Dell Technologies and Starbucks have been highlighted as Zacks Bull and Bear of the Day

Globe and Mail

3 days ago

For Immediate Release
Chicago, IL – July 1, 2025 – Zacks Equity Research shares Dell Technologies DELL as the Bull of the Day and Starbucks SBUX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on JPMorgan JPM, Bank of America BAC and Goldman Sachs GS.
Here is a synopsis of all five stocks:
Bull of the Day:
Dell Technologies develops and sells comprehensive and integrated information technology solutions and products globally. The top-ranked company is benefiting from strong demand for AI servers amid an ongoing digital transformation and heightened interest in generative AI applications.
This stock is displaying relative strength off the April lows and has been making a series of higher highs. The broader technology sector is providing a durable backing for this industry leader. Increasing volume has attracted investor attention as buying pressure accumulates in this highly-ranked stock.
A Zacks Rank #1 (Strong Buy), Dell is part of the Zacks Computer – Micro Computers industry group, which currently ranks in the top 18% out of approximately 250 industries. Because this group is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months.
Take note of the favorable characteristics for this group below. Stocks in this industry are relatively undervalued based on traditional valuation metrics. They are also projected to experience above-average earnings growth, which signifies a powerful combination that should lead to higher prices in the future.
Historical research studies suggest that approximately half of a stock's price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It's no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top industries, we can dramatically improve our stock-picking success.
Company Description
Dell operates through two segments. The first is their Client Solutions Group, which is what most people think of when they hear the name Dell. This segment offers desktops, workstations, notebooks, displays, and projectors.
And while Dell remains a prominent PC maker and is expected to benefit from increased adoption of remote working along with recovering demand amid the PC refresh cycle, it's their other segment – called Infrastructure Solutions Group - that is really at the heart of the artificial intelligence boom. This segment provides modern and traditional storage solutions, AI-optimized servers, and networking products.
In the first quarter of 2025, Dell secured $12.1 billion in AI server orders, surpassing shipments and building a strong backlog. A growing partner base that includes the likes of Nvidia, Microsoft, and Facebook-parent Meta Platforms has been a major growth driver.
In addition to its IT products, Dell also offers cybersecurity solutions to prevent security breaches, detect malicious activity, and identify emerging threats. The company serves enterprises, public institutions, and small and medium-sized businesses. It was founded in 1984 and is headquartered in Round Rock, Texas.
Earnings Trends and Future Estimates
Dell has built an enviable track record in terms of surpassing earnings estimates. The AI server and storage provider missed the EPS mark just twice over the past five years.
While one of those misses came in the recent quarter, Dell's bottom line still leapt 37.6% year-over-year. Quarterly revenues jumped 5.1% versus the year-ago period.
The technology giant has delivered a trailing four-quarter average earnings surprise of 2.26%. Consistently beating earnings estimates is a recipe for success.
Dell continues to witness rising earnings estimates as the company benefits from AI momentum. Analysts covering DELL increased their second-quarter EPS estimates by 14% in the past 60 days. The Q2 Zacks Consensus Estimate now stands at $2.28/share, translating to a healthy 20.6% growth rate versus last year. Revenues are anticipated to climb 16.5% year-over-year.
Let's Get Technical
This market leader has seen its stock advance more than 70% off the April lows. Only stocks that are in extremely powerful uptrends are able to experience this type of outperformance. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
The stock has been making a series of higher highs over the past few months. With both strong fundamental and technical indicators, DELL stock is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Dell has recently witnessed positive revisions. As long as this trend remains intact (and Dell continues to deliver earnings beats), the stock will likely continue its bullish run.
Bottom Line
Dell's measures to reward shareholders are encouraging. In the first quarter of 2025, the company returned $2.4 billion to shareholders through share repurchases and dividends. Dell announced an 18% increase to its annual dividend, and its board approved a $10 billion increase in share repurchase authorization.
Backed by a leading industry group and history of earnings beats, it's not difficult to see why DELL stock is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly justify adding shares to the mix.
Recent positive earnings estimate revisions should also serve to create a 'floor' in terms of any sudden or unexpected downside moves. If you haven't already done so, be sure to put DELL on your shortlist.
Bear of the Day:
Starbucks operates as a roaster, marketer, and retailer of specialty coffee worldwide. The company offers roasted whole beans, coffee and tea beverages, single-serve products, and various food items such as pastries and breakfast sandwiches.
The coffee retailer provides its services under the Starbucks, Seattle's Best Coffee, Evolution Fresh, Ethos, and Teavana brands. Founded in 1971 and based in Seattle, Washington, Starbucks maintains a presence in nearly 90 markets worldwide.
Starbucks faces several notable headwinds. The stock is underperforming amid decreased global comparable store sales along with higher operational expenses. Domestic market softness remains evident, triggered by a 4% decrease in comparable transactions during the company's fiscal second quarter. New competition also represents a significant and ongoing threat to its core business.
The Zacks Rundown
A Zacks Rank #5 (Strong Sell) stock, Starbucks is part of the Zacks Retail – Restaurants industry, which currently ranks in the bottom 42% out of approximately 250 industries. Because this industry is ranked in the bottom half of all Zacks Ranked Industries, we expect it to underperform the market over the next 3 to 6 months, just as it has over the past few months.
Stocks in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when they're part of a lagging industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
SBUX stock has been severely underperforming the market off the April lows. The stock has failed to show any real momentum and represents a compelling short opportunity as we head further into 2025.
Recent Earnings Misses and Deteriorating Outlook
Starbucks has fallen short of earnings estimates in three of the past six quarters. Back in April, the company reported quarterly earnings of 41 cents per share, missing the Zacks Consensus Estimate by a whopping -16.3%.
Starbucks posted a trailing four-quarter average earnings miss of -2.95%. Consistently falling short of earnings estimates is a recipe for underperformance, and SBUX is no exception.
The coffee retailer has been on the receiving end of negative earnings estimate revisions as of late. Looking at the full year, analysts have slashed estimates by -15.36% in the past 60 days. The fiscal 2025 Zacks Consensus EPS Estimate is now $2.48 per share, reflecting negative growth of -25.1% relative to last year.
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Let's Get Technical
SBUX stock has also experienced what is known as a "death cross," whereby the stock's 50-day moving average (blue line) crosses below its 200-day moving average. Shares would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. The stock has fallen about 20% since February, all while the general market returned to new heights.
Final Thoughts
Ongoing investments in the "Back to Starbucks" strategy, various restructuring actions and additional labor are pressurizing the margins of the company. Moving forward, the ongoing macro uncertainties and elevated expenses are expected to hurt Starbucks' growth trends.
Our Zacks Style Scores illustrate a deteriorating investment picture for Starbucks, as the company is rated a worst-possible 'F' in our overall VGM score. Recent earnings misses and declining future estimates signal more trouble on the horizon.
The fact that Starbucks is included in a weak industry group simply adds to the growing list of concerns. Investors will want to steer clear of an overvalued SBUX until the situation shows major signs of improvement.
Additional content:
Major Banks Pass 2025 Stress Test: Bigger Payouts in the Cards?
The results of the much-awaited annual stress test are out. As expected, the 22 banks that were tested have easily passed this year's annual health checkup, given that the 2025 scenario used to test the banks was less severe than last year.
The Federal Reserve's vice chair for supervision, Michelle Bowman, said, "Large banks remain well capitalized and resilient to a range of severe outcomes."
Thus, the largest U.S. lenders, which include JPMorgan, Bank of America and Goldman Sachs, will be able to withstand a severe recession with sufficient capital on hand to absorb hundreds of billions of dollars in losses.
What is a Stress Test?
Each year, the Federal Reserve's stress test assesses the capacity of the biggest U.S. banks to withstand a significant economic downturn. The test is used to determine the most recent minimum capital requirements, which are intended to cushion potential losses. It further dictates the size of share repurchases and dividends.
The 2008 financial crisis gave rise to this annual assessment, which covered institutions with at least $100 billion in assets.
The Fed evaluates the financial resilience of banks by estimating losses, revenues, expenses and resulting capital levels under hypothetical economic conditions. A baseline scenario and a severely adverse scenario are used for assessment.
The severely adverse scenario is characterized by a hypothetical severe global recession accompanied by a period of heightened stress in commercial and residential real estate markets, and corporate debt markets.
Details of This Year's Test
This year, the severely adverse scenario featured a slightly smaller increase in the unemployment rate from the 2024 scenario. It also featured a smaller decline in house prices and a fall in commercial real estate prices that is 10% less than that in 2024.
All the 22 lenders that have passed the test show that their capital levels will stay above the key threshold in a scenario where GDP contracts by 8%, commercial real estate prices decline by 30%, there is a 33% decline in house prices and the unemployment rate rises to 10%.
The minimum common equity tier 1 capital ratio that is required to pass the test is 4.5%. This year, all the banks as a group had a common equity tier 1 ratio of 11.6% during the stress scenario, after absorbing total projected hypothetical losses of more than $550 billion.
The projected loss includes nearly $158 billion in credit card losses, $124 billion in losses from commercial and industrial loans, and $52 billion in losses from commercial real estate.
Now, as the banks have passed the stress test displaying sufficient capital on hand, they will be able to issue dividends to shareholders and buy back shares to return proceeds to investors.
Moreover, with all the banks passing the test, the Trump administration will now be in a position to make its case that rules for financial institutions should be lessened. The Trump administration implements a deregulatory agenda because it is of the view that it will boost lending and drive economic growth.
Easing Regulation in the Cards?
A couple of days ago, the Fed unveiled a proposal to ease the enhanced Supplementary Leverage Ratio (SLR) to reduce capital requirements significantly for major U.S. banks, including JPM, BAC and GS.
Banks have been complaining that the SLR penalizes them for holding lower-risk assets such as Treasury bonds.
Thus, such a proposal could make it easier for these banks to handle these low-risk assets and free billions in capital currently tied up due to the post-2008 leverage requirements.
Details of the Proposed Plan
The Fed's proposal would lower capital requirements for Global Systemically Important (GSIBs) banks like JPM, BAC and GS by 1.4%, or $13 billion. More substantially, it would reduce capital requirements for depository institution subsidiaries of banks by 27% or $213 billion.
Under the proposed rule, the Fed would replace the current 2% enhanced SLR buffer with a buffer equal to half of each bank's GSIB surcharge. Similarly, the 3% ESLR buffer for global bank subsidiaries would be replaced with half of each bank's GSIB surcharge.
The easing of these requirements could directly benefit major banks by reducing the amount of capital they must hold in reserve. This will likely give them more flexibility to expand operations, particularly in lending and Treasury trading.
Additionally, lower capital buffers could enhance bank profitability by freeing funds for investment or business expansion.
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The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report
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