For Immediate Release
Chicago, IL – July 29, 2019 – Zacks Equity Research Shares of Zoom Video Communications ZM as the Bull of the Day, National Beverage Corp. FIZZ asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Facebook FB, PayPal PYPL and Microsoft MSFT.
Here is a synopsis of all five stocks:
Bull of the Day:
Zoom Video Communications is a cloud-based video-conferencing platform; it lets users connect on a desktop or other devices like a smartphone or tablet through an app. Its main customers are enterprises, though it does provide a free and cheaper tier plans that appeal to individuals and smaller groups.
Once customers sign up for plan, they have access to a slew of conference and communications tools that help organize meetings. Zoom’s products also integrate with many standard workplace software, including services and products made by Google, Microsoft, Dropbox, salesforce.com and Slack.
Shares Soar After First Earnings Report
Back in June, Zoom reported impressive numbers in its first earnings report since its IPO.
Revenues of $122 million beat our consensus estimate and soared 103% year-over-year. Plus, revenue from customers who spend over $100K annually jumped 120%; this means that Zoom is successfully getting its customers into some of its higher-value platforms and services.
Zoom also posted a profit in Q1. EPS came in at $0.03, beating our consensus estimate of breakeven. In the year ago quarter, the company reported a $1.7 million loss.
Cash flow was strong too. Net cash hit $22.2 million for the quarter, up from $2.8 million a year ago, while free cash flow turned positive to $15.3 million.
The cloud-based video communications company provided full-year revenue guidance, and expects its top line to be in the range of $535 million to $540 million. The analyst consensus was $526 million.
ZM on the Move
Since its IPO, shares of Zoom Video have been white hot, jumping more than 67% compared to the S&P 500’s return of roughly 3.4%. ZM priced its IPO at $36 per share, and for those investors who were able to get in right away, their shares have soared as high as 170%.
Earnings estimates have since been rising, and the stock is now a Zacks Rank #1 (Strong Buy).
For the current fiscal year, eight analysts have revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate has risen five cents from $-0.03 to $0.02. 2021 looks pretty strong too, with earnings expected to still remain in positive growth territory.
Since Zoom just began reporting a net profit, it’s hard to try and value the company, especially using traditional metrics like P/E.
Looking at its P/S ratio, shares are currently trading at 42X its F12 sales, well above the broader computer software-services market. This isn’t surprising though. With young companies like Zoom, you’re paying for the growth right now. And the company’s top line is growing; revenues are expected to see double-digit expansion over the next two fiscal years.
Thanks to this bullish near-term outlook and soaring sales, the future is looking promising for Zoom Video. If you’re an investor searching for a broader SaaS sector stock to add to your portfolio, make sure to keep ZM on your shortlist.
Bear of the Day:
National Beverage Corp.develops, manufactures, markets, and distributes a large portfolio of beverages. They are best known for LaCroix sparkling flavored water, but the company also owns drink brands Shasta, Faygo, Crystal Bay, Clear Fruit and Everfresh, among others.
Q4 Earnings Disappoint, Is Growth Slowing?
Earnings of 56 cents per share missed the Zacks Consensus Estimate and declined 28% year-over-year; net income of $26 million also fell 28% from the prior-year period.
Revenue came in at $240 million, also lagging behind our consensus estimate and decreasing 2% year-over-year. Putting Q4’s performance into perspective, sales dropped 3% last quarter and gained 7% in Q2. For the full-year, sales dipped 4% compared to 18% growth in fiscal 2018.
Volume gains in National Beverage’s core brands—this includes LaCroix—fell to 5% in fiscal 2019versus 39% last year.
Estimates Keep Falling
Analysts have since turned bearish on National Beverage, with two cutting estimates in the last 60 days for the current fiscal year. Earnings are expected to decline over 15% for the year, and the Zacks Consensus Estimate has dropped well over one dollar during that same time period from $3.67 to $2.54 per share.
This sentiment has stretched into 2021. Earnings are expected to still remain in negative growth territory, and our consensus estimate has dropped 48 cents in the past two months.
FIZZ is now a Zacks Rank #5 (Strong Sell).
Shares of the beverage distributor have fallen about 40% since January compared to the S&P 500’s gain of about 20.5%.
National Beverage is currently in the middle of an ongoing lawsuit that alleges unnatural ingredients in LaCroix products, which has resulted in some negative press.
But management is instead focusing on the company’s, and the LaCroix brand’s, strengths. Its plans for 2020 include additional LaCroix flavors, U.K. expansion, and a more aggressive marketing campaign, all initiatives that will help National Beverage’s goal to return to sales growth.
3 Bluechip Tech Stocks to Buy Following Earnings
Some of the biggest technology companies in the world have once again helped drive indexes to new highs in July. Second-quarter earnings season has, of course, not been kind to everyone, but some large-cap tech firms look strong following their recent quarterly financial releases.
Aside from Apple, which reports Tuesday, all of the other so-called FAANG stocks have Q2 earnings season in their rearview mirrors. Alphabet saw its stock price surge after hours Thursday and soar in morning trading Friday after the Google parent posted stronger-than-projected results and announced a massive buyback.
Amazon, meanwhile, fell short of earnings estimates Thursday. And Netflix last week scared off some investors following the streaming TV firm’s huge subscriber miss.
For those paying attention, we are still missing one FAANG stock. So, let’s jump into why a social media power and two other blue-chip tech stocks might be worth buying following earnings…
Facebook posted better-then-expected earnings and revenue results on Wednesday, with sales up 28% to $16.886 billion. The firm’s top-line expansion was spurred by continued user growth, with both monthly and daily active user totals up 8% to match Q1’s growth. Company executives estimate that more than 2.7 billion people use at least one of its “Family of services” every month, which includes Facebook, Instagram, WhatsApp, and Messenger. Facebook’s overall user strength comes despite privacy concerns that forced the company to pay a record $5 billion fine as part of a Federal Trade Commission settlement.
Mark Zuckerberg’s firm still faces government scrutiny and antitrust investigations. But it is ready to go along with regulation and has the money to deal with oversight. Plus, Facebook and all of its other platforms offer size and reach that make the company highly attractive to advertisers. Facebook is expected to grab over 22% of total U.S. digital ad revenue in 2019. FB also has plans to roll out a blockchain-based cryptocurrency and dive deeper in services-style offerings, as well as augmented reality.
FB is a Zacks Rank #2 (Buy) right now that has seen its upward earnings estimate revision activity surge following its earnings release, particularly for Q3 and fiscal 2020. Shares of Facebook are up 50% in 2019. This means FB stock could continue its post-earnings slip in the near future. But Facebook is an impressive company and its stock is trading at a significantly lower forward earnings multiple (22.9X vs. 29.3X) than its industry’s average.
Like Facebook, PayPal posted its quarterly results on Wednesday. The digital payments firm topped bottom-line estimates even though it came up just short of revenue projections. PYPL shares did slip from right below their all-time highs following the company’s lower-than-expected full-year revenue guidance. Nonetheless, PayPal appears to be well positioned to profit within the larger fintech revolution. This includes its widely popular person-to-person payment platform, Venmo, which competes against Square’s Cash App and others.
PayPal’s P2P volume jumped 40% in the second quarter to account for nearly 30% of the company’s total payment volume. Overall, the firm added 9 million, or 17% more, new active accounts during the quarter to bring its total to 286 million. Investors should also note that PayPal, which split from eBay in 2015, has beefed up its commercial future through deals with banks and fellow tech companies. PYPL has also invested hundreds of millions of dollars in Uber and MercadoLibre—which has been called the Amazon of South America.
Despite slightly subdued guidance, our current Zacks Consensus Estimates call for the firm’s adjusted third-quarter earnings to jump nearly 21% on the back of 17.8% revenue growth that would see it hit $4.34 billion. This top-line growth would crush Q2’s 12% climb. PYPL is a Zacks Rank #2 (Buy) at the moment that sports an “A” grade for Momentum and “B” for Growth in our Styles Scores system. As we mentioned, the stock could pull back off its recent highs of $121.48 a share. Yet PayPal appears solid overall and its P/E of 37.9 rests far below its industry’s 65.6 average and Square’s 106.1
The last stock on our list today topped quarterly Wall Street estimates last Thursday. Microsoft stock has continued to hit new heights following its release, which includes Friday morning’s new 52-week high of $141.25 a share. The tech titan’s Intelligent Cloud unit once again stole the show. Unit revenue climbed 19% to $11.4 billion in MSFT’s Q4 fiscal 2019, with Azure up 64%. The firm’s expansion into cloud computing has seen it compete directly with industry leader Amazon.
Not to be outdone, Microsoft’s “Productivity and Business Processes” unit—that features Office, LinkedIn, and more—jumped 14% to $11.0 billion. The company’s Windows business has also continued to grow and its gaming unit is expected to play a vital role for years to come. Peeking ahead, MSFT’s fiscal 2020 revenue is expected to climb 11% above 2019, with 2021 expected to jump 10.4% higher to reach $154.18 billion. MSFT’s EPS is projected to pop nearly 10% this year and 13.5% above that in fiscal 2021.
Microsoft stock has climbed 39% in 2019 to help it become the world’s most valuable public company with a market cap over $1 trillion. On top of that, its recent positive earnings estimate revision activity helps it earn a Zack Rank #2 (Buy). Microsoft also pays an annualized dividend of $1.84 a share at the moment, with a 1.31% yield.
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