For Immediate Release
Chicago, IL – March 27, 2020 – Zacks Equity Research Shares of Edwards Lifesciences EW as the Bull of the Day, The Trade Desk TTD asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Blue Apron Holdings, Inc. APRN, Domino's Pizza, Inc. DPZ and Grubhub Inc. GRUB.
Here is a synopsis of all five stocks:
Bull of the Day:
Edwards Lifesciences, the $40 billion global leader in structural heart disease innovations, is still a Zacks #2 Rank Strong Buy after reporting strong Q4 results and improved guidance for 2020 that prompted analysts to raise EPS estimates in February.
And this despite the impacts of COVID-19 on the global economy where many elective medical procedures are being deferred indefinitely until healthcare providers and facilities have more visibility about management of the pandemic disease.
Raymond James analysts issued a detailed research report this week addressing the challenges and opportunities for 20 different medical device and technology companies including Abbott Labs, Medtronic, Johnson & Johnson and Boston Scientific.
The analyst team looked at the percentage of revenues that might be impacted by an elective deferral and Edwards Lifesciences came out near to the top of the pack, with only 5% of procedures considered "elective, deferrable, or likely to be restricted."
This is further testament to the safety and efficacy of the Edwards TAVR (transcatheter aortic valve replacement) technology as a vital minimally-invasive solution for so many older patients with worn-out, defective or diseased heart valves who could never survive open-heart surgery.
Fourth Quarter Results, Outlook and Analyst Reaction
On January 30, EW delivered these Q4 and full-year FY19 highlights...
- Q4 sales grew 20% to $1.2 billion; underlying1 sales grew 19%
- Q4 TAVR sales grew 29%; underlying sales grew 30%
- Q4 EPS was $1.32; adjusted1 EPS grew 25% to $1.46
- Full year 2019 sales and earnings significantly exceeded original guidance
- 2020 guidance ranges increased: sales $4.6 billion to $5.0 billion; EPS $6.15 to $6.40
- SAPIEN 3 transcatheter heart valve received low risk indication expansion in Europe
Here's what I told my Healthcare Innovators group where we were buyers of the stock on the pullback after earnings...
EW reported earnings on Thursday and while missing on EPS, management also raised guidance for the year. Shares opened above $240 on the mixed-to-strong report, but then sold off all day with the broad market. Here was one of the more bullish views of the quarter and outlook...
Piper Sandler analyst Adam Maeder raised his price target for Edwards Lifesciences to $270 from $262 and reiterated an Overweight rating on the shares. The company reported Q4 results that beat consensus estimates on the top-line behind "robust" TAVR growth, but missed slightly on adjusted earnings due to one-time costs associated with changes to Cardioband manufacturing and accelerated spending to drive TAVR therapy awareness. The analyst sees room for potential upside to the company's 2020 guidance behind strength in TAVR.
In the Buy Alert on Monday (Jan 27), I told you that we could see a mixed reaction like this and therefore to only start a position under $230 before earnings, while preparing to add under $220. Now you have your chance to secure a full position.
5 other i-banks loved the quarter and outlook, including Jefferies, Stifel, Raymond James, Leerink and Oppenheimer. And all raised or maintained to an average PT of $270!
Therefore, you have the green light to buy EW under $220. Of course, you can wait and see if market volatility hands you a better bargain too.
(end of Healthcare Innovators commentary on Feb 2)
I should note that we've been trading EW for 3 years in Healthcare Innovators, initially buying shares under $100 and banking 3 separate gains of 48%, 23% and 20%. Since I believe in the company fundamentally for the long-term, we are rarely concerned about the technical swings between quarters and simply use them strategically and tactically.
Two other items worth noting here. First, many of those rosy analyst outlooks and lofty price targets are being scaled back in the current economic and market environments. Second, waiting for market volatility to hand us better bargains was definitely the right call -- I just didn't know we were going to get a 30% market correction and EW shares would be dropping under $170!
As I write this article on Thursday 3/26, I observe that smart investors were busy scooping EW bargains all week, driving shares back to $200. Here were some more recent analyst views...
Credit Suisse analyst Matt Miksic lowered the firm's price target on Edwards Lifesciences to $267 from $278 and kept an Outperform rating on the shares to reflect the potential impact of the coronavirus on the company's major businesses. The analyst reduced his sales estimates for 2020 and 2021 by 4.0% and 0.5% respectively, which now reflect organic growth of 8.3% and 16.5%. Accordingly, Miksic also reduced his EPS estimates for 2020 and 2021 by 56c and 8c to $5.70 and $7.08, respectively.
Citi analyst Joanne Wuensch initiated coverage of Edwards Lifesciences with a Buy rating and $252 price target. The analyst said the focus of the company is on their TAVR and TMTT franchises -- which she called large, growing market opportunities -- noting that the TAVR market is expected to increase to reach $7B in 2024 from $4B today and the TMTT market expected to reach $3B in 2024 from $1B estimated in 2021.
As of 3/26, the consensus revenue estimate for this year remains at $4.82 billion, representing 10.8% growth. And consensus EPS is at $6.17, also targeting a 10.8% advance.
Hydraulic Pump Engineer Creates First Successful Heart Valve
Since I've been an EW investor for years, I also always love to tell the story of its remarkable founding and success...
Edwards Lifesciences’ roots date to 1958, when Miles “Lowell” Edwards set out to build the first artificial heart.
Edwards was a 60-year-old, recently retired engineer holding 63 patents in an array of industries, with an entrepreneurial spirit and a dream of helping patients with heart disease. His fascination with healing the heart was sparked in his teens, when he suffered two bouts of rheumatic fever, which can scar heart valves and eventually cause the heart to fail.
With a background in hydraulics and fuel pump operations, Edwards believed the human heart could be mechanized. He presented the concept to Dr. Albert Starr, a young surgeon at the University of Oregon Medical School, who thought the idea was too complex. Instead, Starr encouraged Edwards to focus first on developing an artificial heart valve, for which there was an immediate need.
After just two years, the first Starr-Edwards mitral valve was designed, developed, tested, and successfully placed in a patient. Newspapers around the world reported on what they termed a “miraculous” heart surgery.
This innovation spawned a company, Edwards Laboratories, which set up shop in Santa Ana, California –- not far from where Edwards Lifesciences’ corporate headquarters is located today.
It also spawned decades more of further innovation in heart valve replacement technology, with the non-surgical catheter procedures being the most remarkable, as they give new hope to older or other at-risk patients who may not be able to withstand surgery.
Bottom line: Be a buyer of EW between $180 and $200 for the long term.
Bear of the Day:
The Trade Desk is the $9 billion digital advertising disruptor who created the most popular new technology platform for companies and agencies to bid for eyeballs on the Internet and connected TV (CTV).
I call The Trade Desk "the CME of advertising" because it has been their express goal to build an algorithmic trading exchange for digital advertising as they seek to capture a bigger share of the $750 billion global ad market. In any given minute, thousands of auctions can take place over digital real estate across the web and OTT (over-the-top) pipelines like Roku (ROKU).
In the jargon of DSPs (demand side ad platforms), they call this automated, algorithmic model "programmatic" ad buying.
TTD is a self-service, cloud-based platform where ad buyers create, manage and optimize data-driven digital advertising campaigns which includes display, video, audio, native and social, on a multitude of devices including mobile. One of the key disruptive features of the TTD model is that advertisers now have much more data at their disposal to target specific audiences and see what's working.
Last Quarter Overshadowed By COVID-19
Before the company's Q4 "beat and raise" report on February 27, TTD actually saw one estimate bump to $4.16 for 2020, taking the full year from $3.77 to $3.82. Since then, the Zacks consensus has fallen to $3.67, for flat annual growth, on global pandemic worries, especially as TTD was expanding aggressively into China and European markets.
And that's why TTD is currently a Zacks #4 Rank Sell.
But longer term, this is a powerful story of technology disruption in a market that CEO Jeff Green sees growing to a $1 trillion TAM (total addressable market) in the next five years. Within that massive market, TTD is growing at nearly 30% and shaking the tree of digital behemoths like Alphabet and Facebook as well as TV incumbents like Comcast/NBCUniversal.
Partnerships with Amazon and Disney/ESPN are helping them in this particular aspect of the content wars.
If learning to understand all the players and battles in those wars is of interest to you, TTD conference calls are always an educational feast. In the most recent Jeff Green CTV manifesto, my favorite part was how he described TTD aggressively "grabbing land" in digital advertising as he saw that TTD Platform Advertising Spend would grows 37% to $4.24B and total 2020 revenues would top $863M at least.
So far, analysts in the Zacks topline consensus have only taken that estimate down to $855 million in the past few weeks.
Meanwhile, TTD will be spending to develop the platform with new features and functionality as they serve their ad-buying customers with better tools and data.
On the conference call, Jeff Green had to explain again that he's often found apologizing for having strong EBITDA when they are supposed to be spending. Nice problem to have.
Here were the quarter details...
Q4 adjusted EPS $1.49 vs consensus $1.19 for a 25% BEAT
Q4 revenue $215.9 million vs consensus of $213.4M.
Q4 and 2019 Business Highlights
Continued Share Gain: 2019 gross spend on the platform was over $3.1 billion, a 33% increase from a year ago.
Strong Customer Retention: Customer retention remained over 95% during the quarter, as it has for the previous 24 quarters.
Continued Omni-channel Growth: Omni-channel solutions remain a strategic focus for The Trade Desk as the industry continues shifting toward transparency and programmatic buying.
Specific channel spend highlights...
Video grew 54% from Q4 2018 to Q4 2019.
Connected TV grew about 100% from Q4 2018 to Q4 2019.
Connected TV grew 137% from 2018 to 2019.
Audio grew over 185% from 2018 to 2019.
Mobile video grew over 50% from 2018 to 2019.
Mobile in-app grew over 67% from 2018 to 2019.
"Our vision is to change the way advertising is bought by enabling data-driven decisions. For The Trade Desk, 2019 was another major step toward achieving that vision. Total spend on our platform was a record $3.1 billion. Spend in Q4 topped $1 billion, the first time we had ever crossed that threshold in a single quarter. This record spend helped drive 39% revenue growth to $661 million in 2019. We also generated $108.3 million in net income and $213.9 million of adjusted EBITDA. We continue to deliver strong revenue growth while also generating profitability that is significantly higher than nearly all other comparable software and internet companies of our size," said Jeff Green, Founder and CEO of The Trade Desk.
Guidance: Platform spend grows 37% to $4.24B and Revs top $863M
"Our focus is on grabbing market share and deepening our engagement and strategic importance with our customers. As a result, in 2020, we expect gross spend on our platform to accelerate year over year to at least $4.24 billion and revenue to be at least $863 million. In the coming year, we will continue to make aggressive investments in high-growth areas such as Connected TV, data, and global expansion. As a result, we expect our adjusted EBITDA to be $259 million, or 30% of revenue. We believe investing in our core growth opportunities will maximize profitability over the long-term. I have never felt more confident in the direction of our business than I do heading into 2020."
The conference call saw lots of questions about earnings, margin and spend.
Now that EBITDA might fall back a bit, the analysts are confused and missing the big picture.
There were also great questions about the Google plan to kill cookies in 2 years. I highly recommend finding a copy of the call transcript if you want to learn more. I listen and re-read them religiously now.
The CME of Advertising Should Double in 2 Years
While it's tough to buy companies when their estimates are falling, the drop in TTD's fortunes hasn't been that dramatic so far. Still, impacts on the global economy are just beginning to trend and we have to watch for more waves of downward revisions to growth for advertising spend and TTD sales and profits.
Aggressive longer-term investors were not swayed though last week, scooping TTD shares quickly under $150 and enjoying 30%+ gains on the bounce this week. Until we know more about the depth and duration of a recession which will surely scale back some advertising budgets -- for products and services where consumers actually have to leave the house -- let me share an excerpt from my November podcast and article...
Streaming Wars Get Hot for Disney, Netflix, Roku and The Trade Desk
The Trade Desk model is centered around advertisers using a data-driven approach to targeting audiences and setting up automated programs to buy ad space according to their parameters, including elements like frequency, location, spend, and real-time optimization.
This "programmatic" model can see thousands of ad auctions take place every minute around the world as agency and brand "ad algos" compete for precision exposure to their messages.
TTD CEO Jeff Green opened the conference call with these remarks...
"Just so you have a frame of reference for that [38%] growth, remember that Magna Global estimates the programmatic advertising market is growing at around 20% this year. And the overall advertising industry is growing at 4% according to IDC. So in the fastest-growing segment of an industry that is expected to reach a TAM of $1 trillion in the next decade, we are significantly outperforming.
"In fact, we are once again growing at about double the pace of the industry. Our outpaced growth and market share gain are the result of investments we've made in key channels and markets. It's also because of our commitment to objectivity and independence. And it's the work we do across the industry with partners and standard bodies to make this an industry that advertisers and content providers trust."
Connected-TV Gives Ad Buyers Data They Never Had
For any investor interested in this new advertising model that will continue to gain share from the digital giants Google and Facebook, I recommend reading Green's 3700-word opening "manifesto" on the company conference call. It is truly an education in all things streaming.
But since I don't watch that much TV and don't have multiple streaming subscriptions, I invited my colleague Ben Rains on the podcast to help me sort out the jungle of offerings and competitive trends.
And we just happened to have this chat on the launch day for Disney Plus, the entertainment giant's $7-a-month streaming service for almost everything it creates.
Ben and I, with the help of further commentary from Jeff Green, discuss the players and the probabilities that any one of them will fail, or reign supreme.
For instance, how can Netflix continue to invest so heavily in content -- without accepting advertising -- when it's now facing armies of libraries from AT&T/HBO, Comcast/NBCUniversal, Disney, and even Amazon?
I always used to think that Netflix had pricing power for its great content and could easily charge $20 per month. But that idea fell into jeopardy when Apple TV rolled onto the battlefield at $4.99.
And what about Netflix's "stranger thing" of just dropping an entire season of a new show all at once for consumers to binge watch?
Since my focus in the Mind Over Money podcast is all about behavioral economics, I'm all over this.
So tune in to hear my views there and to get Ben's take on why Comcast launching their own magic box wasn't a Roku-killer.
I also explain the AMZN-TTD partnership from two important angles -- why Amazon chose The Trade Desk as a 3rd-party gateway to Fire TV and how TTD is changing the ad game by drastically reducing the potential for data-privacy abuses with their Unified ID solution.
Oh, I almost forgot Spotify. I asked Ben to explain what Jeff Green meant in this quote from his conference call manifesto...
"Connected TV is changing all of that as more viewers access TV content via connected devices and smart TVs. And as more content providers build and launch new streaming platforms, advertisers can apply data to their TV campaigns for the first time. It's a game changer. And as I said two years ago, companies like Hulu, AT&T and Spotify were pioneers of this ad-funded streaming revolution. I said that they were what I call tea leaf companies. If you watch what they do, you can predict and know what others are going to do. They developed new TV and audio revenue models. They took strong positions on ad-supported options."
TTD's audio segment was actually the fastest growing in Q3 at 162% as it serves music, digital radio and the rise of podcast channels.
And finally on my rising podcast, we dish on why the whole streaming wars are just a fun walk in the park for Amazon and Apple.
Be sure to catch this episode if you want to understand how The Trade Desk wins, no matter who loses the streaming wars.
3 Food Delivery Stocks on a Roll During Lockdown
Consumers who are social distancing are looking for viable solutions to stay safe and healthy. Coronavirus has so far infected nearly 474,968 people worldwide and more than 68,489 people just in the United States.
With major cities like New York under lockdown, food delivery is in demand, boosting meal kit services at large.
Food Delivery Service in Demand
Personal sanitization and avoiding interactions could help curb the spread of coronavirus. Additionally, avoiding big-box stores could help reduce interactions. Hence, keeping the household fed via delivery services is both a necessity and also a complicatedtask. Online delivery can be risky for both consumer and the person bringing food.
Well, the problem isn’t the food. According to the Food and Drug Administration (FDA), so far there has been no evidence that coronavirus is transmitted from food or food packaging.
While cooked food cannot transmit the virus, the risk can be reduced if recipients ask delivery persons toleave the food outside the door. Consumers can tip electronically or place cash outside before the delivery arrives.
Some private players are already making the most of this opportunity. DoorDash’s default delivery option is "leave it at my door," though one can change that option to "hand it to me”, whenever required. The company has set an example by waiving commission fees for independent restaurants in the United States, Canada, Puerto Rico and Australia for 30 days. Moreover, DoorDash is collaborating with United Way Worldwide to provide groceries and prepared food for food-insecure households.
3 Stocks to Watch
As Americans stay confined at home, food delivery sales have increased. In such scenario, these three food delivery stocks are poised to grow.
Our first choice is Blue Apron Holdings, Inc., a direct-to-consumer platform that delivers original recipes, and fresh and seasonal ingredients. Shares of Blue Apron Holdings have risen 10.5% in the past month as consumers who are social distancing favor online grocery pickup or delivery services. In fact, in the beginning of March,Blue Apron had said it has seen a “sharp increase” in demand for its meal kits and is trying to meet the greater number of orders
This Zacks Rank #2 (Buy) company’s expected earnings growth rate for the current year is 4.3%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Next we have Domino's Pizza, Inc., a Zacks Rank #2 company that operates as a pizza delivery chain. The restaurant chain has a well performing delivery service, which accounts for about 55% of total orders. The pizza chain boasts17,000 stores in more than 90 countries. It has now began implementing its ‘Contact Free Delivery’ service and is expected to hire about 10,000 workers in the United States alone to meet increased orders. The company’s expected earnings growth rate for the current year is 11.9%.
Lastly, we have Grubhub Inc. that provides an online and mobile platform for restaurant pick-up and delivery orders in the United States. The company is offering contact-free delivery service and also deferring commission fees for several restaurants. The company recently launched Grubhub Community Relief Fund that allows recipients to leave donations that could benefit delivery drivers and restaurants impacted by dining room closures.
This Zacks Rank #3 (Hold) company’s expected earnings growth rate for the next year is more than 100%.
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Domino's Pizza Inc (DPZ) : Free Stock Analysis Report
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