend on new automobiles, food products and housing.
Commodity prices have been cooling off lately, which has allowed people to spend more freely. Also, personal income rose 0.7% in October, above economists’ expectations of a rise of 0.4%. This follows a 0.4% jump in personal income in September.
Disposable personal income also rose 0.7% in October after increasing 0.3% in September. Higher personal income is giving people not only the option to save more but also the power to purchase.
Spending Increases Despite High Interest Rates
Last month, the Fed hiked interest rates by 75 basis points for the fourth time in a row. The central bank also indicated that it will continue hiking interest rates as inflation is still at multi-year highs and its target rate of 2% is still a far cry.
However, with inflation cooling off lately, Fed Chair Jerome Powell said on Nov 30 that the Fed could slow down its pace of interest rate hikes as early as December. This definitely is an indication that people will gain more confidence in spending freely in the near term.
Growing economic optimism now appears to have allayed concerns of a recession. Moreover, the board said that households are “heading into the holiday season in fairly good shape.”
The holiday season has started on an impressive note and sales on both Black Friday and Cyber Monday have hit record highs. According to Adobe Analytics, online sales on Cyber Monday hit a record $11.3 billion, increasing 5.8% year over year. Also, Black Friday online sales totaled $9.12 billion, hitting a record high.
The holiday season traditionally sees people spending more on both goods and traveling. According to a Deloitte report, 31% of Americans plan to travel between Thanksgiving and mid-January. This comes despite prices still being quite high.
Given this scenario, it would be wise to invest in these three stocks with a strong online presence. Each of the stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Wyndham Hotels & Resorts, Inc. provides a hotel and resort chain. WH operates primarily in Canada, Mexico, Colombia, Ecuador, Turkey, Germany, the UK, the Caribbean and Margarita Island in Venezuela. Wyndham Hotels and Resorts is headquartered in New Jersey, United States.
Wyndham Hotels & Resorts’ expected earnings growth rate for the current year is 21.5%. The Zacks Consensus Estimate for current-year earnings has improved 5.8% over the past 60 days. WH currently has a Zacks Rank #2.
Hyatt Hotels Corp. is a leading global hospitality company engaged in the development, ownership, operation, management, franchising and licensing of a portfolio of properties, including hotels, resorts and residential and vacation ownership properties around the world. As of Mar 31, 2022, H’s portfolio included more than 1,150 properties in 71 countries across six continents.
Hyatt Hotels’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 70.1% over the past 60 days. H presently carries a Zacks Rank #2.
Hilton Grand Vacations Inc. is engaged in the hospitality business. HGV markets and operates vacation ownership resorts. Hilton Grand Vacationsalso manages and serves club membership programs, which include Hilton Grand Vacations Club and The Hilton Club.
Hilton Grand Vacations’ expected earnings growth rate for the current year is 60.9%. The Zacks Consensus Estimate for current-year earnings has improved 19.3% over the past 60 days. HGV currently sports a Zacks Rank #1.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.