For Immediate Release
Chicago, IL – September 10, 2020 – Zacks Equity Research highlights Ultra Clean Holdings UCTT as the Bull of the Day and Vail Resorts MTN as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Lam Research LRCX, Verizon VZ and Applied Materials AMAT.
Here is a synopsis of all five stocks:
Bull of the Day:
Ultra Clean Holdings is a Zacks #1 (Strong Buy) that is a developer and supplier of critical subsystems for the semiconductor capital equipment, flat panel, solar and medical device industries. The company customers are mostly manufacturers in the semiconductor equipment space, which gives the investors in UCTT exposure to tech.
About the Company
Ultra Clean was founded in 1991 and has almost 4,000 full time employees. It is headquartered in California, in the Silicon Valley region.
The company has a market cap of about $800 million and has Zacks Style Scores of “A” in Value and “B” in growth. The Forward PE is just over 8, making the stock a value candidate.
Ultra Clean reported Q2 EPS in late July, posting a 66% EPS surprise to the upside. Revenues were up to $344.8M v the $265M in the prior year. The company also guided Q3 EPS higher, now seeing a range of $0.56-0.72 v the $0.23 expected. Revenues look to improve and were guided higher to $320-360M v the $278 expected.
The beat was the sixth straight and the biggest surprise beat the company has ever seen. The quarter was well received, with the stock jumping over 20% after earnings were released.
Analysts have been hiking their numbers since the company reported and gave guidance. Over the last 60 days, estimates have jumped 333% for next quarter, from $0.12 to $0.52. For the current year, estimates have gone higher by 67% over the same time frame.
A couple upgrades of note since earnings. First coming from Stifel, who rates UCTT as a hold, but raised their price target to $26 from $23.
Needham has the stock at a Buy, and after earnings raised their targets to $35 from $26.
Is it time to buy after the big sell off?
The stock gapped higher after earnings, printing a 2020 high of $31.10. The stock is down over 35% since those tops, falling after the gap was filled and moving averages were broken. Recent issues with Intel could be hurting the stock with news of delays in manufacturing. Investors have a right to be nervous, but considering the valuation and recent earnings, the sell-off looks to be overdone.
Earnings caused a massive spike higher, but since the gap was filled the stock has been bleeding lower. The stock has now fallen into a 61.8% retracement level drawn from March lows to recent highs. This could be a big area for the bulls to step in, so investors should watch for a reaction around the $19.50 area.
If that area holds, the bulls would need to take back the 200-day MA at $21.75. Another area of resistance on a bull run would be $25, with longer term traders targeting $35.
The sell off is overdone and investors looking to buy should confirm support in the $19.50 area. While there might be fundamental issues coming from Intel, the company has long-term growth prospects at great value.
Bear of the Day:
Vail Resorts is a Zacks Rank #5 (Strong Sell) that operates mountain resorts and ski areas in the United States. The company owns popular names like Vail, Breckenridge, Keystone, Kirkwood, Park City Resort among others.
Vail typically sees a steady flow of visitors in its various resorts, but with COVID-19 still around as winter approaches, the stock could be in for some rough terrain.
Overview of Company
The Broomfield, Colorado company was founded in 1997 and has 6,600 employees. MTN has a market cap of almost $9 billion and has a Forward PE of 45. The stock has Zacks Style Scores of “F” in Growth and “D” in Value.
COVID-19 and Mountains
The big issue the company faces is the upcoming winter season and restrictions on travel and lodging. Additionally, the fear that is still in the air surrounding the virus will keep people away from ski resorts, which were thought to be one of the major areas of the original spread.
The Mountain segment accounts for almost 92% of the revenues for the company. So if ski schools, dining and retail operations don’t flourish as usual, the company will see less revenue.
Earnings and Estimates
Q3 earnings weren’t as bad as expected and the company actually beat expectations. This helped the stock rally, but when we look at the year over year numbers from the quarter there is reason to be worried about what the winter may bring. Mountains EBITDA came in $301M v the $468M the previous year and Lodging and Resort EBITDA was also down year over year.
The company had to suspend its dividend, cut capex and furlough most of its employees.
The next earnings release is September 24th, so the company might give some guidance on what to expect this ski season. Looking at estimates, analysts are not that optimistic.
For the current year, estimates have come down over the last month, from $2.61 to $2.58. For next year, analysts have dropped their numbers from $5.04 to $4.83, or 4% over the last month.
The stock rallied and held up well considering the environment. For now, it looks like investors are giving the company a free ski pass. However, if the 21-day MA break at $218 we could see the 200-day MA test at the $200 level. Below that area, the $180 and $140 levels could come into play. The big move lower likely won’t happen unless resorts have to be shut down again, but until COVID is vanquished, the upside will be limited.
All-time highs are $302.76. If a vaccine comes before the winter months, the stock could rally quickly. Until then, investors should stay off this black diamond of a stock.
3 Tech Stocks to Pick Up After Nasdaq Recalibrates
Tech stocks continued their lightning-quick selloff on Tuesday, with the Nasdaq closing 4% lower to enter correction territory as Wall Street returns from its summer break. The selling, as to be expected, has been driven by coronavirus standouts such as Apple, Zoom Video and others.
The S&P 500 and Nasdaq both hit records last Wednesday, while the Dow climbed above 29,000 for the first time since February. Since then, all three major U.S. indexes have tumbled, with the tech-heavy Nasdaq down slightly over 10% from its recent highs. This selling could simply have been a chance for many investors to take home profits on the high-flying tech space.
It took only three trading sessions for the Nasdaq to enter a correction, which seemed overdue given the massive run over the last five months. This downturn likely marks the healthy recalibration of many overheated stocks. And since the pullback happened so fast, things could potentially turn around somewhat quickly as well.
Investors should also remember that most of the recent economic data continues to point to a recovery. Therefore, the next frontier for the market to navigate will likely be the upcoming U.S. election, which is only eight weeks away. The quickly approaching election could put more pressure on Congress to push through another stimulus.
All that said, stocks might continue to fall in the near-term. Yet investors seem likely to start scooping up some of these quickly beaten-down tech names sooner than later. And, of course, stocks are poised to benefit as the Fed keeps interest rates pinned near zero.
Now it’s time to dive into three tech stocks with strong fundamentals that investors might want to consider buying after the Nasdaq entered correction territory. All three also offer the added bonus of a dividend, which is always nice to have, especially amid broader uncertainty.
Lam Research is a global supplier of wafer fabrication equipment and services, which is a vital part of the ever-growing semiconductor space. LRCX is part of our Semiconductor Equipment - Wafer Fabrication industry that currently ranks No. 4 out of over 250 Zacks industries. LRCX’s sales jumped 18% last quarter (Q4) to lift its FY20 revenue by 4%. This helped it start to bounce back from a 13% revenue decline in fiscal 2019.
Looking ahead, Zacks estimates call for LRCX’s adjusted fiscal 2021 earnings to surge 30% on 24% stronger revenue, with another 15% earnings growth expected in FY22 on 10% better sales. Along with its strong outlook within the historically cyclical chip market, its consensus earnings estimates have climbed significantly to help LRCX land a Zacks Rank #1 (Strong Buy) right now.
Lam Research announced at the end of August that it raised its dividend by 13%. LRCX’s yield now rests at 1.72% to top its industry’s 0.98% and match the S&P 500. The stock also continues to trade at a solid discount compared to its peer group.
Plus, Lam Research was already sliding before the recent selloff pushed it back to its June levels. Lam Research shares closed regular trading Tuesday down 21% off its early August highs. And the stock is still up 90% over the last 24 months.
Verizon is the largest U.S. wireless carrier by subscribers. The firm beat our Q2 estimates in late July. The telecom powerhouse’s revenue did slip roughly 5% during the period that captured the worst part of the coronavirus downturn. Despite the economic backdrop, management maintained its full-year guidance and the stock is up over 7% since its July 24 financial release.
Investors should note that VZ didn’t get hammered during the past three trading days because it wasn’t part of the massive run. Nonetheless, the stock has jumped 20% since the market’s March lows and is up around 2% over the last year to crush AT&T’s 20% decline. This outperformance extends back around three years, with VZ up 30%, with its telecom rival down 18%.
Verizon is a Zacks Rank #3 (Hold) right now that rocks “B” grades for Value, Growth, and Momentum in our Style Scores system. Plus, the firm announced last week that it raised its dividend for the 14th year in a row. VZ’s yield, which clearly isn’t artificially inflated by a falling stock price, sits at 4.19% right now to blow away the S&P 500 average and many other established dividend-paying tech stocks.
Let’s also not forget that Verizon will play a significant role in the 5G future. And it hasn’t taken on a ton of debt to fuel expansion into new industries like AT&T.
Applied Materials is a leading semiconductor equipment firm that boasts that its solutions are “used to produce virtually every new chip and advanced display in the world.” AMAT is part of the same industry as Lam Research and executives expect the company to benefit from the expansion of big data, AI, and more. AMAT topped our Q3 estimates in mid-August, with revenue up 23% and adjusted earnings up 43%. And its CEO said in prepared remarks that it “is positioned to grow faster than our markets over the next several years.”
Shares of Applied Materials are down around 15% in the last three sessions and over 18% since their post-Q3 release highs. Still, AMAT is up 40% during the market’s comeback and 10% over the last years. AMAT also trades at a discount against the broader tech sector even though its shares have skyrocketed 260% during the past five years, against 130%.
Peeking ahead, our Zacks estimates call for AMAT’s adjusted Q4 earnings to jump 46%, on 23% stronger sales that would see it reach $4.6 billion. Applied Materials has also seen its bottom-line revisions trend higher since its release to help it land a Zacks Rank #2 (Buy), alongside its “B” grade for Momentum. And its 1.58% dividend yield puts it roughly in line with the S&P 500’s average.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Ultra Clean Holdings, Inc. (UCTT) : Free Stock Analysis Report
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
Lam Research Corporation (LRCX) : Free Stock Analysis Report
Applied Materials, Inc. (AMAT) : Free Stock Analysis Report
Vail Resorts, Inc. (MTN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research