For Immediate Release
Chicago, IL – October 7, 2019 – Zacks Equity Research Shares of Five9 FIVN as the Bull of the Day, Charles Schwab SCHW asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on The Meet Group MEET, Telenav, Inc. TNAV and Digital Turbine, Inc. APPS.
Here is a synopsis of all five stocks:
Bull of the Day:
The leading cloud-based contact center solution company is lining up to be a buy. Five9 continues to impress investors and analysts alike. Sell-side analysts have been increasing bullish on these shares propelling FIVN into a Zacks Rank #1 (Strong Buy).
Customer relations are vital to any business and in this increasingly digitalized age its becoming progressively more difficult to keep up with customer demands. Five9 has made this imperative but demanding business function much more manageable through its cloud-based product offering.
Five9’s omnichannel engagement platform improves customer service, increases sales performance and advances a firm’s operational excellence, ultimately cutting cost and creating efficiencies. The company’s interface “is designed to enable customers to seamlessly engage through voice, video, website, mobile, chat, email, click-to-call, callback, social and messaging,” according to the 2018 annual report.
Five9 cloud-based solution allows companies of any size to optimize their contact centers no matter the infrastructure.
Five9 has been chasing profitability since they began but have experienced a topline that has been proliferating over 20% year-over-year and consistent quarter-over-quarter expansion. The firms reoccurring revenue stream is a driving feature that makes this stock so attractive. Locked in long-term revenue combined with consistent growth figures allows me and other investors to be comfortable with larger than normal valuation multiples.
Current market penetration is 10-15% and with the total accessible market being valued at $24 billion, according to the firm’s latest annual report. Five9 has become a leader in a niche market with proven demand and this demand will only grow as firms become more digitalized.
Adaptation of CRM has driven growth for smart contact centers that can effectively manage customer service, sales, and marketing. Five9 allows for easy integration of CRM and customer service platforms like Salesforce, Oracle and Zendesk. Five9 is a supplementary solution with these other large enterprise cloud platforms, meaning that as the CRM space grows and enterprise cloud penetration increases, the opportunity for Five9 will also expand.
Performance & Valuation
FIVN has been on a run over the past 5 years with shareholder returns hitting close to 1000%. FIVN just went from a small to mid-cap (passing the 2 company in the past 52-weeks) and investors are beginning to see the opportunity in this niche cloud player.
So far in 2019, FIVN is up 30% outperforming the cloud category and the broader equity market. With this firm’s recent share price run-up came a valuation surge. FIVN’s P/S has grown from 2x in 2015 to over 11x that the stock is demonstrating today.
The valuation is a bit large, but its comes from Five9’s continued proven business model, and ability to meet and satisfy its growing demand.
Five9 is the market leader in cloud-based contact center solutions and facilitates more than 5 billion calls annually. It has marketed its ground in the niche but fast-growing market. As more enterprises digitalize their customer interactions the demand for Five9 will only expand.
I don’t love FIVN’s current valuation, but this firm is still in its early growth stage with a sizable amount of potential, so its high multiples may be justified. This stock has an ample amount of long-term potential and would make a good addition to your cloud portfolio.
Bear of the Day:
The trading platform battle is quickly heating up with America’s largest brokers completely cutting out trading fees. Charles Schwab, E*Trade and TD Ameritrade all announced that they would be offering commission-free trading. Investors are not happy about this decision and have been trading down these e-broker stocks since the announcement.
Investors and analysts are specifically pessimistic about Charles Schwab, the largest publicly traded electronic brokerage in the US. SCHW has fallen roughly 15% since its no-fee trade announcement, October 1st. The stock had been selling off all year as interest rates fall, and economic uncertainty shakes the market. This latest decision was icing on the cake of a struggling year.
The Charles Schwab Corporation Price and Consensus
Analysts have been dropping their EPS estimates and have pushed SCHW into a Zacks Rank #5 (Strong Sell).
The retail investor space has been changing rapidly over the past 10 years, with the traditional Wall Street stockbroker becoming archaic. The days of high testosterone, fast-moving exchange floors are almost entirely over as efficient computerized systems take the main stage in high finance.
Electronic brokerages were a revolutionary step in the evolution of retail investing. Early adopters like Schwab were able to capitalize on this. Investors could now buy and sell stocks on their own personal computers without a stockbroker having to mediate the transaction. This significantly cut costs for investors and made it easy for anyone, no matter the amount of capital, to play their hand in the equity markets.
The most recent change in electronic trading came with millennial’s favorite free-trading app Robinhood. This application started a cultural shift in investing for the young generation. The ability to trade with no fees has brought a substantial portion of the millennials to the equity markets.
Millennials are the largest consumer group and create a sizable market for electronic brokerages. With the younger generation being more interested in stocks than past generations, the longstanding e-brokerages want to take back that market. The zero-commission move was a play that these firms couldn’t avoid if they wanted to remain competitive in the field.
Charles Schwab doesn’t rely on trading commissions as much as some of the other e-brokers, but it will still impact 7% of its revenue. The move of investor capital into passive funds like ETFs and index funds is hurting the firm’s asset management segment. Falling interest rates are likely negatively impacting Schwab’s banking business as margins narrow.
I would stay away from any electronic broker stocks until the full impact of their shift to free trading impacts the business. Robinhood can make money through selling users orders to market makers and through its premium platform. Schwab and its cohorts could offer similar premium packages to investors.
Wait for SCHW’s earnings report on October 21st for more color on the impact of this new move.
3 Cheap Tech Stocks Trading Under $10 to Buy in Q4
All three major U.S. indexes climbed Friday on the back of a solid jobs report. U.S. unemployment dipped to 3.5% in September from 3.7% in August, which marked a 50-year low. Nonetheless, as geopolitical tensions and global economic slowdown worries mount, Wall Street and Traders have placed a higher chance on additional interest rate cuts in 2019.
With this in mind, investors should likely continue to stay in stocks. So why not add a few solid low-priced picks to your portfolio. At Zacks, we do try to avoid labeling stocks as “cheap” or “expensive.” Instead, we opt to look beyond a stock’s face value, and our system puts an emphasis on earnings estimate revisions to find stocks that will hopefully be winners for investors.
Stocks trading under $10 can be more volatile than their pricier peers. But investors can still scoop up big returns with the right low-priced stocks. Today we found three stocks using our Zacks Stock Screener that fall into the broader technology sector that investors might want to buy as the fourth quarter of 2019 gets underway…
The Meet Group
Prior Close: $4.00 USD
The Meet Group is a social media company that offers a portfolio of various dating and social entertainment apps, including MeetMe, Skout, and Lovoo. These apps are primarily focused on streaming video, mobile chat, photo sharing, and more. MEET shares soared roughly 23% Thursday after the company raised its third-quarter 2019 revenue guidance to between $52.0 million and $52.3 million, up from its previous $50.5 million to $51.0 million range. The firm pointed to video strength as part of the reason for its optimism and projects that its advertising business will be strong in the fourth quarter.
Looking ahead, our quarterly revenue estimates have not been updated to reflect the firm’s new guidance. But we should note that MEET’s fiscal 2019 sales were already projected to jump 17.7% to reach $210.27 million, with 2020 expected to come in 11.1% higher. Meanwhile, The Meet Group’s adjusted earnings are projected to jump 33.3% this year and another 18% in fiscal 2020. MEET stock is currently a Zacks Rank #2 (Buy) that boasts an “A” grade for both Growth and Value in our Style Scores system, and is trading at a discount against its industry. The recent positivity could help MEET shares climb after a significant post-Q1 selloff.
Prior Close: $4.75 USD
Telenav is a connected car and location-based services firm that works with global giants such as Ford and AT&T. The stock did tumble from over $10 per share in early September after one of its major clients, General Motors, announced that will start working with Google’s connected-car tech in 2021. The firm did say in a statement that its contract with GM is still effective through model year 2025 and that GM’s announcement “does not alter the contract in any way. Telenav does not expect GM’s announcement to affect Telenav’s internal operating forecasts for fiscal years 2020 and 2021.”
Clearly, Wall Street fears that this will dent the company, but that impact might already be priced in, with its shares down over 50% since the September 5 announcement. Telenav still works with other firms, such as Toyota and makes money through its targeted advertising platform, utilized by the likes of Walmart and Best Buy. Our Zacks Consensus Estimates call for its upcoming quarter (Q1 2020) sales to surge 20%. Peeking ahead, fiscal 2020 and 2021 revenues are projected to jump 10.7% and 11.3%, respectively. This is expected to help TNAV jump from a projected adjusted loss of -$0.12 per share this year to +$0.16 in 2021. Telenav is currently a Zacks Rank #2 (Buy) that sports “A” grades for both Growth and Momentum.
Digital Turbine, Inc.
Prior Close: $6.31USD
Digital Turbine connects OEMs, mobile operators, and publishers with advertisers and app developers. The firm announced in mid-August a partnership with Razer that will see Digital Turbine help the lifestyle-focused brand for gamers “power curated app recommendations to users of Razer Cortex Mobile enabled smartphones.” This could end up playing a significant role for Digital Turbine as the mobile gaming industry continues to boom. APPS shares have slipped recently, down 14% in the last month, but are still up 250% in 2019 and 370% during the last 12 months.
Looking ahead, the Austin, Texas-based company is projected to see its adjusted current-quarter (Q2 2020) earnings soar 300% on 32.3% higher revenue. The firm’s full-year EPS figure is then expected to surge 150% on 26.4% stronger sales. Digital Turbine is then expected to report 20.5% revenue growth in 2021 and 11.7% bottom-line expansion. Investors should also note that APPS has crushed our quarterly earnings estimates by an average of 125.00% in the trailing four periods. Digital Turbine is a Zacks Rank #1 (Strong Buy) right now, with “A” grades for Growth and Momentum, which helps it earn an overall “B” VGM score.
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