The Zacks Analyst Blog Highlights Cadence Design Systems, Splunk and Vipshop
For Immediate Release
Chicago, IL – October 24, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Cadence Design Systems CDNS, Splunk SPLK and Vipshop VIPS.
Here are highlights from Monday’s Analyst Blog:
Pricing-In Risks: Global Week Ahead
In the Global Week Ahead, stock traders attempt to price in risks from:
· Escalating tension in the Middle East, as
· Surging U.S. bond yields set financial markets up for more turbulence
· Exacerbated by high oil prices, and
· China's property pain
In terms of weekly events?
· There's a slew of U.S. earnings, with mega-cap tech stocks among them
· The European Central Bank looks to sit tight after a string of rate hikes, and
· Argentina's presidential election stirs up that Latin American country
Next are Reuters' five world market themes, reordered for equity traders—
(1) Many mega-cap tech stocks report results.
Reports from mega-cap companies highlight a big batch of third quarter U.S. corporate earnings, a key test for stocks that have propelled equity indexes higher this year.
· Microsoft and Alphabet results are due on Tuesday
· Meta Platforms on Wednesday, and
· Amazon on Thursday
Those stocks, along with Apple, Nvidia and Tesla, combined have accounted for the bulk of the S&P 500's +11% year-to-date gain, so any results disappointment could have broad fallout.
Others reporting in the coming week include Coca-Cola, General Motors, Merck and United Parcel Service.
Investors are banking on an overall recovery in U.S. profits after a tepid first half.
Markets also get a fresh look at the state of the economy from data including third-quarter GDP and the monthly Personal Consumption Expenditures (PCE) price index.
(2) Risk markets remain uneasy, about a possible widening Hamas-Israel war.
War is raging between Israel and Palestinian militant group Hamas, and an uneasy calm grips market, as they wait and see how the conflict unfolds.
Market reaction has been relatively modest with Wall Street's so-called 'fear gauge,' the VIX index, showing investors are not as nervous as they were when Russia invaded Ukraine last year — at least, not yet.
Oil is the barometer to watch. It hit $93 a barrel on Wednesday as the risk of escalation threatened to disrupt Middle East oil supplies.
A wider conflict would deliver another shock to markets, potentially forcing the hand of central banks that have been unswerving in their determination to fight inflation.
The "flash" manufacturing and service sector activity surveys in coming days could add to uncertainty if they point to economic weakness.
(3) On Thursday, the European Central Bank (ECB) meets. On Wednesday, it's the Bank of Canada (BoC).
The European Central Bank, meeting on Thursday, will likely have one eye on the potential for conflict in the Middle East to disrupt dis-inflationary trends and the other on a weakening economy.
Hopes for rate cuts would be premature. ECB Chief Economist Philip Lane says the central bank was still "quite some distance" from easing monetary policy.
But traders can expect, at least, a pause for now.
After the ECB raised its deposit rate at each of its last 10 meetings to a current record high, policymakers have signaled it is time to keep borrowing costs on hold as they assess the impact of monetary tightening so far.
Canada's central bank, meeting on Wednesday, is tipped to leave rates steady as inflation eases.
(4) Signs of green shoots for mainland China's economy? Or a real estate bust?
Signs of green shoots for China's economy after upbeat retail sales, factory production and GDP data are hard to spot as the weeds in the property sector get thicker.
Making up a quarter of the world's No. 2 economy, property turmoil threatens China's +5.0% growth target — even after a consensus-smashing +4.9% quarterly expansion.
That hasn't escaped investors, who pushed mainland shares to a nearly one-year trough.
A lot of what's happening is hidden from view: A default deadline for Country Garden's debt passed in silence, and the property developer was forced to deny its founder and his daughter had fled China.
The market is scouring the landscape for who's next, and the sudden resignation of Gemdale's chairman, for unspecified health reasons, spurred a fire sale of its bonds.
Pressure on Beijing for further stimulus is strong and steps so far have disappointed.
(5) Argentina votes again Nov. 19th, as their economy deals with +138% inflation.
On Sunday, Oct. 22nd, stewardship of Argentina's $600 billion economy was on the line.
Latin America's third largest economy is engulfed by a severe economic crisis: inflation runs at +138% and is on the verge of going hyper, interest rates stand at +133% and the black-market peso has weakened more than 60% this year alone.
For investors, the survival of the country's $43 billion program with the International Monetary Fund is at stake, as well as the possibility of Argentina defaulting on its debt for the tenth time.
Argentina's ruling Peronist coalition smashed expectations to lead the country's general election on Sunday, setting the stage for a polarized run-off vote next month between Economy Minister Sergio Massa and far-right libertarian radical Javier Milei.
Massa had 36.6% of the vote, ahead of Milei on just over 30%, while conservative Patricia Bullrich was behind on 23.8% with near 98% of the vote counted, a result that defied pre-election polls that had predicted a libertarian win.
The surprise strength of the Peronists, despite overseeing inflation hitting triple digits for the first time since 1991, sets up an intriguing second round on Nov. 19th between two polar opposite economic models for the embattled country.
Zacks #1 Rank (STRONG BUY) Stocks
Let's look at 3 top info tech stocks, ones with long-term A or B Zacks Growth ratings.
(1) Cadence Design Systems:This is a $245 a share stock, with a market cap of $67B. I see a Zacks Value score of F, a Zacks Growth score of B and a Zacks Momentum score of A.
Based in San Jose, CA, Cadence Design Systems offers products and tools that help customers to design electronic products.
Through System Design Enablement (SDE) strategy the company offers software, hardware, services and reusable IC design blocks (IPs) to electronic systems and semiconductor customers.
Cadence's core electronic design automation (EDA) software and services enable engineers to develop different types of ICs. Its design IP's are directly integrated into the ICs.
System Connect tools and services are used for the design, analysis and verification of PCBs. Further, System Integration solutions aid in designing and analyzing systems as well as verifying system functionality.
Cadence reported revenues of $3.562 billion in 2022.
The major product lines are as follows:
· Functional verification products (26% of total 2022 revenues) comprise four primary verification engines – JasperGold formal verification platform, Xcelium parallel simulation platform, Palladium Z1 enterprise emulation platform and Protium S1 FPGA-based prototyping platform.
· Digital IC Design and Signoff (28%) offerings include Genus synthesis, Stratus high-level synthesis, Joules RTL power and Modus test solutions. Innovus implementation system is the company's physical implementation offering. Tempus timing and Voltus power analysis, Quantus QRC extraction solutions, Physical Verification System and DFM are the signoff solutions.
· Custom IC Design and Simulation (22%) includes the Virtuoso custom design platform. Virtuoso Advanced Node, Virtuoso Electrically Aware Design (EAD) and Spectre XPS FastSPICE Simulator are new products in the segment.
· Systems Design & Analysis segment (12%) offers Allegro system interconnect design platform, Sigrity analysis tools and OrCAD solution.
· Under the IP segment (12%), Cadence offers Tensilica DSPs, vertically targeted subsystems for audio/voice, baseband and vision/imaging applications, controllers and physical interfaces (PHYs) for standard protocols and analog IP.
In 2022, the company derived 44.3% of revenues from the United States, while the balance 55.7% came from its international operations.
(2) Splunk: This is a $148 a share stock, with a market cap of $25B. I see a Zacks Value score of F, a Zacks Growth score of A and a Zacks Momentum score of D.
San Francisco, CA-based Splunk Inc. provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data.
The company's offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source, and helps in operational decision making.
The company's flagship offering, Splunk Enterprise, is primarily a machine data platform. It can collect and index petabytes of machine data on a daily basis.
Splunk Enterprise also enables users to interactively explore, analyze and visualize data stored in sources such as Hadoop and Amazon S3.
Splunk Cloud delivers the benefits of Splunk Enterprise deployed and managed reliably and scalably as a service. Splunk Light provides log search and analysis, which are designed, priced and packaged for small IT environments.
The company's premium solutions include Splunk Enterprise Security (ES), Splunk IT Service Intelligence (ITSI) and Splunk User Behavior Analytics (UBA).
These solutions address emerging security threats and information and event management (SIEM), monitor health and key performance indicators of critical IT, and detect cyber-attacks and insider threats in business operations, respectively.
Splunk complements the aforementioned services with few add-ons, including Splunk Machine Learning Toolkit (MLTK), Splunk App for AWS, Splunk DB Connect and Cisco Firepower App for Splunk.
Splunk generated revenues of $910.6 million in the second quarter of fiscal 2024. License and Cloud Services contributed 32.4% and 48.9% of total revenues, respectively. Maintenance and services revenues accounted for the rest.
Splunk Enterprise customers pay license fees generally based on their estimated peak daily indexing capacity needs. The company also generates revenues from enterprise adoption agreements (EAAs). Splunk Cloud customers pay an annual subscription fee based on the combination of the volume of data indexed per day and the amount of data stored.
The company faces significant competition from the likes of Oracle, IBM, Intel and Microsoft, among others.
(3) Vipshop: This is a $15 a share Mainland China tech stock, with a market cap of $8.9B. I see a Zacks Value score of A, a Zacks Growth score of B, and a Zacks Momentum score of C.
Vipshop Holdings Ltd. is an online discount retailer for brands.
The company offers branded products to consumers in China through flash sales on its vipshop.com website.
It offers a wide selection of various famous branded discount products including apparel for women, men and children, fashion goods, cosmetics, home goods and other lifestyle products through its website.
Vipshop Holdings Ltd. is headquartered in Guangzhou.
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