Ticker Reports for February 3rd
How the 'No Buy' Trend of 2025 Is Boosting These 3 Stocks
The Wall Street Journal pointed out a peculiar new trend on social media, where influencers are not showcasing their lavish purchases but rather going the opposite route, embracing a “No Buy” trend. Consumers are tired of inflation and lofty credit card interest rates and have deemed 2025 a year of frugality. TikTok is littered with “No Buy Challenges," where users are spending less to nothing and working to pay down debt. While this trend may be painful for most retailers in the consumer discretionary sector, some discount retailers may end up being benefactors of the “No Buy” trend.
Dollar Tree: When the Off-Price Is Still Too Expensive
The advent of the off-price shopping trend took social media by storm in 2024, triggering consumers to shop expensive brands at deep discounts through off-price retailers like Ross Stores Inc. (NASDAQ: ROST) and TJX Companies Inc. (NYSE: TJX). They shunned low-quality dollar stores, but the “No Buy” trend may perk up the business of Dollar Tree Inc. (NASDAQ: DLTR) as frugality shopping grows. Off-price shopping is about treasure hunting for quality at a value price, but “No Buy” shopping is all about saving money. This trend is already showing up with business upticks.
Dollar Tree posted EPS of $1.12, beating consensus estimates by 5 cents. Revenues rose 3.5% YoY to $7.57 billion, beating consensus estimates of $7.45 billion in the third quarter of 2024. Same-store sales rose 1.8% YoY for Dollar Tree stores, 1.9% for Family Dollar stores and 1.8% enterprise-wide.
In-Line Guidance for Q4, Potential Sale of Family Dollar
Dollar Tree issued in-line guidance for Q4 2024 with EPS of $2.20 to $2.30. Revenues are expected between $8.1 billion to $8.3 billion versus $8.23 billion. The company will continue to undergo its strategic review for its Family Dollar stores, which could include a potential sale or spin-off.
Dollar Tree CEO Mike Creedon commented, "As an organization, our top priorities remain to accelerate the growth of the Dollar Tree segment, completing the Family Dollar strategic review process, and unlocking value for Dollar Tree shareholders."
Five Below: Paying a Little More, But Still Frugal
While Dollar Tree sells most of its items for $1.25 for the most frugal budget-conscious shopper, Five Below Inc. (NASDAQ: FIVE) is for those who don’t mind splurging a bit more for most items priced at $5.00 or below. Business is bouncing back with velocity as many shoppers find it easier to trade down incrementally.
The turnaround was apparent in its third quarter 2024 earnings when it reported EPS of 42 cents, crushing consensus analyst estimates by 25 cents. Revenues rose 14.6% YoY to $843.71 million, crushing the $801.48 million consensus estimates. Q3 comp sales rose 0.6% YoY versus a mid-single digit decrease from previous guidance. The company opened a record 82 new stores, and Black Friday was very encouraging.
The company announced a new CEO; Winnie Park is a 30-year veteran of retail and, most recently, the former CEO of fast fashion giant Forever 21.
Holiday Period Sales Update and Reaffirmed Q4 Guidance
On Jan 13, 2025, Five Below provided a holiday sales update and reaffirmed guidance. Net sales for the Holiday Period of the nine weeks from Nov 9. 2024, through Jan 6, 2025, saw revenues rise 8.7% YoY to $1.19 billion. However, comparable sales for the 2024 Holiday Period fell by 3.2% YoY. The company continued to reaffirm Q4 2024 guidance.
Affirm: Buy Now, Pay Later in Four Interest-Free Installments Bi-Weekly
One of the common themes with the “No Buy” trend is to try to pay down credit card debt, but especially to stay away from the high interest rates. Affirm Holdings Inc. (NASDAQ: AFRM) is the pioneer of the buy now, pay later (BNPL) industry in the United States. When “No Buy”-ers need to spend, they will opt to go with a clean, interest-free installment plan like Affirm's, which is four payments each paid every two weeks until the balance is paid off.
It’s a win-win for shoppers and merchants who benefit from the conversion from window shopper to buyer, which is why they pay a fee to Affirm. The fourth quarter holiday shopping season is the busiest period of the year, and 2024 should have produced some record metrics.
FQ1 Sets the Stage for a Blowout FQ2 Holiday Shopping Season
Affirm reported a loss of 31 cents per share in fiscal Q1 2025, which still beat consensus estimates by a penny. Revenue ballooned 40.7% YoY to $698.48 million, crushing the $664.04 million consensus estimates. Gross merchandise volume surged 35% YoY to $7.6 billion.
Affirm conservatively issued in-line guidance for fiscal Q2 2025 of revenue between $770 million and $710 million versus $784.51 million. GMV is expected to be between $9.35 billion to $9.75 billion. Fiscal full-year 2025 revenues are expected to rise 20 bps higher than fiscal 2024 as a percentage of GMV, which should be more than $34 billion.
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Teva Pharma: Why This Generic Drug Giant Is a Smart Buy Now
Teva Pharmaceuticals Industries Ltd (NYSE: TEVA) is the world's largest generic drug maker, with over 500 generic and biosimilar treatments in its broad portfolio. The medical sector giant also has a line of branded drugs driving growth.
Its specialty medicines address specific conditions, including respiratory diseases, oncology, and central nervous system (CNS) disorders. Its stock took a 17% tumble in the days following its fourth quarter of 2024 earnings release. Teva’s cautious full-year 2025 guidance fell short of consensus analyst estimates. With shares trading at just 6.8x forward earnings, value investors may view this as a dip buying opportunity.
The Transformative Year 2024
Teva Pharmaceuticals, like many other large drug makers and pharmacies like Johnson & Johnson (NYSE: JNJ), Allergan plc (NYSE: AGN), CVS Health Co. (NYSE: CVS), and Walgreens Boots Alliance Inc. (NASDAQ: WBA), were involved in settlements for their participation in the opioid epidemic. Teva’s black cloud surrounding the opioid settlements dissipated after 2023 when the company agreed to make ongoing payments and supply their generic version of Narcan as part of the agreement. This marks 2024 as the year of normalization and return to growth.
Teva CEO Richard Francis commented, “2024 marked a transformative year for Teva, resulting in a second consecutive year of growth, driven by our generic products and key innovative products. Focusing on the rigorous execution of our Pivot to Growth strategy throughout the year, we continued to achieve important milestones in each of its four pillars, including surpassing the outlook for our key innovative products, growing our generics business across all segments, and accelerating our early-stage innovative pipeline, including the positive Phase 2b results for our duvakitug (anti-Tl1A) asset. These results pave the way for pivotal trials in Crohn's disease and ulcerative colitis, as well as, potentially, other Immunological and fibrotic indications beyond, in collaboration with our partner, Sanofi."
Wrapping Up 2024 With a Strong Finish for a Solid Year
Teva’s Q4 2024 results were relatively strong. The company posted EPS of 71 cents, which met consensus estimates.
Revenues fell 5.1% year-over-year (YoY) to $4.23 billion, beating $4.23 billion consensus estimates.
For the full year 2024, revenues rose 6% YoY to $16.5 billion. Its generics business grew 15% in the United States, 6% in Europe, and 15% YoY in international markets. Global sales of its brand drugs were robust.
AUSTEDO exceeded $1.6 billion in revenues, surpassing the company’s 2024 outlook.
AJOY revenues rose 17% YoY to $507 million. UZEDY revenues surpassed the $100 million outlook, generating $117 million in 2024.
Guidance Was on the Cautious Side
Teva issued its 2025 full-year preliminary guidance for EPS of $2.35 to $2.65 versus $2.78 consensus estimates. Full-year revenue is expected to be between $16.8 billion to $17.4 billion versus $17.09 billion consensus estimates. This is what triggered the sell-off in shares.
First-to-Market Generic GLP-1 Medication in 2025
In January 2025, Teva entered into a license and supply agreement for a proposed GLP-1 treatment in the United States and Europe. The company with be first-to-market with the launch of a generic version of Sandostatin LAR Depot and liraglutide injection 1.8mg. It’s an authorized generic of Victoza.
Liraglutide is a GLP-1 agonist, which is the active ingredient in Victoza. Victoza is an older GLP-1 drug made by Novo Nordisk A/S (NYSE: NVO), maker of semaglutide, the active ingredient in Ozempic and Wegovy. Victoza was an early GLP-1 used specifically for type 2 diabetes, with patients losing an average of 6.2 pounds. It paved the way for the development of the newer GLP-1 drugs Ozempic and then Wegovy for weight loss.
TEVA Stock Forms a Symmetrical Triangle Breakdown
A symmetrical triangle is comprised of a descending (falling) upper trendline resistance converging with an ascending (rising) lower trendline support at the apex point. A breakout occurs when the stock surges above the upper trendline resistance. A breakdown occurs when the stock collapses below the lower trendline support. A breakout or breakdown becomes eminent as the stock gets closer to the apex point as the channel narrows.
TEVA formed a symmetrical triangle with the upper descending trendline forming at the $22.80 swing high and the ascending lower trendline support forming at the $19.03 gap fill. TEVA chopped towards the apex point before gapping down on its earnings release to the $19.75 level and proceeding lower towards the $17.26 fib. Fibonacci (Fib) pullback support levels are at $17.26, $16.83, $16.25 and $15.81.
TEVA stock’s average consensus price target is 23.56% higher at $22.00, and its highest analyst price target sits at $30.00. It has six analysts' Buy ratings and two Hold Ratings. The stock has a 1.39% short interest.
Bullish investors can consider using cash-secured puts at the Fib pullback support levels to buy the dip. If assigned the shares, then writing covered calls at upside Fib levels executes a wheel strategy for income.
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Sector Rotation: Are Utilities Gaining as Financials Weaken?
One of the top-performing sectors YTD has been financials, with the popular financial ETF, Financial Select Sector SPDR (NYSEARCA: XLF), already up 6.5% as of Friday’s close. Conversely, one of the sectors that outperformed for the first three quarters of last year, utilities, represented by the Utilities Select Sector SPDR ETF (NYSEARCA: XLU), has lagged financials and performed in line with the benchmark S&P 500.
However, with rotation constantly occurring in the current market and capital flowing out of potentially overbought sectors and into sectors presenting more favorable risk: reward, could utilities gain flow from financials and gain a boost in the coming months?
Financials Outperform Early On But Face Selling Pressure
The XLF, which tracks the financial sector within the S&P 500, has experienced a strong start to 2025, yielding a year-to-date and outperforming return of approximately 6.5% as of Friday’s close. This performance reflects an optimistic outlook influenced by expectations around policy changes, particularly with Donald Trump as the 47th President of the United States. Along with the upbeat outlook, earnings for many of the ETF’s major players and holdings significantly beat expectations, resulting in significant upward momentum for the sector. For example, on January 15, the ETFs second-largest holding, JPMorgan Chase (NYSE: JPM), with a 10.2% weighting, topped EPS by over 17% and sales by 2%, helping the XLF break out of its declining consolidation.
However, this initial surge has been followed by early signs of selling pressure, potentially due to the sector swiftly entering overbought territory. Technical analysis suggests a risk of forming a double-top pattern, indicating that the sector might be due for a pullback or consolidation, which would allow recent gains and price action to digest the move.
This scenario unfolds against a backdrop where earnings reports have been largely positive and with financial institutions facing a favorable tailwind as they will likely benefit from less stringent regulations thanks to the new White House administration. While YTD net fund flows for the financial ETF are an impressive 4.59%, and momentum is clearly on its side, might the short-term extreme swing to the upside now diminish the risk: reward, setting the stage for another sector to experience fresh flows and renewed optimism? If that were to happen, one sector that could benefit is the utilities sector.
Utilities Consolidate in a Major Bull Flag
For much of last year, the utilities sector ETF, XLU, led and outperformed the market due to several factors. After breaking its downtrend in early 2024, the sector ETF surged from a low near $60 to a record high of $83.41 in late November before returning to its uptrend support line. While the sector has slightly outperformed the benchmark YTD, it’s significantly lagging financials, up only 2.89% YTD. Despite its relative underperformance, the enthusiasm remains, with the fund experiencing 2.45% positive flows YTD. Sentiment remains optimistic for the sector, with holdings in the XLU possessing an aggregate rating of Moderate Buy.
The sector's inherent stability, consistent consumer demand, and defensive characteristics continue to make it a safe haven for investors amidst economic uncertainty. Additionally, the push towards renewable energy, the surge in power consumption from AI and data centers, and recovery from undervaluation in 2023 contributed to its strong performance in 2024 and might continue to do so in 2025. The sector also continues to benefit from the electrification trend, including the rise in electric vehicle usage and increasing electricity demand. Recent comments from President Donald Trump indicate a bullish stance on energy companies. His early actions have made it clear that he aims to rebuild affordable, reliable, and secure energy supplies.
From a technical perspective, XLU remains attractive as it consolidates in a developing bull flag just 6.6% away from its 52-week high and right near a swiftly converging 50- and 20-day Simple Moving Average (SMA).
While there’s no telling if the sector will attract flows from other leading sectors, such as financials, one thing is for sure: price action. If the XLU can break above its bull-flags downtrend resistance, near $80, that would confirm a technical breakout and potential rotation back into the sector.
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