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Micron, Match Group, Microsoft, Apple and Facebook highlighted as Zacks Bull and Bear of the Day

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Zacks Equity Research
·12 min read
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For Immediate Release

Chicago, IL – January 26, 2021 – Zacks Equity Research Shares of Micron Technology, Inc. MU as the Bull of the Day, Match Group, Inc. MTCH as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Microsoft Corporation MSFT, Apple Inc. AAPL and Facebook, Inc. FB.

Here is a synopsis of all five stocks:

Bull of the Day:

Micron stock has soared over the last several months and its impressive first quarter fiscal 2021 results on January 7 showcased why the memory chip powerhouse might have more room to run.  

Comeback Time

The semiconductor space is historically cyclical, and the memory section of the industry is even more prone to waves and is heavily impacted by pricing. And Micron is one of the largest makers of DRAM and NAND memory chips on the planet. This means that Wall Street often treats the stock more like a commodity than most semiconductor stocks.

It’s worth quickly understanding that DRAM chips are key components within PCs and servers. Meanwhile, NAND flash chips are crucial to smartphones and solid-state hard drives. And MU had been hurt by pricing for over a year.

But the industry has seen its pricing power and demand return, and Micron hit its cyclical bottom in the first quarter of last year. The company returned to growth in the third quarter, with sales up 14% and fourth quarter revenue up 24%. Most recently, the Boise, Idaho-headquartered firm beat our Q1 FY21 estimates on January 7 and provided strong guidance.

Micron’s revenue jumped around 12% to $5.77 billion and its adjusted earnings surged over 60% to $0.78 per share. “We are excited about strengthening DRAM industry fundamentals,” CEO Sanjay Mehrotra said in prepared remarks.

“For the first time in our history, Micron is simultaneously leading on DRAM and NAND technologies, and we are in an excellent position to benefit from accelerating digital transformation of the global economy fueled by AI, 5G, cloud, and the intelligent edge.”

Analysts rushed to update their EPS estimates after the firm raised its outlook, with MU’s consensus earnings estimate for the current quarter up 78% since then. Longer-term, its FY21 earnings estimate has jumped 44% since its Jan. 7 release, with its fiscal 2022 figure 42% higher.

Memorable Run

Micron shares have climbed 55% in the last three months after it began to break out of a rough stretch in August of 2020. The stock is also up 45% in the past year and 115% in the last two years. This is part of a 670% run during the last five years that’s helped it outpace Apple, Amazon and other giants. And investors can see that this run includes a rough patch.

MU’s recent run has stretched its valuation to its highest levels in years. Still, given the memory space’s commodity-like standing within chips, it still trades at a big discount to its broader industry at 3.4X forward 12-month sales vs. 5.3X. Micron stock has also dipped recently to rest around 6% off its recent highs at roughly $82 per share.

Peeking ahead, Zacks estimate calls for MU’s full-year fiscal 2021 revenue to jump 16%, with FY22 projected to climb over 25% higher to hit $31.1 billion. These estimates would mark a strong return to growth after two down years and see FY22 top fiscal 2018’s sales total.

At the bottom end of the income statement, MU’s adjusted earnings are projected to surge by 36% this year and 98% in fiscal 2022. And we already discussed Micron’s recently boosted earnings outlook.

Bottom Line

Micron’s improved EPS outlook helps it earn a Zacks Rank #1 (Strong Buy) at the moment. The stock also sports an “A” grade for Momentum in our Style Scores system. On top of all of that, 14 of the 21 brokerage recommendations that Zacks has for MU come in at a “Strong Buy” with three more at a “Buy” and none below a "Hold."

Some might think it’s prudent to wait for a deeper possible pullback before pulling the trigger. But given Micron’s outlook, the stock might be able to continue its run in 2021 and beyond.

Bear of the Day:

Match Group has performed well given the social distancing climate and the havoc that the coronavirus has caused throughout the entire hospitality and travel and leisure space. Despite its recent strength and solid overall outlook, the digital dating conglomerate’s near-term appears tough.

Online Dating Growth

Match was one of the first online dating companies out there. And over the last 20 years or so, the company has expanded its portfolio to include a ton of different offerings that help it attract users across age, gender, and various dating goals. Today, MTCH’s offerings include its namesake, as well as Tinder, OkCupid, Hinge, PlentyOfFish, and more.

In a world where everything is digital and people spend countless hours glued to their smartphones, Match has certainly benefitted from its diverse range of apps and websites. The company is coming off a year that saw its revenue climb by 19% to reach $2.1 billion.

Last quarter, its revenue jumped 18%, for its strongest growth of the year so far, which makes sense as economies around the world returned closer to normal during the third period. On top of that, its average subscribers popped 12% to 10.8 million.

Near-Term Outlook

Despite its overall strength, Match cannot change the fact that a rise in coronavirus cases around the U.S. and much of the world in the fall and winter saw a return of increased restrictions, particularly at restaurants and other places where people might go on dates. The vaccine is currently being rolled out and many areas have started to lift some restrictions again.

However, uncertainty clearly remains as the winter continues. And our current Zacks estimates call for MTCH’s fourth quarter revenue to fall 46%, with the first quarter of 2021 projected to sink 47%.

Bottom Line

Match’s downward earnings revisions activity helped it grab a Zacks Rank #5 (Strong Sell) heading into the release of its fourth quarter FY20 financial results on Tuesday, February 2. MTCH also holds a “D” grade for Value in our Style Score system and its Internet – Commerce space rests in the bottom 15% of our over 250 Zacks industries.

Match shares have slipped roughly 12% since January 13, which means Wall Street might be down on the stock at the moment. That said, the company’s long-term prospects remain strong in our digital world and it could boom again when this is all over. Therefore, interested investors should pay close attention to its upcoming earnings release.

Additional content:

3 Tech Giants to Watch in the Busiest Week of Earnings

U.S. stocks gyrated on Jan 22 but managed to finish in the green last week, mostly banking on encouraging fourth-quarter 2020 results. No doubt, the corporate earnings season is off to a flying start with major names coming up with promising results.

However, there were concerns that the relentless rise in coronavirus cases and record-high hospitalization rates could have hampered corporate profits in the quarter. What’s more, the coronavirus outbreak has increased threats of further government curbs that could derail economic progress and raise risks of a recession. Early reports of fourth-quarter earnings suggest that companies, to some extent, have been successful in implementing measures to weather the coronavirus pandemic and register strong quarterly results.

After all, as of Jan 22, 66 S&P 500 members reported results with total earnings rising 0.3% compared to the same period last year on 0.6% higher revenues (read more: Q4 and 2021 Earnings Estimates Keep Going Up).

However, all eyes are on this week’s releases, with majority of the S&P 500 and Dow members poised to report quarterly results. This week’s results will tell whether businesses have been able to withstand the coronavirus onslaught during the last quarter of 2020.

Interestingly, market pundits believe that tech stocks, in particular, have done well and may have witnessed a sales jump amid the pandemic. This is because people’s dependence on tech products and services grew during this period as many continue to work, learn and entertain themselves at home. Lest we forget, the stay-at-home trend has been the new normal as coronavirus cases continued to rise, in fact more than ever, in the last quarter of 2020.

Against this backdrop, it’s prudent to watch out for three big technology-driven companies set to release their quarterly results this week. First on the list is Microsoft Corp., which is due to report fiscal second-quarter results on Jan 26, after market close.

Let’s admit that the economy in the December quarter improved compared to the earlier quarters when the pandemic had struck. Thus, small and mid-sized businesses bumped up outlays on tech initiatives, driving Microsoft’s revenues. Moreover, a remote-work economy has likely boosted the company’s cloud computing business in the December quarter, lifting Azure’s revenues. In fact, CFO Amy Hood recently said that the company expects December-quarter sales for the Intelligent Cloud segment of healthy $13.55 billion to $13.8 billion, as quoted in a Barron’s article.

Microsoft is thus expected to earn $1.64 a share on revenues of $40.12 billion in the December quarter compared to the year-ago earnings of $1.51 per share on revenues of $36.91 billion. Notably, commendable earnings results are expected to lift its share price. Thus, Microsoft’s expected earnings growth rate for the current quarter and year is 11.4% and 16.8%, respectively. Microsoft currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Second on the list is Apple Inc., due to report its December-quarter results after the close of trading on Jan 27. The tech behemoth is now projected to earn revenues worth more than $100 billion for the first time ever in a quarter. In Apple’s fiscal first quarter, it started to roll out iPhone 12, particularly from the month of October. The demand for such a 5G-enabled smartphone had been immense and should certainly get reflected in the company’s revenue results.

Thanks to the pandemic, the company witnessed high demand for its Macs and iPads as more people are working and studying from home. Needless to say, the company launched its latest iPad in the latter half of last year. Thus, the company’s earnings for the December quarter is expected at $1.39 a share on revenues of $102.61 billion, suggesting an improvement from the year-ago quarter’s earnings of $1.25 a share on $91.82-billion revenues.

The pandemic in no way could impede Apple’s rally in recent times, with the company’s earnings growth for the current quarter and year now expected at 45.3% and 22.9%, respectively. The company at present has a Zacks Rank #2 (Buy).

Lastly, social media giant Facebook Inc. is set to report December-quarter results on Jan 27, after the close of trading. It’s worth pointing out that the COVID-19 pandemic, strong negative reaction from Trump supporters and even antitrust lawsuit couldn’t impact the company’s performance in the latter half of last year. And that should surely get reflected in the company’s December-quarter results.

The company, actually, is widely assumed to have performed well in the said quarter, mostly due to an uptick in daily and monthly average users. At the same time, when it comes to advertising, the company has the highest reach compared to any other social media platform. Thus, it is expected to witness an improvement in advertising revenues as well.

Facebook, therefore, is likely to see earnings per share of $3.22 on revenues of $26.26 billion in the December quarter, up from the year-ago earnings of $2.56 a share on $21.08 billion in revenues.

Facebook’s projected earnings growth rate for the current quarter and year is 24.6% and 11.8%, respectively. To top it, the company at this time has a Zacks Rank #2.

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