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TechTarget and Clorox have been highlighted as Zacks Bull and Bear of the Day

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·13 min read
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For Immediate Release

Chicago, IL – February 23, 2022 – Zacks Equity Research shares TechTarget TTGT as the Bull of the Clorox CLX asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on D.R. Horton DHI, Toll Brothers TOL and KB Home KBH.

Here is a synopsis of all five stocks:

Bull of the Day:

The medically induced economic coma that we have lived through the past 2-years has forced the world to function remotely, driving a nearly immediate pull-forward in digital adaptation and providing well-positioned next-generation innovators with an unprecedented tailwind that shows no signs of slowing as the Roaring 20s recommence.

TechTarget, the world’s leading provider of technology purchase intent data and services, is one such digitally powered enterprise with operations predicated for knowledge-based sales in the new economy. This future-focused strategic enterprise solution company provides best-in-class B2B customer behavioral data to help maximize sales opportunities within the rapidly expanding enterprise tech sector.

TechTarget’s mid-February earnings report drove up long-term expectations for this niche customer data supplier (with a quickly growing total accessible market, aka TAM), driving TTGT into a Zacks Rank #1 (Strong Buy), with long-term earnings growth potential that can’t be ignored.

The consensus price target for this still under-the-radar technology play is over $100 a share, and it’s only a matter of time before this now heavily discounted stock (over 30% off highs) gets back up there (50% upside in many cases).

The Business

TTGT has more than quadrupled in value since its pandemic lows, having gone from a slow-growth micro-cap information company into the global leader in intent data for next-generation enterprise software. The company’s more than 2,500 customers are in critical 4th Industrial Revolution-focused fields like cloud computing, big data, artificial intelligence (AI), cybersecurity, and numerous other digitally energized business solutions.

TechTarget has 22 years’ worth of technology onboarding experience with more than 20 million ‘permissioned’ members it collects data from, generating 1.4 million leads annually (and growing). The pandemic was the exact digital jump-starter the company needed to solidify its dominance of behavioral data analytics in the tech space.

TechTarget just named Forbes Best Mid-Size Companies of 2022 (market cap between $2 and $10 billion). Following its inclusion in Forbes’ Best Small-Cap Companies of 2021, this rapidly expanding enterprise is looking to market on Forbes’ Best Large-Cap Companies of 2023. With 78% revenue growth in 2021, swelling investable capital, and a 5-year compounded annual shareholder returns north of 50%, I see this 2023 large-cap goal as a very attainable feat.

TechTarget has been a massive beneficiary of the global economy’s rapid digital transformation. It remains at the forefront of swelling enterprise demand as companies turn to the ease and convenience that TechTarget’s understanding and identifying solutions provide the tech world’s sales and marketing teams.

The firm’s tech-focused insight about the target customers allows its users to focus on the right set of cloud-based enterprise solutions from its tech vendor partners, setting both buyers and vendors up with the most advantageous execution plans for their quickly growing and improving business models as our economy rapidly digitalizes.

Technical Analysis

TechTarget was perfectly positioned for the imminent technological renaissance and managed to execute on the pandemic’s digitalizing opportunities exceedingly well. Analysts have been getting increasingly bullish on TTGT in recent weeks as its shares finally float down to an equitable level after an over-euphoric pandemic rally (going from less than $17 a share at its pandemic low to over $100 less than a year later).

TTGT has been trading in a highly volatile manner due to its “pandemic-winner” profile, which has caused many future-focused stocks to slip into bear market territory in recent months (-20% or more off highs).

TTGT bounced off a critical extended horizon Fibonacci-retracement from 2018’s summer highs to the lows that December 2018 brought. This Fib from 2018 has been crucial to TTGT’s technical outlay for years now, having peaked out at nearly the exact long-term technical target (423.6% Fib-retracement at $111.44 a share) this Fib provided 3 years prior.

Today the shares bounced cleanly off the 261.8% Fib-retracement just south of $72.96 a share and headed higher from there. TTGT is trading at a recently discounted valuation south of 30x forward P/E, and with double-digital annual growth projections for years to come, the value looks to be undeniable here.

Final Thoughts

The fundamental and technical stars appear to be aligning on this underappreciated mid-cap equity. TechTarget’s leading global positioning in the intent data and services corner of the burgeoning tech space positions it for years of growth as innovators endless assess new ways to get their product in front of the right customers.

It’s time to consider starting a position in TTGT amid the current market opportunity ripening volatility.

Bear of the Day:

Clorox, a leading multinational consumer staples conglomerate with a controlling interest in cleaning supplies, was a clear-cut COVID winner. Masked consumers raced to their local drug stores and supermarkets to stock up on everything from Clorox wipes to Glad trash bags (a Clorox subsidiary) as the world prepared to lockdown, boosting CLX shares to all-time highs.

However, this hoarding-fueled consumption behavior was proven to be unsustainable, which can be seen from the margin-pinching year-over-year top and bottom-line declines in Clorox's past 4 quarterly reports.

Clorox's family of brands posted record revenues in the first few quarters of the pandemic, with its topline growth monetarily breaching 20% (year-over-year) in 2020 as these highly demanded consumer products became scarce commodities.

Clorox's previously low-beta shares took off in the first 7-months of 2020, going from a stable $150 to its $240 peak in early August (60% appreciation), which is when the tide turned as analysts began suspecting peak growth and they weren't wrong.

CLX has since fallen nearly 40% off its 2020 highs as investors begin to realize that the pandemic was more of a moment of glory for Clorox than a sanitation-focused societal shift.

In the first week of February, its latest inflation plagued earnings report showed the market that Clorox's pandemic-thriving business was now struggling to keep its margins above water. Clorox missed EPS estimates because of rapidly reversing sales growth, margin crushing commodity costs, and feeble forward guidance, causing CLX to capitulate nearly 15% in just one session.

CLX is now trading below its pre-pandemic levels as commodity pricing pressures look to be a longer-term headwind than initially priced in.

Analysts have been reeling in their earnings expectations and price targets in tandem, as CLX's net margins get diminished to almost nothing, with inflation driving up costs at the fastest pace in 4-decades. CLX is now sitting at a Zacks Rank #5 (Strong Sell) and could go lower depending on the pivotal January CPI reading, which will have direct implications on Clorox's current quarter costs.

I'm not recommending that you take any position in CLX at this juncture with the stock sitting deep in oversold RSI territory, which could catalyze a technical bounce. Still, I wouldn't want to be holding CLX in this inflationary environment as its margins get pressured down to nothing.

I recommend staying away from CLX until it can generate proven margin-improving results.

Additional content:

Homebuilding Market Still Flourishing: 3 Picks

Since the economy started reopening following the onset of the pandemic, demand for homes in the United States has helped the homebuilding market. While construction activity is yet to attain the optimum level, the homebuilding sector has played an active role in overall construction spending.

After a successful 2020 and 2021, the homebuilding market seems to be on track for further growth this year, with home sales rising in January. Given this situation, stocks like D.R. Horton,Toll Brothers and KB Home  are likely to benefit in the near term.

Existing Home Sales Soar

The National Association of Realtors (NAR) said on Feb 18 that existing home sales jumped 6.7% in January to a seasonally adjusted annual rate of 6.5 million units. Economists had forecast a decline of 1% in existing home sales to a rate of 6.1 million units. The NAR also said that sales increased 9.3% in the densely populated South.

Existing home sales account for the bulk of the home sales in the United States. However, sales declined 2.3% on a year-over-year basis as median prices of homes increased 15.4% from last year at this time to $350,300.

People have been scrambling to buy homes, while homebuilders are struggling to ramp up construction owing to higher labor costs, rising prices of raw materials like softened lumber and shortage of supply.

However, January’s sales growth came despite rising costs. People rushed to buy homes across the United States in anticipation of prices rising further once the Fed goes for rate hikes. This will further push up the prices of homes, which many buyers are trying to avoid.

Homebuilding Market Overcoming Challenges

The homebuilding market seems to be on track for a rally after slowing down during the last few months of 2021. Demand for homes is expected to be strong this year, driven by the ongoing demographic shift, as millennials and Gen-Zers are trying to come of age and become homeowners now.

However, the supply of homes is far lower than what it was before the pandemic hit, making it difficult to find new homes. Increasing costs of raw materials and rising rates may also be a cause of concern in the coming months.

This may not be all true. According to a separate report released last month by the Conference Board, home-buying intentions for the next six months have reached a new high, which is a positive indication for the industry.

There were fewer homes available before the pandemic because of high demand, and fewer homeowners are willing to put their homes on the market now. This has led to higher home prices, which is projected to continue in the coming days.

Our Choices

The homebuilding market is going strong, despite rising prices, and demand for homes is predicted to remain high through 2022. As a result, this is an opportune time to invest in homebuilding stocks.

D.R. Horton is one of the leading national homebuilders, primarily engaged in the construction and the sale of single-family houses both in the entry-level and move-up markets. DHI’s operations are spread over 91 markets across 29 states in the East, Midwest, Southeast, South Central, Southwest and West regions of the United States. D.R. Horton’s houses are sold under the brand names D.R. Horton - America’s Builder, Emerald Homes, Express Homes and Freedom Homes.

D.R. Horton’s expected earnings growth rate for the current year is 38.5%. The Zacks Consensus Estimate for current-year earnings has improved 9.4% over the past 60 days.  DHI has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Toll Brothers Inc. builds single-family detached and attached home communities; master-planned luxury residential resort-style golf communities; and urban low, mid, and high-rise communities, principally on the land it develops and improves. TOL operates in Arizona, California, Florida, Delaware, Maryland, Pennsylvania, and South Carolina. Toll Brothers offers homes under two segments, namely Traditional Home Building Product and City Living.

Toll Brothers’ expected earnings growth rate for the current year is 49.9%. The Zacks Consensus Estimate for current-year earnings improved 2.5% over the past 60 days.  TOL has a Zacks Rank #2.

KB Home is a well-known homebuilder in the United States and one of the largest in the state. KB Homes’ revenues are generated from Homebuilding (accounting for 99.7% of fiscal 2021 total revenues) and Financial Services (0.3%) operations. KBH’s homebuilding operations include building and designing homes that cater to first-time, move-up and active adult homebuyers on acquired or developed lands. KB Home also builds attached and detached single-family homes, town homes and condominiums.

KB Home’s expected earnings growth rate for the current year is 67.9%. The Zacks Consensus Estimate for current-year earnings has improved 28.9% over the past 60 days. KBH sports a Zacks Rank #1.

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