For Immediate Release
Chicago, IL – April 8, 2019 – Zacks Equity Research Avid Technology, Inc. AVID as the Bull of the Day, GameStop Corp. GME asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Delta Air Lines DAL, SkyWest SKYW and Atlas Air Worldwide AAWW.
Here is a synopsis of all five stocks:
Bull of the Day:
Based in Burlington, MA, Avid Technology, Inc. develops, markets, sells and supports a wide range of software and systems for creating and manipulating digital media content. This content includes video or audio or graphics, in which the image, sound or picture is recorded and stored as digital values, as opposed to analog signals.
Avid’s systems are designed to improve the productivity of video and film editors by enabling them to edit moving pictures and sound in a faster, easier, and more cost-effective manner than traditional analog tape-based systems.
Q4 Earnings Show Strong Growth
Non-GAAP earnings of 29 cents per share easily beat the Zacks Consensus Estimate of 15 cents per share. GAAP earnings came in at 14 cents compared to a net loss of 2 cents per share in the year ago quarter.
Adjusted EBITDA was $21.3 million, while free cash flow was $17.7 million for the quarter.
Revenues in Q4 grew 5% to $112.7 million, and software revenue from subscriptions soared 77%. E-commerce sales increased a healthy 50% year-over-year.
Non-GAAP gross margin expanded by almost 5 full percentage points to 60.8%.
In the earnings release, CEO Jeff Rosica said that "Our return to revenue growth and the improvement in our key financial metrics, including Free Cash Flow and Adjusted EBITDA, demonstrate an improving business profile for [Avid]. Additionally, the management team is focused on continuing to build upon a scalable recurring revenue model as evidenced by our double-digit growth in subscriptions and e-commerce revenue.”
Year-to-date, shares of AVID are up almost 76% compared to the S&P 500’s return of over 16%.
Along with strong Q4 results, Avid Technology reaffirmed its guidance for 2019.
For Q1, revenue is expected to fall in the range of $96 million to $104 million, with adjusted EBITDA between $7 million and $12 million. For fiscal 2019, we can expect revenues to be between $420 million to $430 million; adjusted EBITDA is forecasted in the range of $60 million to $65 million and free cash flow of $12 million to $17 million.
Estimates, thus, have been rising lately too, pushing the stock towards a Zacks Rank #1 (Strong Buy).
For the current fiscal year, the company’s earnings are expected to grow a whopping 148.15% year-over-year. One analyst has revised their estimate upwards in the past 60 days, and the Zacks Consensus Estimate sits at $0.67 cents for the year.
2020 looks pretty strong too, and earnings are expected to grow almost 39%; next year’s consensus estimate has moved six cents higher from $0.86 to $0.93, with one upward revision in the last 60 days.
Thanks to an expansive platform of digital platforms, tools, and solutions, the future is looking bright for Avid Technology. If you’re an investor looking for a tech stock to add to your portfolio, make sure to keep AVID on your shortlist.
Bear of the Day:
GameStop Corp. is the world’s largest video game and entertainment software retailer. The company operates more than 5,800 stores across the U.S. and in fourteen countries worldwide. GameStop also sells new and used video game software, hardware and accessories for next generation video game systems from Sony, Nintendo and Microsoft. Additionally, the company sells PC entertainment software, related accessories and other merchandise.
Holiday Quarter Results Were Rough
Adjusted earnings of $1.45 per share missed the Zacks Consensus Estimate of $1.59 per share, mostly due to an asset impairment charge and other one-time items totaling $334.5 million.
Revenues of $3.06 billion also missed our consensus estimate and plunged 7.6% year-over-year, but comparable sales managed to pick up 1.4% thanks to two things: the timing of Call of Duty and a calendar shift.
Despite that comps growth, sales in the majority of GME’s business segment’s declined. New software sales fell 7.8%, new hardware sales dropped 9.8%, and pre-owned sales plunged 21.3% year-over-year.
On top of these weak results was a weak outlook for GameStop’s fiscal 2019.
Comparable store sales are now expected to decline by 5% to 10%, and total sales are projected to decrease by the same percentage. GameStop did not give any earnings guidance, due to planned cost savings and a new CEO hire.
Analysts have since turned bearish on GameStop, with four cutting estimates in the last 60 days for the current fiscal year. Earnings are expected to decline roughly 27.5% for the year, and the Zacks Consensus Estimate has dropped 73 cents during that same time period from $2.28 to $1.55 per share.
This sentiment has stretched into 2021. Earnings could decline almost 12%, but our consensus estimate has dropped significantly in the past two months.
GME is now a Zacks Rank #5 (Strong Sell).
Shares of the video game retailer have fallen 19% since January. In comparison, the S&P 500 is up over 16% year-to-date.
GameStop does plan to improve its annualized operating profit—hopefully by $100 million—as part of a new cost savings initiative. The company will focus on supply chain, operations, expense, and pricing efficiency.
But, things aren’t looking too bright for GME right now, as the cost cutting plan won’t likely benefit the retailer in 2019.
Airline Stocks Rally Could Help These 3 Stocks Fly Higher
The U.S. airline industry has officially shaken off its first-quarter blues on the back of Delta Air Lines’ improved profit outlook and extended credit-card partnership with American Express, Airlines for America’s encouraging spring forecast, beneficial policies and the U.S. economy’s overall good shape.
Airline Equities Climb Higher
This week’s rally in airline stocks came as a huge relief to investors, thanks to the jump in Delta shares. On Apr 2, Delta said that it is expecting higher-than-expected Q1 results. The company cited healthy demand and record performance for its raised earnings and revenue guidance. Delta also announced that it has extended its attractive credit-card partnership with American Express through 2029.
The airline told investors that it is expecting to earn 85-95 cents per share during Q1, up from its earlier estimate of 70-90 cents, on an adjusted basis. Delta’s shares have jumped 3% since the announcement.
However, Delta’s upbeat profit outlook for Q1 is merely one of the many factors driving airline stocks at present. Bullish forecast by Airlines for America (A4A) in the last week of March indicated a significant jump in airline operations through Mar 1- Apr 30, which is the spring travel season.
According to A4A, the industry trade organization for leading U.S. airlines, American airlines can expect an all-time high of 158.2 million passengers to fly worldwide during the mentioned period, marking a 4.3% jump from the same period last year. This demand has led to domestic airlines adding 129,000 additional seats per day to accommodate the higher passenger inflow.
U.S. consumers’ satisfying flight experiences and better financial well-being are increasing demand for air travel (according to the University of Michigan, U.S. consumer sentiment climbed in Marchto 98.4 from February’s 93.8) Secondly, applications for unemployment benefits declined to a 49-year low in the last week of March, indicative of the prolonged strength in the U.S. labor market. Unemployment rate remained at 3.8.
Friendly Fiscal and Monetary Policies
Current fiscal and monetary policies are extensively helping the airline industry. Be it President Donald Trump’s tax law, which took effect in late 2017, or Federal Reserve’s decision to keep interest rate hikes at bay, airlines are greatly benefiting.
Lower corporate tax cuts are definitely upping the bottom line of airlines and resulting in increased cash flows and higher savings. This means that airlines have more capital to spend on improving their infrastructure, add new facilities and engage in acquisitions.
Frozen interest rates are helpful as well, since it makes it easier for carriers to take loans for infrastructure-related investments, which can be quite huge.
Investing in Airlines is Lucrative Right Now: 3 Choices
Given the aforesaid positives, investing in airline stocks seems prudent. In fact, the NYSE ARCA AIRLINE INDEX (XAL) has gained 1.9% since Apr 2, with many prominent airlines such as United Continental, American Airlines and Spirit, SkyWest and Atlas Air Worldwide registering a jump in price performance.
We have chosen three airline stocks that you could consider adding to your portfolio.
Delta Air Lines, Inc. is a provider of scheduled air transportation for passengers and cargo in the United States and globally.
Delta Air Lines has a Zacks Rank #2 (Buy) and its expected earnings growth rate for the current year is 15.6% compared with the Zacks Transportation – Airline industry’s projected rise of 13.7%. Its Zacks Consensus Estimate for current-year earnings has risen 0.5% in the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
SkyWest, Inc. operates as a regional airline in America and offers scheduled air transportation for passengers and air freight services.
SkyWest has a Zacks Rank #1 (Strong Buy) and its expected earnings growth rate for the current year is 9.1%. Its Zacks Consensus Estimate for current-year earnings has risen 3.2% in the past 60 days.
Atlas Air Worldwide Holdings, Inc. is a provider of outsourced aircraft and aviation operating services.
Atlas Air Worldwide has a Zacks Rank #2 and its expected earnings growth rate for the current year is 3.7%. Its Zacks Consensus Estimate for current-year earnings has risen 4.7% in the past 60 days.
Zacks' Top 10 Stocks for 2019
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SkyWest, Inc. (SKYW) : Free Stock Analysis Report
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