For Immediate Release
Chicago, IL – June 12, 2020 – Zacks Equity Research Shares of LivePerson LPSN as the Bull of the Day, Children's Place PLCE asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Limelight Networks, Inc. LLNW, DouYu International DOYU and Mitek Systems, Inc. MITK.
Here is a synopsis of all five stocks:
Bull of the Day:
LivePerson is the world's #1 AI-powered messaging platform, and COVID-19 has provided a strong tailwind that could send these shares surging past their old all-time highs. The company is still on the ground floor of its potential, and analysts are becoming increasingly optimistic about the future of this business. EPS estimates have been on the rise for LPSN pushing this stock up to a Zacks Rank #1 (Strong Buy).
LivePerson is a leader in conversational commerce and customer service through messaging applications, including Apple Business Chat, WhatsApp, Facebook Messenger, text messaging, and even through Amazon's Alexa. The company leverages AI to enable seamless communication between brands and customers.
You probably wonder what conversational commerce is, and it's exactly what it sounds like. Conversational commerce is a form of e-commerce facilitated through messaging applications. For example, you can send a text or say to Alexa, "I need to book a flight," "I need a mortgage quote," or a plethora of other requests. Businesses that utilize LivePerson's platform will be able to satisfy these demands through the customers' preferred messaging application.
According to the business's most recent annual report, the firm has "over 18,000 customers — including leading brands like HSBC (HBCYF), Orange (FNCTF), GM Financial, and The Home Depot (HD) — have deployed our conversational platform to orchestrate how AI and human agents serve customers at scale."
LivePerson is seeing healthy organic growth as the ease and necessity of utilizing already heavily dependent communication channels like smartphone messaging and Alexa voice communication. The Pandemic has intensified our reliance on digital technology, and LivePerson's is well-positioned to capitalize on this expedited trend.
This AI-driven messaging platform has seen 9 consecutive quarters of robust double-digit year-over-year sales growth. Conversation volumes surged 20% in March from the prior month and compounded at a double-digit pace in April.
Contact centers are only at 50% capacity compared to pre-COVID levels, and this is a division that businesses are eager to cut spending on. The automated customer interactions that LivePerson offers provide this increasingly attractive service, which allows companies to reduce contact center spending.
In the enterprise's latest earnings release, management raised its EBITDA guidance from effectively flat to a robust positive range, while maintaining its revenue expectations.
Uncertainty is high as LPSN remains unprofitable as it grows out of its topline. The company still has a healthy balance sheet with $171 million in cash, which more than makes up its level of current liabilities. Analysts are optimistic about the future of this business, with average annual revenue targets representing a topline acceleration over the next couple of years (23% and 27%, respectively).
LivePerson is still just beginning to dive into its market potential. According to the business's internal analysis, the go-to-market opportunity is as large as $60 billion.
LPSN is currently trading at an enterprise-value-to-revenue of 6.1x, which is a substantial discount to the broader software-as-a-service (SaaS) category multiple, which is sitting at a little more than 14x. The messaging opportunity for automated communication between brands and customers is enormous, and I see these shares as a great opportunity today.
10 out of 12 analysts are calling this stock a buy right now with an average price target that is north of $38 per share and some saying the stock could blow past $50, which would represent upsides of 16% and 60% respectively (from the $33.25 it is trading at today). I would not hesitate to pull the trigger on this under the radar investment opportunity.
Bear of the Day:
Children's Place is yet another product of the quickly escalating retail apocalypse. The COVID pandemic has been devastating to retail businesses that rely on brick-and-mortar foot-traffic, and PLCE is no exception. PLCE shares have run up unjustly these last few months, and I would pull my money out while I still had the chance. Analysts have been dropping their expectations for PLCE for some time, and this stock is now sitting at a Zacks Rank #5 (Strong Sell).
The business is getting hammered by the COVID pandemic, with sales down 38% in PLCE's Q1 (ending May 2nd). Earnings flipped to a massive loss of ($28.6) million (on an adjusted basis) and an EPS of ($1.96), which represents the company's worst quarter in over a decade.
Children's Place liquidity is dwindling with a disappearing line of credit that leaves the company with only about $100 million left in liquidity and currently liabilities up to $759 million. I am worried that if the business is unable to open its stores to full capacity in the next 6-months or so, it could be looking at a bankruptcy restructuring or worse.
The Retail Apocalypse & Recent Acquisition
The company has closed over 200 stores since 2013, with 42 store closures in 2018 and another 45 closures in 2019. The company is en route to close about 1/3 of its stores in less than 10 years. Management will not give up despite the obvious systemic issues in its business model.
Children's Place just acquired children's brand Gymboree for $76 million (this acquisition also included Crazy 8 brand) after the company filed for its second bankruptcy in less than two years. Gymboree was forced to close down ¾ fourths of its stores following its January bankruptcy as the brand goes seemingly obsolete. Children's Place is attempting to revitalize the company through rebranding, which I expect will take a substantial amount of capital and may not be successful.
The acquisition brought on an extensive amount of debt to the firm's balance sheet bringing its total debt-to-capital up to 72%. This is a concerning level for me to see, especially when the firm is experiencing a declining top and bottom-line. If consumer discretionary spending dries up, this combined company will find itself in bankruptcy court pretty quickly.
Children's Place is hoping to rejuvenate Gymboree with its 200 remaining stores and the relaunch of Gymboree.com in 2020. This whole venture is a massive risk, and I personally don't see it working out.
Children's Place appears to have systemic issues that will not be improved by this new acquisition of an obsolete brand. I think that the purchase of Gymboree marks the beginning of the end for this enterprise. I would stay away from PLCE, especially after the unjustified share price run-up these past few months.
3 Cheap Tech Stocks to Buy Despite Renewed Volatility
Stocks dropped Thursday, with all three major indexes down over 3.5% through morning trading. The move follows reports of upticks in coronavirus cases in the U.S. But the dip could simply mean more investors are taking home profits after a recent rally saw the S&P 500 climb into positive territory on the year and the tech-heavy Nasdaq hit new record highs.
Despite the recent declines, the S&P 500 is still up roughly 40% since the market’s March 23 lows. On top of that, May’s better-than-expected jobs data helped showcase that the economy is starting to recover as the pandemic lockdowns are lifted.
Meanwhile, the Fed on Wednesday indicated that interest rates could remain near zero through 2022. And economists said in a new Wall Street Journal survey that the U.S. economy will likely be in recovery by the third quarter, while also highlighting lower expected unemployment by the end of 2020.
Given this backdrop, stocks could continue to climb despite some near-term and intermittent volatility. As always though, investors should be on the hunt for stocks with fundamentals that are attractive to them. Today we dive into three “cheap” stocks trading under $10 a share that are part of the broader technology space because tech is poised to continue to drive the market for years to come…
Limelight Networks, Inc.
Prior Close: $5.27 USD
Limelight provides digital content delivery, video, cloud security, and edge computing services. The Scottsdale, Arizona-based firm allows its customers to deliver streaming video and other digital content to “any device, anywhere.” Limelight’s offerings are geared toward industries from media and broadcasting to gaming and more. This makes it not only an attractive stay-at-home play, but also a solid longer-term bet on the future of streaming that the biggest companies in the world have bet on, from Apple to Disney.
LLNW posted stronger-than-expected Q1 earnings in late April, with revenue up 32% to help it post a new first quarter record. CEO Robert Lento said in prepared remarks that the firm was carrying momentum into Q2, “primarily driven by the increase of video-on-demand.”
Our current Zacks estimates call for Limelight’s Q2 revenue to jump 24%, with its FY20 sales projected to climb over 16%, crushing last year’s roughly 3% top-line expansion. Plus, Limelight is expected to soar from an adjusted loss of -$0.02 in FY19 to +$0.06 a share in FY20, while its bottom-line is projected to soar another 92% higher to $0.12 per share in FY21.
LLNW, which is a Zacks Rank #3 (Hold) at the moment, has seen its FY21 earnings consensus pop recently. Limelight also sports an “A” grade for Growth in our Style Scores system. LLNW shares have surged nearly 90% in the last year and currently rests below their 52-week highs. The stock also trades at 2.6X forward 12-month sales, which marks a discount against its industry’s 7.3X average and its own year-long high of 3.5X.
Prior Close: $8.91 USD
DouYu International is a live streaming video game giant in China that is poised to expand as esports and video gaming streaming proliferate. The company can be loosely thought of as a Chinese Twitch, as it allows people to watch video games live like they are sports—Amazon bought Twitch in 2014 for roughly $1 billion and that looks like a steal these days. Overall, the global gaming market is projected to jump from $159 billion in 2020 to over $200 billion by 2023.
DouYu outperformed the high-end of its sales guidance last quarter and its margins hit a record high. Meanwhile, its mobile monthly average users jump by 15% in Q1 FY20 to 56.6 million, with its quarterly average paying user count up over 26% to 7.6 million. DouYu, which is backed by Chinese social media and gaming powerhouse Tencent, has seen its stock price pop 30% since it posted first quarter financial results on May 26.
DouYu’s positive earnings revisions help it earn a Zacks Rank #1 (Strong Buy) right now. DouYu’s FY20 revenue is projected to climb over 29%, with FY21 expected to jump another 23% higher to hit $1.66 billion. And its adjusted FY20 EPS figure is projected to skyrocket 200% to $0.51 a share, with FY21 set to come in at $0.68.
Despite its post-earnings run, DouYu sits over 20% below the highs it hit on its market debut in July 2019. Like LLNW, DOYU trades at a discount against its industry, which includes Glu Mobile and Activision Blizzard, and its own highs at 1.9X forward 12-month sales.
Mitek Systems, Inc.
Prior Close: $10.00 USD
Mitek’s technology helps financial institutions and other enterprises verify a user’s identity during digital transactions, utilizing artificial intelligence and machine learning. MITK’s solutions are embedded in the apps, platforms, and websites of over 7,000 organizations to help perform tasks such as mobile check deposit, new account openings, and more. Mitek beat our second quarter fiscal 2020 earnings and revenue estimates at the end of April, with revenue up 16%
Looking ahead, the San Diego-based company’s adjusted 2020 earnings are projected to jump 19% to $0.50 per share on 13% higher revenues. Mitek’s sales and earnings are both expected to climb another 17% higher in 2021. MITK is currently a Zacks Rank #2 (Buy) that rocks an “A” grade for Growth in our Style Scores system and is part of industry that rests in the top 2% of our more than 250 Zacks industries.
Mitek stock has climbed 70% since mid-March and is now up 25% in 2020. And the stock is trading 15% off its 52-week highs. MITK is also trading well below its one-year highs in terms of forward sales at 3.8X vs. 4.7X. In the end, Mitek could continue to grow within our online and mobile-heavy economy.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
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