For Immediate Release
Chicago, IL –March 24, 2020 – Zacks Equity Research Shares of AeroVironment AVAV as the Bull of the Day, Bright Horizons Family Solutions BFAM asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon AMZN, eBay Inc. EBAY and Atlassian Corp. TEAM.
Here is a synopsis of all five stocks:
Bull of the Day:
AeroVironment is a Zacks Rank #2 (Strong Buy) and it is the Bull of the Day today. Let's take a look at the recent moves in estimates and why it has seen a strong move in it's Zacks Rank.
AeroVironment, Inc. designs, develops, produces, operates a portfolio of products and services for government agencies, businesses and consumers. It operates through two segments: Unmanned Aircraft Systems, which focuses primarily on the design, development, production, support and operation of UAS and tactical missile systems that provide situational awareness, multi-band communications, force protection and other mission effects, and Efficient Energy Systems, which focuses primarily on the design, development, production, support and operation of electric energy systems.
The company supplies UAS, tactical missile systems and related services primarily to organizations within the United States Department of Defense. The company also supplies charging systems and services for electric vehicles, and power cycling and test systems to commercial, consumer and government customers. It serves the U.S. Department of Defense, including the U.S. Army, Marine Corps, Special Operations Command, Air Force, and Navy.
AVAV has topped the Zacks Consensus Estimate in three of the last four quarters. The most recent report was a miss, and a big one. The company reported a loss of a penny when the Zacks Consensus Estimate was calling for a gain of 17 cents. This translated into a negative earnings surprise of -105%.
Prior to that report, the company had topped the Zacks Consensus Estimate in the three previous quarters. Those beats were all pretty substantial so the average positive earnings surprise over the last four quarters is +5.7%
AVAV has seen estimates moving higher. The Zacks Consensus Estimate for 2020 has moved from $1.63 to $1.77 in the span of about 4 weeks.
Over that same time horizon, the Zacks Consensus Estimate for 2021 moved from $1.83 to $1.94.
When earnings estimates move higher, the Zacks Rank tends to follow suit.
Another Drone Name For Your Radar Screen
I am always on the hunt for small growth names that show great potential. In the drone space I have found one in DraganFly - which is very small but shows great promise.
The company recently did a deal with AVAV and for those that are looking for lower price points for exposure to the drone space, this name is certainly worth a deeper look.
You can learn more about that company on its website (https://draganfly.com/) -- the company will get a Zacks Rank when there is research on the firm.
At 30x forward earnings, AVAV is somewhat richly valued. At the same time a 2.6x price to book isn't that bad and there could still be room for growth in terms of the price to sale multiple of 4x.
Margins have been slipping of late and if that continues, earnings estimates could be challenged. Look for AVAV to get back on track soon as the virus outbreak is more of an opportunity than anything else for the entire drone space.
Bear of the Day:
Bright Horizons Family Solutions has slipped to a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day today. As much as this is the Bear, it is also a chance to look at a stock that has been thrashed due to the outbreak. Most of us believe that the virus will be defeated and things will get back to normal so looking at a name like this is good exercise.
Bright Horizons Family Solutions Inc. is engaged in providing employer-sponsored child care, early education and work/life solutions. Its employer-sponsored child care programs include child care and early education centers, infant/toddler/preschool care and education, full and part-time child care, kindergarten, school-age programs, summer camps and back-up care.
Bright Horizons manages child care centers for corporations, hospitals, universities and government agencies The Company operates primarily in North America, Europe and India. Bright Horizons Family Solutions Inc. is based in Watertown, Massachusetts.
I see a good earnings history here with 3 of the last 4 quarters coming in ahead of the Zacks Consensus Estimate. The lone miss was two quarters ago and it was a miss of only a penny.
For the most part, this stock has a very good earnings history.
The main reason a stock has its Zacks Rank move is due to earnings estimate revisions. In the case of BFAM, the estimates are moving the wrong way.
The full year 2020 estimate has moved from $4.15 to $3.22 over the last seven days. Estimates tend to lag movements in the stock price.
The 2021 numbers also took a hit, but not nearly as big. The 2021 Zacks Consensus Estiamte moved from $4.70 to $4.52.
Those negative revisions helped push the Zacks Rank down to the lowest level.
At 24x forward earnings, BFAM isn't cheap even as the stock looks to be cut in half. Last quarter we saw growth of about 9%, but the outbreak is likely to cause some ugly growth numbers in the next two earnings reports. I see a price to book of 5x which is pretty rich given any market environment... and a price to sale of 2.4x which is also somewhat high.
Margins are holding steady over the last 3 quarters with the operating marking in the 9's and the net margin in the high 8's -- but improvement is need to justify the big multiplies on this stock.
AWS to Invest $20M for Faster Coronavirus Testing
Amazon’s cloud unit Amazon Web Services (AWS) has come up with a new program to help the society to better combat the coronavirus pandemic.
AWS is investing $20 million to speed up the development of faster COVID-19 testing. Notably, AWS has announced a new program named AWS Diagnostic Development Initiative.
This program is aimed at accelerating diagnostic research and development in a bid to speed up the detection of COVID-19. The speedy and accurate detection of this virus will likely result in accelerated treatments and shorten the course of this epidemic.
The program will be available to all private entities and accredited research institutions that are using the AWS platform to bring in better and more accurate diagnostic solutions to the market. In addition, it plans to promote more effective collaboration between organizations working on the treatment of other infectious diseases.
Amazon strives to manage this pandemic situation with this new program by accelerating the testing process.
With the latest effort, the company is aiming to reduce the risk of further spreading the virus, which has become the need of the hour. We believe the new AWS initiative is a major positive in this coronavirus-induced global crisis. This is likely to instill investor optimism in the stock.
Amazon’s Continuous Efforts
The e-commerce giant’s strengthening initiatives to combat COVID-19 are noteworthy.
Early this month, the company’s virtual medical clinic for employees, Amazon Care was in talks with local public health organizations to provide kits to residents of Seattle who suspect they may have COVID-19. The test kits include nose swabs that can be mailed to the University of Washington for analysis.
This apart, the company made great efforts on the retail front to combat this contagious virus. It stated that Whole Foods stores will dedicate an entire hour to serve only senior citizens in an attempt to keep them safe from crowd, as they are more susceptible to COVID-19 infection.
In addition to this move, the company has recently taken an initiative to bolster its Same-Day Delivery program by making same-day delivery service available in the cities of Philadelphia, Phoenix, Orlando and Dallas for Prime members.
Further, the company has built mini-fulfillment centers that are first-of-their-kind buildings. Notably, the new facilities are located closer to customers, in turn helping Amazon to reduce the number of hours taken to deliver orders via same-day delivery services.
Additionally, Whole Foods stores are closing two hours early in order to sanitize the stores and restock the shelves. Further, the company will continue to deliver Prime orders from these stores during these two hours.
Also, the company’s delivery drivers have been asked to sanitize the delivery vans every day before going out for delivery.
The coronavirus pandemic has engulfed the entire world, putting countries under lockdown and claiming more than 10,000 lives globally. The virus has spread far and wide, and crippled the global economy.
Therefore, any investment such as the one made by AWS would provide a much-needed relief and help slow down the spread of the pandemic on the economy.
Moreover, the latest step by AWS will drive the company’s performance and instill investor optimism in this challenging situation.
Zacks Rank & Stocks to Consider
Currently, Amazon carries a Zacks Rank #2 (Buy). Some better-ranked stocks in the broader technology sector include eBay Inc. and Atlassian Corp. While Stamps.com and eBay sport a Zacks Rank #1 (Strong Buy), Atlassian carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth for Stamps.com, Atlassian Corp. and eBay is currently projected at 15%, 22.3% and 11.25%, respectively.
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