NCR Corporation and Dollar General have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 18, 2023 – Zacks Equity Research shares NCR Corporation NCR as the Bull of the Day and Dollar General DG as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Salesforce CRM, Atlassian TEAM and Adobe ADBE.
Here is a synopsis of all five stocks.
Bull of the Day:
NCR Corporation, a current Zacks Rank #1 (Strong Buy), is the world's leading enterprise provider of software, hardware, and services for banks, retailers, restaurants, and small businesses. You’ve likely utilized the company’s technology without realizing it, particularly at ATMs.
Analysts have taken their earnings expectations higher across the board over the last several months, reflecting positive sentiment.
The company resides within the Zacks Computer – Integrated Systems industry, which is currently ranked in the top 31% of all industries thanks to positive earnings estimate revisions.
As many are aware, roughly half of a stock’s movement can be attributed to its group, helping to clarify the importance of targeting industries seeing bright outlooks.
Aside from the improved earnings outlook, let’s take a closer look at a few other traits of NCR.
Current Standing
NCR shares could attract growth-focused investors, further reflected by the Style Score of “B” for Growth. Estimates for its current fiscal year suggest 20% EPS growth in its current fiscal year (FY23) and an additional 9% of growth in FY24.
In addition, shares remain cheap on a relative basis given the company’s projected growth, with the current 8.3X forward earnings multiple (F1) sitting well beneath the 11.3X five-year median and its Zacks Industry average.
The stock carries a Style Score of “A” for Value.
NCR has delivered some big beats as of late, exceeding the Zacks Consensus EPS estimate by an average of 11% across its last four quarters. Just in its latest release, the company penciled in a sizable 30% EPS beat and reported sales nearly 3% ahead of expectations.
The market cheered on the results, sending NCR shares on a fresh uptrend.
NCR shares have enjoyed this recent momentum and reclaimed their 200-day moving average, a level at which shares previously struggled to break.
Bottom Line
Investors can implement a stellar strategy to find expected winners by taking advantage of the Zacks Rank – one of the most powerful market tools that provides a massive edge.
Additionally, the top 5% of all stocks receive the highly coveted Zacks Rank #1 (Strong Buy). These stocks should outperform the market more than any other rank.
NCR Corp. would be an excellent stock for investors to keep on their watchlists, as displayed by its Zack Rank #1 (Strong Buy).
Bear of the Day:
Dollar General, a current Zacks Rank #5 (Strong Sell), is a discount retailer in the United States offering a wide selection of merchandise, consumable items, seasonal items, home products, and apparel.
Analysts have taken a bearish stance on the company’s earnings outlook, with expectations decreasing across all timeframes over the last several months.
Down more than 30% in 2023, what’s going on with Dollar General shares? Let’s take a closer look.
Current Standing
Dollar General has posted mixed quarterly results lately, falling short of the Zacks Consensus EPS estimate in two of its last three quarters. In its latest release, DG fell short of EPS expectations by 1.7% and delivered sales results modestly below the consensus.
The market wasn’t particularly impressed with the results, sending DG shares plunging post-earnings.
The company’s growth is forecasted to cool in its current fiscal year (FY24), with the $10.03 per share estimate reflecting a year-over-year decline of roughly 6%. Still, growth is forecasted to resume in FY25, with expectations reflecting 9% year-over-year earnings growth on 7% higher revenues.
In addition, shares aren’t stretched regarding valuation, with the current 16.3X forward earnings multiple (F1) sitting well below the 21.1X five-year median and the Zacks Retail – Discount Stores Industry average.
While the company’s near-term outlook may be cloudy, DG’s commitment to increasingly rewarding shareholders is worth highlighting; DG shares currently yield 1.5% annually, with the payout growing by a strong 17% over the last five years.
Bottom Line
Negative earnings estimate revisions from analysts and mixed quarterly results paint a challenging picture for the company’s shares in the near term.
Dollar General is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company’s earnings outlook.
For those seeking strong stocks, a great idea would be to focus on stocks carrying a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy) – these stocks sport a notably stronger earnings outlook paired with the potential to deliver explosive gains in the near term.
Additional content:
3 Enterprise Software Stocks That Can Carry Momentum Forward
Enterprise software stocks have made a remarkable comeback year to date (YTD) after a massive sell-off in 2022 on recession concerns, inflationary pressure, increased oil prices and higher interest rates. Enterprise software stocks, such as Salesforce, Atlassian and Adobe, have either overcome last year’s loss or are on the verge of the same.
YTD, Salesforce, Atlassian and Adobe stocks have rallied 73%, 39.1% and 53%, respectively. In 2022, CRM, TEAM and ADBE stocks declined 48.1%, 66.6% and 41%, respectively.
The aforementioned stocks have also outperformed the broader equity market. Major U.S. stock market indexes, Nasdaq Composite, The Dow Jones Industrial Average and the S&P 500, have risen 34.9%, 4.1% and 17.3%, respectively, YTD.
Additionally, Salesforce and Adobe stocks have handily surpassed Tech ETF XLK’s, the most important component of the broad market index, YTD gain of 41.4%. However, Atlassian’s YTD increase is slightly lower than XLK’s gain.
What’s Driving This Rally?
With persistent inflationary pressure and softening demand, the fears of recession have not subsided yet. However, enterprise software companies have been focusing on cost-cutting measures to improve profitability and stay afloat amid these turbulent times. The strategies have boosted investors’ confidence, thereby boosting their share prices.
Furthermore, the success of OpenAI’s ChatGPT has demonstrated the AI technology’s potential to improve operations in almost every industry. Though AI has been around for years, the meteoric rise of OpenAI’s ChatGPT has captivated the world’s attention on the power of generative AI to augment human capability, suggesting that the AI boom may just get started.
Generative AI is a type of AI technology that can produce various types of content, including text, imagery, audio and synthetic data. The long-term growth prospect attached to this technology has led to a sharp rise in the share prices of AI-related technology and solutions providing mega-cap companies.
Invest in Enterprise Software Stocks
Considering the probable new demand for enterprise software integrated with generative AI features and a possible improvement in profitability due to cost-cutting initiatives, we believe that there is still significant upward potential left in CRM, TEAM and ADBE stocks. Therefore, investors should invest in these stocks that are fundamentally strong and can sustain market jitters and ensure solid portfolio returns.
We ran the Zacks Stock Screener to identify the aforementioned enterprise software stocks that have a favorable combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or #2 (Buy).
The Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Additionally, per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or #2 and a Growth Score of A or B offer solid investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
The abovementioned enterprise software stocks look promising based on their encouraging growth prospects, Zacks Rank and Growth Score. Let’s discuss the tech stocks in detail:
Salesforce has been benefiting from the strong adoption of its cloud-based products and solutions as customers are undergoing a major digital transformation amid the ongoing hybrid work environment. Its ability to provide an integrated solution for customers’ business problems is the key driver.
Salesforce is currently focusing on incorporating generative AI tools across its products as it looks to keep its business ahead of rivals. The company forayed into the generative AI space with the launch of Einstein GPT in March 2023. Upping its ante in the space, last month, Salesforce launched its AI Cloud service, which the company claims is a one-stop AI-powered solution for enterprises looking to enhance productivity.
Furthermore, the company is cutting costs and raising product prices to improve profitability. To cut costs, Salesforce announced a broader restructuring plan in early January 2023. Under the plan, it intends to lay off approximately 10% of its total global workforce, exit real estate and shut down office spaces in certain markets.
Additionally, last week, Salesforce announced that it would raise the prices of certain products, which we believe is likely to boost the company’s profitability. CRM plans to hike prices across its core products — Sales Cloud, Service Cloud, Marketing Cloud, Industries and Tableau — by an average 9%, effective from August 2023.
Currently, Salesforce sports a Zacks Rank #1 and has a Growth Score of A. The Zacks Consensus Estimate for Salesforce’s fiscal 2024 earnings has been revised upward by 33 cents to $7.44 per share over the past 60 days, implying a year-over-year increase of approximately 42%.
Salesforce Inc. price-consensus-chart | Salesforce Inc. Quote
Atlassian is benefiting from the rising demand for remote working tools amid the hybrid work trend and accelerated digital transformation. An improvement in product quality and performance, multiple product launches, transparent pricing and a unique sales strategy is an upside. The expansion of its product portfolio through acquisitions is expected to accelerate growth momentum. Also, integration with leading applications like Dropbox and Adobe, along with partnerships, is likely to expand its paying-user base.
Atlassian’s latest focus on adding AI features to some of its collaboration software is likely to drive the top line over the long run. In April 2023, the company collaborated with OpenAI to enhance the capabilities of its Confluence, Jira Service Management and other programs with generative AI features.
Additionally, the company’s announcement of reducing its total workforce by 5% or 500 employees in March 2023 shows its sincere focus on improving profitability. The company cleared that the layoff is not a financially-driven reduction rather it is done to reallocate resources to concentrate on growth divisions.
Currently, Atlassian carries a Zacks Rank #2 and has a Growth Score of B. The Zacks Consensus Estimate for TEAM’s fiscal 2024 earnings has been revised upward by a penny to $2.11 per share over the past 60 days, suggesting a year-over-year increase of approximately 21.2%.
Atlassian Corporation PLC price-consensus-chart | Atlassian Corporation PLC Quote
Adobe has aggressively expanded its footprint in the generative AI space through partnerships and new solutions. Through its partnership with NVIDIA, Adobe is developing a generation of advanced generative AI models, with a focus on deep integration into applications. Adobe and Google also partnered to bring Firefly to Bard. Adobe Firefly is the most differentiated generative AI service that generates commercially viable, professional quality content.
Adobe has expanded its offerings powered by Adobe Sensei GenAI. It has unveiled Generative Fill in Photoshop, bringing Adobe Firefly generative AI capabilities directly into design workflows.
On the cost-cutting front, Adobe laid off about 100 employees in December 2022. Though it is a very small number compared with massive layoffs announced by other tech giants, the move reflects that Adobe has kept its operating expenses under check.
The stock carries a Zacks Rank #2 and a Growth Score of B at present. The Zacks Consensus Estimate for ADBE’s fiscal 2023 earnings is pegged at $15.70 per share, up by 26 cents over the past 30 days. This indicates year-over-year growth of 14.5%.
Adobe Inc. price-consensus-chart | Adobe Inc. Quote
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Salesforce Inc. (CRM) : Free Stock Analysis Report
Dollar General Corporation (DG) : Free Stock Analysis Report
NCR Corporation (NCR) : Free Stock Analysis Report
Adobe Inc. (ADBE) : Free Stock Analysis Report
Atlassian Corporation PLC (TEAM) : Free Stock Analysis Report
