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MasTec, Toll, Franklin Financial, Adesto, Glu and Vipshop highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research

For Immediate Release

Chicago, IL – June 10, 2019 – Zacks Equity Research MasTec Inc. MTZ as the Bull of the Day, Franklin Financial Network FSB as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Adesto Technologies Corporation IOTS, Glu Mobile Inc. GLUU and Vipshop Holdings Ltd. VIPS.

Here is a synopsis of all five stocks:

Bull of the Day:

When we think about “infrastructure,” we generally think of roads or bridges, sewers and water lines, the electrical grid and other utilities. The big physical accomplishments that take a lot of time and money to establish and maintain, but also afford us all the comforts and convenience of modern life, as well as facilitating commerce. Often overlooked, data connectivity is also an important component of infrastructure.

Fiber and Copper

MasTec Inc is one of the industry’s established experts at designing, installing and maintaining all of those systems. They provide both copper and fiber optic infrastructure to companies of all sizes, as well as phone companies and municipalities.

Early on, when most communications happened over what had previously been traditional telephone line, most of that connectivity was comprised of copper cables. The advent of fiber-optic technology allowed bits of information to travel much more quickly (basically the speed of light) over long distances. Because a huge amount of the existing information infrastructure was already made from copper cable, most networks still include a combination of the two materials.

That information infrastructure needs to be continually upgraded and expanded to meet the demands of an increasingly interconnected and information-hungry world.

Electricity, Oil and Gas, Water

It also takes a lot of electricity to power all the systems we’ve come to rely on so heavily. There again, MasTec is in the business of providing exactly what the modern world needs. They currently have 44 projects in North America that are either under construction or already in operation, spanning Technology Deployment, Power Generation, Power Delivery, Oil and Gas Services and Communications.

MasTec’s power generation businesses include wind farms, solar energy facilities, alternative fuel plants (biofuels) and even traditional power plants (coal). They’ve got a foothold in all areas of traditional and renewable energy.

Just like data connectivity, the demand for clean and reliable energy continues to grow constantly.

The US Government

Though it has taken years to develop, Republican and Democratic leaders agreed in principal in April on a $2 trillion infrastructure plan. It’s one of the only major issues currently under consideration that has truly bipartisan support.

As trade battles drag on between the US and both China and Mexico and rounds of tariffs escalate, MasTec is largely insulated from the fracas because virtually all revenues are generated in the US and Canada and their reliance on imported materials that are subject to tariffs is minimal.

The Financials

In the most recent quarter, MasTec posted revenues of $1.52B, up 9% from the year-ago quarter while expenses increased only 5%. The result was net earnings of $0.57/share, beating the Zacks Consensus Estimate of $0.43/share by 35% and topping Q1 2018 results by 66%.

The company also increased full-year 2019 guidance from $4.34/share to $4.55/share, as well as raising second quarter earnings guidance to $1.11/share. Recent upward analyst revisions earn MasTec a Zacks Rank #1 (Strong Buy).

Share Price and Valuation

Thanks to 14 consecutive earnings beats, MasTec shares have more than tripled since 2016, from a low of $13.26/share to recent levels near $49/share.

Bear of the Day:

Last week brought the news that Fed Chairman Jay Powell was inclined to lower interest rates to address global growth issues going forward and stocks broadly rallied, shaking off the previous week’s malaise. Long term rates stayed at 20-month lows as well, with the yield on the benchmark 10-year treasury note just barely above 2% and the rate on 30-year mortgages dipping below 4% again, which should give a shot in the arm to the housing industry.

There’s one notable sector that doesn’t benefit from low rates however and that’s banking – especially smaller regional outfits which are more dependent on traditional deposit and lending activity than their larger counterparts who have many other lines of business.

As rates fall, the spreads between borrowing and lending rates contract, hurting profits at small banks.

Franklin Financial Networ, headquartered in Franklin Tennessee, is a holding company for Franklin Synergy Bank and operates primarily in that local market.

FSB shares were hurt recently by an earnings miss and the surprise resignation of Chairman, President and CEO Richard Herrington as well as his son, the company’s COO Kevin Herrington.

On Friday, a day when the Dow Jones Industrial average ended up 1% to finish the best week of the year with a gain of over 250 points, Franklin Financial Network shed $0.09/share.

The bank declined to provide any details about the Herringtons’ departures other than to say that they would stay on board as employees while the company executes a search to fill their former positions. The responsibilities of Chairman, President, CEO and COO will all be filled by existing employees (and one board member) on an interim basis.

Unexpected executive departures not due to health or other personal reasons are generally viewed as a negative indicator for a company’s future prospects. (Who jumps ship when they’re in line for increased compensation from expected successes?) The resignation of the two officials who have the best view of the financial position of a lending institution as a big red flag.

FSB shares now trade more than 37% lower than all-time highs reached in 2017 - a period during which the S&P 500 has gained almost 20%.

Since that Q1 earnings miss and the unexpected departures, estimates for the next two quarters, full-year 2019 and 2020 have all come down. The reductions haven’t been huge, but it’s another red-flag in a lending company with a stock market and economy that are both expanding.

3 Tech Stocks Under $10 to Buy Now

At Zacks, we 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.

With that said, low-priced stocks can still be attractive to investors as they present the chance to take a larger position in a company, which they might not be able to in higher-priced stocks. 

When searching for these low-priced stocks, we still look for similar trends in growth, value, and momentum. Then we apply the Zacks Rank to properly analyze the potential that these companies have. We are also aware of the latest sector trends and make sure to cover all of the hottest industries.

Today we’ve highlighted three stocks that fall into the broad “technology” sector. Each of these three stocks is currently trading for less than $10 a share and holds a Zacks Rank #1 (Strong Buy) or #2 (Buy) at the moment.

1. Adesto Technologies Corporation

Prior Close: $7.81 USD

Adesto makes application-specific semiconductors and embedded systems that help drive Internet of Things edge devices, from medical products to industrial equipment and more. The firm is coming off a better-than-projected first quarter of fiscal 2019. The memory products maker’s stock price has also soared 80% in 2019 and is currently a Zacks Rank #2 (Buy).

Adesto’s strong Zacks Rank is supported in larger part by its recent positive earnings estimate revision activity for fiscal 2019 and 2020. Looking ahead, our current Zacks Consensus Estimates call for the firm’s adjusted fiscal 2019 EPS figure to soar roughly 87% as Adesto inches near break-even earnings on the back of 49% revenue expansion. Peaking ahead, the company’s 2020 earnings are projected to skyrocket from an estimated loss of $0.02 per share this year to positive earnings of $0.21. Adesto has also beat quarterly earnings estimates for three straight periods.  

2. Glu Mobile Inc.

Prior Close: $7.05 USD                     

Glu Mobile is a global developer and publisher of mobile video games, such as MLB Tap Sports Baseball, Deer Hunter, and Kim Kardashian: Hollywood. The company announced at the end of May the launch of a new wrestling game called WWE Universe, as part of a multi-year agreement with WWE. On top of that, Glu Mobile is projected to debut Disney Sorcerer’s Arena in August. Both of these new titles could help GLUU expand its user base and revenues as mobile gaming continues to grow in popularity around the world.

GLUU shares did plummet following the release of its Q1 financial results in early May, despite topping our revenue estimate and matching on earnings. The selloff can be attributed in part to many shareholders taking profits after GLUU’s stellar run from under $2 a share in December 2016 to $11.22 per share on May 6. Glu Mobile’s adjusted fiscal 2019 earnings are projected to skyrocket 250% from $0.10 per share in the year-ago period to reach $0.35 per share. Meanwhile, the company’s fiscal 2019 revenue is projected to jump 18% to $452.82 million. Glu Mobile’s positive longer-term earnings estimate revision activity helps it earn a Zacks Rank #2 (Buy). And its price/sales ratio of 2.7 comes in below its industry’s 3.4 average and gaming giant Take-Two Interactive’s 4.7.

3. Vipshop Holdings Ltd.

Prior Close: $7.01 USD

The Guangzhou, China-based online discount retailer sells popular branded products, from the likes of Nike and more regional-specific companies, throughout China. Vipshop’s first-quarter fiscal 2019 revenue popped 7.3% and its total active customer base expanded by 14%. On top of its under $10 price tag, VIPS shares are currently trading at 9.3X forward earnings, which marks a discount compared to its industry’s 18.6X and is not too far above Chinese e-commerce giant Alibaba’s 7X. On top of that, its price/sales ratio of 0.36 falls well below its industry’s 1.01 average.

Looking ahead, the company’s full-year 2019 EPS figure is projected to surge over 31% to reach $0.76 per share on the back of 3% revenue expansion, which is projected to reach $13.07 billion. Peeking further ahead, VIPS’ adjusted 2020 earnings are projected to climb roughly 31.5% above our current year estimate. Vipshop stock has jumped 33% so far this year. VISP is a Zacks Rank #2 (Buy) at the moment that also sports a “B” grade for Value and an “A” for Momentum in our Style Scores system.  

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Adesto Technologies Corporation (IOTS) : Free Stock Analysis Report
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