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CME, TiVo, Texas Instruments, STMicroelectronics and Marvell Technology as Zacks Bull and Bear of the Day

Zacks Equity Research
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For Immediate Release

Chicago, IL – January 10, 2018 – Zacks Equity Research highlights CME Group Inc. CME as the Bull of the Day and TiVo Corporation TIVO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Texas Instruments TXN, STMicroelectronics N.V. STM and Marvell Technology MRVL.

Here is a synopsis of all five stocks:

Bull of the Day:

With a strong global economy and a rising rate environment domestically, now is a great time to be investing in U.S. exchanges. We are seeing strength in a number of these companies, but one stock that sticks out right now is CME Group Inc., operator of the world’s largest futures exchange.

CME Group as it is today was formed through the merger of the Chicago Mercantile Exchange and the Chicago Board of Trade in 2017. The company also operates the New York Mercantile Exchange, the New York Commodity Exchange, and the Kansas City Board of Trade. CME handles about 3 billion contracts worth approximately $1 quadrillion, annually.

Shares of CME have moved about 9% higher over the past 12 weeks. Meanwhile, earnings estimates for the company’s upcoming fiscal year have been on the rise, underscoring optimism over rising interest rates. CME Group is currently sporting a Zacks Rank #2 (Buy).

Latest Earnings Results and Outlook

CME Group most recently reported earnings on October 26. The company posted third-quarter profits of $1.19 per share, beating the Zacks Consensus Estimate by three cents and improving by over 13% year-over-year. Revenues of $891 million edged out the Zacks Consensus Estimate of $890 million and grew 6% from the year-ago period.

CME noted that its strong results were primarily driven by higher trading volumes. Specifically, its options business remained solid in the quarter. Average daily volume rose 10% year-over-year, with growth recorded in five out of six product lines.

Bear of the Day:

It is always difficult to watch our old favorites slowly fade away. I, for one, am guilty of clinging to my haggard “lucky” shirts for far too long. Similar things happen in the technology world, and unfortunately for this once-revolutionary brand, TiVo Corporation looks to be on the fritz.

TiVo Corporation provides digital home entertainment services and solutions. The company offers services which allow viewers to record and control live television, customize viewing preferences, and access television shows.

You likely remember the “TiVo” name as being one of the first in-home, digital DVR systems. The brand was acquired by Rovi Corporation in 2016, and Rovi subsequently adopted the iconic name. The original product helped usher in a new generation for TV consumption, but now the company simply cannot compete with cable companies that are simply doing it all by themselves.

The stock has been on a steady decline since missing earnings estimates in November, and it is currently sporting a Zacks Rank #5 (Strong Sell).

Latest Earnings and Outlook

TiVo most recently reported earnings on November 2. The company reported a GAAP loss of 14 cents per share, down significantly from a profit of 59 cents per share recorded in the year-ago period. Revenues were up about 29% year-over-year, as the acquisition lifted year-over-year comparisons, but the company’s outlook remains questionable.

For one, an ongoing legal dispute with Comcast (CMCSA) could put a damper on TiVo’s 2018. In November, U.S. regulators ruled in favor of TiVo’s claim that Comcast’s X1 set-top boxes violated one of its patents, but Comcast has decided to fight this ruling. On top of that, Comcast may not renew its licensing agreement with TiVo this coming July.

Meanwhile, intense competition continues to threaten TiVo. The company faces increasing competition from cable and satellite providers, who offer bundled up DVR service with digital cable in one set-top box at comparable monthly subscription rates and without any upfront costs. TiVo is also challenged by the growth of Chromecast, Roku, and Apple TV.

In response to this competition, TiVo has increased research and development costs in order to find new innovations. But as we know, this could have a significant impact on profitability. Plus, the company relies on sole suppliers for many of its hardware offerings, which creates a lingering supply chain vulnerability concern.

Shares of TiVo have plummeted over 28% over the past year, including a 6% slump within the last four weeks. The Zacks Consensus Estimate for the company’s upcoming fiscal year has lost 12 cents within the last 60 days.

The stock is trading at just 7x forward earnings, but true value stocks are not ones with deteriorating estimate trends. There’s a reason that TiVo has lost so much value recently, and that reason is its crippled business model.

Additional content:

3 "Internet of Things" Stocks to Buy for 2018

One of the strongest corners of the market in 2017 was the semiconductor industry, and we expect that trend to continue into the New Year. Throughout the chip-making space, companies have successfully adapted to the changing needs of the consumer, including an increased demand for small, high-powered chips that enable “Internet of Things” (IoT) devices.

For those that don’t know, the Internet of Things is the growing world of interconnected household and industrial devices. Everyday products and machines can now be embedded with sensor technology to process data or interact with other electronic devices.

For example, consumer-level IoT products include things like Amazon’s Echo “smart speaker,” wearable motion and activity tracking products, and advanced in-car technology. On the commercial side of the IoT market, industrial manufacturers have begun implementing sensors into machines to track performance and efficiency.

(Also Read: How to Invest in the "Internet of Things")

As demand for the microchips that power these IoT devices continues to grow, semiconductor manufacturers with a focus on IoT products will continue to benefit. And 2018 promises to be another marquee year for these suppliers, with the number of connected devices worldwide set to continue its rapid growth.

With that said, we’ve found three already-strong stocks that are looking to benefit even more from further IoT growth in 2018:

1.       Texas Instruments

Although you might recognize the brand because of its calculators, Texas Instruments is actually one of the leading suppliers of advanced semiconductors in the world. The company’s IoT profile falls under its Embedded Processors division, which includes the Connectivity, Microcontrollers, and Processors categories.

In its most recent earnings report, Texas Instruments saw growth of 17% in its Embedded Processors unit, while segment operating profit climbed 45%—and that’s not to mention that TXN once again surpassed our consensus estimates for earnings and revenue. Texas Instruments is currently a Zacks Rank #2 (Buy), putting it near the top of the “Semiconductor – General” group, which is currently in the top 6% of the Zacks Industry Rank.

2.       STMicroelectronics N.V.

STMicroelectronics is a French-Italian semiconductors company that develops circuits and discrete devices for use in microelectronic devices. The company specifically tailors its tiny, low-power technology for use in a wide range of Internet of Things products. The stock is currently sporting a Zacks Rank #1 (Strong Buy).

The story for STM is aggressive earnings growth. Our consensus estimates call for earnings to expand by 38% in fiscal 2018, and that’s on top of a staggering 217% projected explosion in 2017. Revenues are growing too, as the firm’s top line is expected to swell by more than 10% this year. Meanwhile, the stock is trading at just 19x forward earnings and 2.75x sales, so investors are getting a decent price for those profits and revenues right now.

3.       Marvell Technology

Marvell Technology is a leading designer, developer and supplier of mixed-signal and digital signal processing integrated circuits. The company’s “EZ-Connect” platform is used by a variety of global customers in the home automation, wearables, automotive, and industrial industries. MRVL is currently a Zacks Rank #2 (Buy).

Marvell is an exciting growth pick, as the firm is expected to expand its EPS figures at an annualized rate of 16% over the next three to five years. The stock also has a PEG ratio of just 1.39, which means that this earnings growth could be undervalued. Marvell also operates with a better-than-industry-average net margin of 16.5% and RoE of 12%, so investors can trust that the firm operates efficiently and delivers value to shareholders.

Bottom Line

The Internet of Things is one of the most exciting emerging tech markets in the world.  And while these specific products are interesting, the real moneymakers in these situations are the companies that are building the tech that powers these products. The Internet of Things needs semiconductors to function, and as the IoT grows, so too will semiconductor companies.

The best way for investors to cash in on this growing trend is to identify semiconductor companies that are not only investing in the Internet of Things, but are also displaying solid fundamentals and impressive Zacks metrics.

Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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Marvell Technology Group Ltd. (MRVL) : Free Stock Analysis Report
 
TiVo Corporation (TIVO) : Free Stock Analysis Report
 
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CME Group Inc. (CME) : Free Stock Analysis Report
 
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