For Immediate Release
Chicago, IL – May 14, 2019 – Zacks Equity Research Anadarko Petroleum Corporation APC as the Bull of the Day, JC Penney JCP as the Bear of the Day. In addition, Zacks Equity Research provides analysis on ServiceNow NOW, Microsoft MSFT and Veeva Systems Inc. VEEV.
Here is a synopsis of all five stocks:
Bull of the Day:
he bidding war for Anadarko Petroleum Corporation is ostensibly over with Chevron unable/unwilling to match Occidental’s $38 billion bid. Chevron walks away with a $1 billion breakup fee, which it will use to buy back stock, and Occidental walks away with Anadarko. Occidental will be acquiring APC for $59 in cash and 0.2934 a share, adding up to $74.89 a share as of close yesterday. This will represent a 2.9% premium for APC’s current shareholders if this deal goes through as planned. APC closed yesterday at $72.79.
Occidental is funding this deal with the help of Warren Buffett and his holding company Berkshire Hathaway as well as a little help from TOTAL. Berkshire Hathaway committed to buying $10 billion in preferred stock to support the Anadarko acquisition. Total SA agreed to purchase Anadarko’s African assets for $8.8 billion which is primarily made up of liquefied natural gas. Both these deals are the contingent factors of Occidental’s acquisition of Anadarko and create some risk if one of them were to fall through.
APC has fallen 4.15% since they agreed to go with Occidental’s offer. Shareholders were hoping for a bidding war between OXY and CVX to raise the price even further. Now APC’s stock price is going to be completely correlated with both the perceived risk of the deal and OXY’s stock price. Every $3.41 change in OXY’s stock price (6% change) will have a $1 effect on APC’s shareholder compensation (1.4%) when the deal does go through.
Many of Occidental’s current stockholders are concerned that they are paying too much for Anadarko, but since the firm is issuing less than 20% of its total equity for this acquisition, it doesn’t require stockholder approval.
Occidental is paying a 19% premium for Anadarko but the synergies in the Permian Basin will make it worth it. Currently, Occidental’s Delaware Basin (part of the Permian) wells perform 74% better than Anadarko’s and spending less on each well. Occidental’s operations are superior to Anadarko’s and will increase their productivity significantly once the deal goes through.
I am confident that this deal will go through with funding secured from Berkshire Hathaway and Total SA’s lucrative deal. The question is when this deal will go through. I might wait to see this stock track down with the rest of the market on trade concerns and buy it at a more equitable price. Beware if this deal does not go through APC will plummet. None the less, I believe this short-term investment has a very high chance of success. APC – Zacks Rank #1 (Strong Buy).
Bear of the Day:
The retail industry has been struggling with brick-and-mortar stores closing at record rates. So far in 2019, roughly 6,000 stores have announced closures with only 2,641 new stores opening (3,353 net closures). This store closure figure is expected to double by the end of the year, according to Coresight Research.
JC Penney is no exception to this story. Over the past 5 years this firm has closed down about 19% of its stores. Sales are falling and profits along with it. This firm doesn’t look like it’s going to be able to keep its head above water for much longer unless some significant changes are made.
This company looks to be headed for bankruptcy with its cash reserves dwindling down to nothing and free-cash-flow not able to stay positive. Over just the last 52-weeks this stock is down 57%. JCP has missed revenue estimates on 5 out of the last 6 earnings reports. They just can’t seem to compete with the big online shopping powerhouses.
Analyst continue to lower estimates for JCP over the next couple of years. They are expected to post losses for the next two years. I have very little hope that this firm will last much longer.
This is a toxic stock that shouldn’t be in anyone’s portfolio. A once profitable growing retail chain is now a money pit of despair. With analysts continuous downward revisions, this stock is pushed to a Zacks Rank #5 (Strong Sell).
3 Cloud Stocks to Buy Right Now
“The Cloud” has evolved from a budding innovation in tech into one of the largest factors driving growth in the technology sector in only a few years. Today, cloud computing is an integral part of software-related firms, which in turn has seen investors search for cloud-focused tech stocks.
In our increasingly mobile world, cloud computing has dramatically reshaped the way companies conduct business. The technology allows firms big and small, as well as individuals, to access all their vital information nearly anywhere. Cloud computing like the smartphone, is hardly a fad, and it seems nearly impossible to think that people will reverse course—unless the cybersecurity concerns become too high.
Think how much market share Amazon’s AWS cloud business was able to gain based on its significant head start into the now booming market over rivals and fellow giants Microsoft, IBM and Google. With this in mind, we have highlighted three stocks that are not only showing strong cloud-related activity but also some strong fundamentals.
Check out these three Zacks buy-ranked cloud stocks to consider right now.
ServiceNow offers its clients the chance to digitize and automate some of their business and operations, which is a market that looks poised to grow quickly. The Santa Clara, California-based company’s cloud platform and solutions help with everything from IT to employee and customer workflows. Fortune ranked ServiceNow No. 3 on its “Future 50” list of global companies “with the best prospects for long-term growth” last year, behind only Weibo and Workday and ahead of giants such as Salesforce and Netflix.
Meanwhile, the firm which was also Forbes’ No. 1 World’s Most Innovative Company in 2018, is coming off a better-than-expected Q1 and just announced that it is set to acquire Israel-based application analytics platform firm Appsee’s in-app mobile analytics platform and R&D talent. Shares of NOW have soared nearly 50% in 2019 and are up roughly 275% in the last three years to help crush its industry’s 55% average climb. Looking ahead, our Zacks Consensus Estimates call for the firm’s current full-year adjusted earnings to jump 28.5% on the back of 32% revenue growth. ServiceNow is then projected to see its EPS figure come in 34% higher than our 2019 estimate next year, with revenue expected to soar 28% from a projected $3.44 billion to $4.41 billion in 2020. ServiceNow is currently a Zacks Rank #2 (Buy) that sports a “B” grade for Growth in our Style Scores system.
Microsoft topped both earnings and revenue estimates on April 24. Much of the focus once again fell on its Intelligent Cloud business, which saw its revenue jump 22%. More specifically, Microsoft’s key Azure division sales skyrocketed 73%. Microsoft’s expansion into new growth areas, such as cloud and IoT, along with the continued strength of its core businesses, is expected to help MSFT post 13.1% revenue growth in fiscal 2019. On top of that, our Zacks Consensus Estimate calls for the company’s fiscal 2020 revenues to jump 10.6% above our current-year estimate to reach $138.09 billion.
At the bottom end of the income statement, MSFT’s full-year earnings are projected to surge 18%, with 2020’s EPS figure expected to jump 11.4% higher than our 2019 estimate. Microsoft has also seen a ton of positive longer-term earnings estimate revision activity since it posted its Q3 2019 results, which helps it earn a Zack Rank #2 (Buy). Moreover, MSFT is a dividend payer that has paid out a $0.46 per share quarterly dividend throughout its fiscal 2019, up 9.5% from the prior year’s quarterly payout. Meanwhile, the company’s dividend yield rests at 1.45%, with Microsoft shares up 22% in 2019 and 81% over the last two years.
3. Veeva Systems Inc.
Veeva makes cloud-based solutions for the pharmaceutical and life sciences industries. Its main offerings are presented in a software-as-a-service model and deliver industry-specific tools for customer relationship management, content management, and many other enterprise applications. Shares of VEEV have skyrocketed 78% over the last 12 months and 53% in 2019, to help the company hit multiple new highs along the way.
Peeking ahead, our current Zacks Consensus Estimate calls for the company’s first quarter fiscal 2020 revenue—which is due on May 29—to jump over 22% to reach $238.7 million. Meanwhile, Veeva’s full-year revenue is expected to surge nearly 20% to reach $1.03 billion. At the bottom end of the income statement, the company’s adjusted Q1 earnings are projected to pop 36.4%. Furthermore, Veeva’s positive, short-term and longer-term earnings estimate revision activity helps it earn a Zacks Rank #2 (Buy) at the moment. VEEV also rocks a “B” grade for growth in our Style Scores system.
Zacks' Top 10 Stocks for 2019
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