Calix, Lyft, Crocs, Tempur Sealy and Brown & Brown highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – November 13, 2020 – Zacks Equity Research Shares of Calix, Inc. CALX as the Bull of the Day, Lyft, Inc. LYFT as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Crocs, Inc. CROX, Tempur Sealy International, Inc. TPX and Brown & Brown, Inc. BRO.
Here is a synopsis of all four stocks:
Bull of the Day:
The world is more digitally connected today than ever before, with the global pandemic putting the world online. The economic shift from the office to home is one that will outlive COVID lockdowns, as a hybrid work structure becomes ubiquitous in post-COVID's 'new normal.'
Our increasingly mobile society is driving our transition to a cloud-based economy. Calix is poised to soar from the mobile economic shift, and the 5G revolution is adding fuel to the fire.
This under-the-radar stock is already up over 200% for the year, but analysts across the board still have high hopes for CALX's further appreciation. These shares are currently trading below the most conservative price targets and have over 20% to go before hitting the average target price. Analysts are increasingly optimistic about Calix's future, raising their EPS estimates and propelling its shares into a Zacks Rank #1 (Strong Buy).
The Business
Calix's mission is to connect everyone and everything.
Calix is an innovative cloud-driven enterprise that provides the leading "platforms, systems, and services required to deliver the unified access network and smart premises of tomorrow." The company helps facilitate smooth network functionality in increasingly complex infrastructures
Communication infrastructures are being forced to handle increased demand from a progressively mobile population. Calix products are becoming essential as the 4th industrial revolution and the Roaring 20s kick-off.
Calix has a broad range of access service solution platforms and is the #1 telecommunications vendor focused exclusively on the access space. Its Unified Access portfolio allows its customers to seamlessly connect their subscribers over any network infrastructure.
The enterprise's essential network software is trusted by service providers of every size and type, spanning across 85 countries. Verizon, one of the world's largest communication technology enterprises, depends on Calix's innovative technology for effective service deployment.
Verizon's VP of technology, Lee Hicks, said, "Innovative partners like Calix are enabling us to leapfrog the competition and consolidate multiple network elements into one platform and automate many of our most critical network functions."
Calix has a massive and growing total addressable market (TAM), with any entity providing communication services to a subscriber being apart of its scope. The 5G revolution will provide Calix with an enormous tailwind as the number of internet of thing (IoT) devices, autonomous vehicles, and mobile devices proliferate across the globe.
Financials
2020 has been a banner year for Calix as its value soared from a nearly micro-cap stock (<$300M) in mid-March to a mid-cap stock ($1-10B) with large-cap (>$10B) aspirations today.
Internet service providers worldwide are turning to Calix's innovative solution software to manage their subscriber access. Demand is evident in its income statements, which have illustrated accelerating year-over-year sales growth for 5 consecutive quarters.
Calix released its Q3 earnings last month and blew the Street's expectations out of the water. On top of the incredible quarterly results, the management provided a much healthier outlook than analysts initially estimated. The base bar for Calix has been raised, and analysts are finally taking notice while investors are acting on the opportunity.
The need for mobile connectivity has driven Calix's bottom-line into robust profitability. This enterprise is on its way to notching 2020 as its first profitable year as a public company.
Calix has more than $100 million in cash & equivalents on the balance sheet with swelling cash-flows, which give the business financial flexibility for organic innovation and synergy driving external acquisition.
Despite CALX's massive 2020 rally, the stock still trades at a reasonable price-to-forward sales (P/S) ratio of 2.6x. This nearly halves the broader telecom equipment market's average P/S of 4.6x.
Final Thoughts
We are living in a world driven by digital connectivity. The necessity of accessing the internet anywhere has never been greater. Calix is working to help facilitate the connected mobility of the 'new normal.'
Calix is a market leader in a niche but essential space with demand just beginning to accelerate as the 5G revolution commences.
The stock remains somewhat under the institutional radar, but 4 out of the 4 analysts I follow are calling CALX a buy today.
Bear of the Day:
Since November began, the ridesharing duopoly has been on a sugar rush with 2 momentum driving events triggering a massive rally in the space. Lyft and Uber have been met with enthusiastic traders & investors soaring 62% and 37% since last Monday, respectively.
It started with a big election win, as California's Prop 22 passes with ease. Then Pfizer announced a 'successful' COVID-19 trial, which put a light at the end of the tunnel for this devastating pandemic.
There is no question that ridesharing stocks are an excellent recovery play, but which enterprise do you want in your long-term portfolio?
I am choosing UBER over LYFT for a long-term investment all day. Uber's Eats business has kept the brand name relevant in consumers' minds throughout the pandemic, while Lyft stayed in the shadows amid the lockdowns. Analysts have been increasingly pessimistic about Lyft's future earnings, pushing this stock into a Zacks Rank #5 (Strong Sell).
Let me be clear, I wouldn't short LYFT, and honestly, I think this stock could have some more room to run once a vaccine is deployable. Still, I am choosing Uber over Lyft in the ridesharing spread.
UBER Over LYFT
My pick is UBER because of its leading positioning in ridesharing and a firm #2 spot in the accelerating delivery space. The business has been able to turn and maintain an operational profit in its rides segment. It also has a seemingly endless stream of capital to continue investing heavily in autonomous vehicles, the future of ridesharing.
'Uber's little brother', Lyft, has not fared nearly as well as its more diversified competitor. Without a food delivery segment to hedge the business, it has hemorrhaged $100s of millions in 2020 with no market share gains to show. LYFT remains down 16% for the year, while its cohort UBER is up 50%.
Before the pandemic, I thought Lyft's pure-play ridesharing strategy was its advantage, as it would be hitting profitability before the diverse Uber enterprise, but it has been the company's downfall this year.
Lyft's management came out in its earnings report this week and said that they expect to reach a positive EBITDA by the 4th quarter of 2021, and analysts are pricing in full-year profitability by 2022.
My concern with this business's future is its lack of use during the pandemic that may cause its pre-COVID customers to choose Uber in the post-pandemic world. The Uber app has stayed at the forefront of consumers' minds during the lockdowns because of its Eats segment. I believe that this could have a psychological impact on consumers' subconscious ridesharing decisions moving forward, giving Uber a leg up in market share in the 'new normal.'
LYFT shares are hot right now, but they have a tough road ahead. Its pure-play approach appears to be one of its downfalls. Lyft's management discussed the possibility of entering the food delivery segment, but I think they are a little late to the already overcrowded party.
Final Thoughts
As I said, I am not advocating any action on LYFT shares as I think they may have some short-term potential as vaccine news continues to flow, but as a long-term ridesharing play, I would prefer to hold Uber, the pioneer, and leader of the space.
Additional content:
3 Sales and Earnings Growth Winners
Here’s a great screen to run during a solid earnings season like we’re having right now. And it doesn’t hurt that we’re in the midst of an epic rally where the Dow has surged thousands of points in a few days in hopes of a coronavirus vaccine.
We’re talking about the Sales & Earnings Growth Winners screen. Of course, it starts with Zacks Rank #1s (Strong Buys) and Zacks Rank #2s (Buys), but seeks out companies with a Zacks Style Score of A or B for growth as well. It also looks for effective management through ROE and good liquidity through the current ratio.
The November rally has loaded this screen with several strong and stable growth stocks. Learn about three of them below:
Crocs
Even this pandemic can’t keep Crocs down, which shows the power of the brand and the customer satisfaction with their ugly yet surprisingly comfortable shoes.
Don’t call it a “pandemic stock” because CROX has been a solid company for years… long before the world changed. Let’s just say it’s performing better than most in an environment where people haven’t worn dress shoes in several months. Nobody cares what’s on your feet during a Zoom call.
The stock is up nearly 350% since the coronavirus low on March 23. More importantly though, CROX did something in its last report that most companies don’t feel comfortable doing right now: it offered some guidance for the future.
It expects revenue growth between 20% and 30% in the fourth quarter and 5% to 7% for full year 2020.
For the third quarter, earnings per share of 94 cents improved approximately 65% from last year and beat the Zacks Consensus Estimate by more than 38%. It has beaten our expectations in 10 of the last 11 reports.
That rare miss came in the first quarter, while the second-quarter beat was more than 700%. It appears the company has normalized a bit after some covid chaos.
Revenue of $361.7 million improved over 15% from last year while topping the Zacks Consensus Estimate by about 4.8%.
E-commerce improved 36.3% in the quarter, but this wasn’t a desperate re-focusing to stay afloat under unprecedented situations. The company has actually grown e-commerce by double digits for 14 consecutive quarters.
Over the past 60 days, earnings estimates for both this year and next have soared. The Zacks Consensus Estimate for 2020 is up just about 35% in that time to $2.63. As for next year, expectations have climbed 31.7% to $2.91.
Therefore, earnings estimates for next are expected to grow more than 10% from this year.
Tempur Sealy
Gone are the days when all a mattress involved were a few springs and some padding. These days, there’s as much innovation while you’re sleeping as there is when you’re awake. Mattresses can keep you cool, switch from supportive to soft, and even elevate your head to better read this exciting article.
In the future, you’ll probably be able to sync your mattress with the chip in your brain to ensure good dreams and a full eight hours of sleep!
But we’re not quite there yet.
Tempur Sealy might be working on it, because this company is a worldwide leader in mattresses, foundations, pillows and other products. It's known for its innovations in sleep with brands like Tempur-Pedic®, Sealy®, and Stearns & Foster®.
Shares of the stock are up approximately 150% from the coronavirus lows, as sleep is one of those pandemic-resistant things that you can’t do without. It’s right up there with food and Netflix. And if a new mattress is going to help refresh you during difficult times, then it’s a small price to pay.
Maybe that’s why TPX is “in the strongest financial position in its history”, according to the CEO. The company has beaten the Zacks Consensus Estimate for seven straight quarters now. Last time, it reported earnings per share of $2.94, which was more than 120% better than the previous year and above our expectations by nearly 35%.
Revenue of $1.13 billion improved almost 38% from last year and also topped the Zacks Consensus Estimate by more than 5%. North American sales were up 43.2%, while International sales improved 12.1%.
Earnings estimates are on the rise. In the past 60 days, the Zacks Consensus Estimate for this year are up 21.8% to $6.66. Next year has gained 14.3% in that time to $7.52, which also suggests year-over-year improvement of 12.9%.
Brown & Brown
Now it’s time to buckle up and get ready for the thrill ride that is the insurance industry!
All right, that may be a bit over-dramatic, but it’s not exactly false. Any investor should be “thrilled” with a stable company from a highly-ranked industry that boasts an impressive earnings history.
We’re talking about Brown & Brown, a leading insurance brokerage firm that provides risk management solutions to individuals and businesses. It’s four segments include Retail (51.8% of commission and fees in 2019); National Programs (24.6%); Wholesale Brokerage (14.2%); and Services (9.4%).
As part of the insurance – brokerage space, it’s in the top 25% of the Zacks Industry Rank. And shares are up almost 49% since the coronavirus low.
In its third quarter report from late last month, BRO reported earnings per share of 52 cents, which was 33% better than the previous year. The result also beat the Zacks Consensus Estimate by nearly 24%.
The past seven quarters included six beats and one match. The stock has an average surprise of almost 14% over the past reports.
Revenue of $674 million improved 8.9% year-over-year, while also topping our expectations by 4.8%. Improved organic growth and margin expansion were big factors in this growth.
The Zacks Consensus Estimate for this year advanced 5.8% over the past 30 days to $1.63. Expectations for next year are up 5.5% in that time to $1.71. Therefore, the market expects year-over-year improvement of just about 5%.
Also, BRO’s Board recently approved an 8.8% raise in the quarter dividend, which brings the payout to 9.25 cent per share. This marks the 27th straight year with a dividend hike.
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