For Immediate Release
Chicago, IL – February 5, 2021 – Zacks Equity Research Shares of Zoom Video Communications, Inc. ZM as the Bull of the Day, Cimpress plc CMPR as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Flex Ltd. FLEX, Huntsman Corporation HUN and Abercrombie & Fitch Co. ANF.
Here is a synopsis of all five stocks:
Bull of the Day:
Remote work and schooling thrust Zoom Video into the spotlight last March and its stock soared for months. The video conferencing platform’s shares have pulled back significantly since October, and Wall Street is currently assessing how the rollout of the coronavirus vaccine will impact Zoom.
Despite one-hit-wonder worries, Zoom was growing before the lockdowns. And no matter what the world looks like by the summer, it seems relatively safe to say that more people will be working remotely in at least some capacity, as the long-talked about work-from-anywhere business environment begins.
Video Conferencing Future
Zoom had steadily grown its business-focused video communication platform since its founding in 2011, within a somewhat crowded space. The company then went public in April 2019 and found early success, before falling back to its early trading levels by the end of 2019. Still, ZM posted strong growth in its first year as a public company, with its fiscal 2020 revenue up 88% to $623 million for the period ended on January 31, 2020.
Then the world changed as lockdowns and social distancing forced companies and people everywhere to find ways to continue working and stay in touch. The company’s relatively easy to use cloud-based video conferencing offerings that can be used across an array of devices became a hit and a verb nearly overnight.
Luckily, ZM’s revenue comes from subscription-based paying customers, which means it doesn’t really matter that many people stopped doing family and friends Zoom calls months ago. The company offers an array of communication services and various tiers geared to different size businesses, as well as educational-focused offerings.
Even as more people return to offices around the U.S. and the world, Zoom’s offerings are still being utilized nearly non-stop in the current remote work and learning environment. And the possibility of businesses remaining in their current remote capacity in the near-term is realistic, especially for many professional services firms in big cities, where public transportation, elevators, and more hamper reopening plans.
Hopefully the vaccines help life return to something far closer to normal later this year. This means that Zoom’s long-term success hinges on the official arrival of the work-from-anywhere age.
The U.S. economy is bouncing back and corporate earnings have come in far better-than-projected, even as millions of people continue to work from home. The reason is simple: so much work was being done digitally already and the proliferation of business software, SaaS, cloud computing, and more created a relativity seamless transition.
This could propel companies to permanently cut back on rent and commercial real estate expenses. Some big companies have already committed to larger-scale remote work plans and hybrid environments. And something like three days in the office and two out, could become permanent.
The pandemic might have also helped normalize fewer work trips, which offers companies the chance to save money. And as the clean energy push grows, firms might use business travel as a simple way to reduce their environmental impact—ZM highlighted the green angle before the pandemic.
Zoom knows that the current environment won’t last forever, but executives are already pretty sure the business world might have reached an inflection point. Zoom has introduced hardware offerings for homes and offices in collaboration with other tech companies. And on February 3 it announced “the general availability of Zoom Rooms innovations that will help organizations safely re-enter the office and sustain an “everywhere workforce.”
ZM is ready to help companies with a hybrid environment and it cited a study that over 80% of employees working remotely hope to continue to “work remotely at least 50% or more once they do return to the office.” It’s not just Zoom talking up the possibilities, Verizon bought video conferencing firm BlueJeans last year and Salesforce paid $28 billion for Slack—which is the second-largest deal in software history.
Zoom’s revenue jumped by 80% in Q4 FY20 (before the pandemic), it then soared 170% in Q1, 355% in Q2, and 367% last quarter. ZM saw its customers with more than 10 employees skyrocket 485% to over 433,000, while its users contributing over $100,000 in trailing 12 months revenue jumped 140%. And executives provided upbeat guidance in early December.
Zacks estimates call for Zoom’s adjusted Q4 earnings to jump 420% to $0.78 a share on 330% stronger sales. The company is then projected to grow its sales by 153% in the first quarter of FY22 to lift its bottom line by another 270%.
Overall, the video conferencing firm’s full-year fiscal 2021 earnings are projected to climb 725% from $0.35 a share in the year-ago period to $2.89. Meanwhile, its pandemic-fueled year is expected to help its revenue climb 314% from $623 million to $2.58 billion.
Clearly, it would be nearly impossible to come anywhere near matching FY21’s growth. Nonetheless, Zoom’s sales are projected to jump another 37% or $1 billion above our current year estimate to $3.53 billion in fiscal 2022 and its adjusted earnings are projected to climb slightly.
As we mentioned at the top, ZM shares have come back to earth over the last few months, down 35% from its October highs of over $570 a share to around $390 at the close of regular trading Thursday. The pullback has created opportunity for Zoom and proven there’s still appetite.
ZM raised $2 billion by selling more stock at $340 a share in an offering that closed in mid-January to help support its rapid expansion and help it fight against Webex, Microsoft’s Teams and others.
ZM stock has climbed 15% since January 12, and Zoom remains far from overbought in terms of the Relative Strength Index, with ZM sitting at around 53—an RSI above 70 is often regarded as overbought, with any number below 30 considered oversold.
Analysts have also remained high on Zoom, with the current consensus price target Zacks has accumulated at $468 a share, 20% above its current levels. And the stock has broken above its 50-day moving average to start February after failing to break through the resistance level twice in January.
Zoom’s positive earnings revisions help it land a Zacks Rank #1 (Strong Buy) at the moment, alongside its “A” grade for Growth in our Style Scores system. The company has topped our bottom-line estimates by an average of 90% in the trailing four quarters and it will report its Q4 results on March 1.
Bear of the Day:
Cimpress fell well short of our earnings estimates near the end of January. The miss marked the third-straight rough quarter on the EPS front for the owner of Vistaprint and other companies that sell customized offerings from clothing to signs to businesses and entrepreneurs.
Cimpress owns BuildASign, Exaprint, Pixartprinting, Vistaprint, and other companies that cater to various business customization needs. The Ireland-headquartered company customizes products on a mass scale, from business cards and stickers to yard signs and clothing. The pandemic has been hard on CMPR, as its customers cut back on spending.
The firm’s revenue has looked better over the last two quarters, after it fell 36% during the height of the pandemic. Still, Cimpress revenue has fallen in the trailing five periods. Most recently, its second quarter fiscal 2021 revenue fell over 4%, while its adjusted earnings tumbled and missed our bottom-line estimate by roughly 57%.
CMPR shares have trended in the wrong direction well before the coronavirus, down around 37% in the past three years, as the nearby chart shows. The stock has bounced back from its March 2020 lows and it has started to recover from its post-Q2 earnings release selloff.
That said, analysts have lowered their earnings outlooks since its report as its outlook remains subdued. Luckily, the company is projected to start to bounce back in a big way in the fourth quarter of FY21, albeit against an easy-to-compare period.
Cimpress is part of our Consumer Services – Miscellaneous space that rests in the bottom 6% of our over 250 Zacks industries. And CMPR’s downward earnings revisions helped it land a Zacks Rank #5 (Strong Sell) at the moment. That said, the stock could be ready to bounce back if the economy starts to kick into a higher gear by the summer.
3 Stocks with Increasing Earnings, Ratings and Prices
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After standing still for a few months, earnings estimates for Flex have finally taken off in the past few days. Expectations are sharply higher after the company outlined “robust” demand across its portfolio of businesses this earnings season.
FLEX provides “sketch-to-scale” services to original equipment manufacturers in various industries, including medical, automotive, industrial, home appliances, capital equipment, energy, and many others. The end-to-end services it provides includes designing, engineering, manufacturing and supply chain services/solutions.
As part of the electronics – misc products space, FLEX is in the top 34% of the Zacks Industry Rank. Shares are up more than 38% over the past year.
Last week, FLEX reported its sixth straight beat of the Zacks Consensus Estimate. Fiscal third-quarter earnings of 49 cents topped our expectations by more than 32%. The average surprise over the past four quarters is now 24.1%. The result was also a nearly 29% improvement year over year.
Revenues of $6.7 billion topped our expectation by 7.4% and eclipsed last year by 4%.
FLEX obviously knows where the future is. For example, the improving automotive sector was a particularly strong area in the quarter, especially as the company expands its business in the space by focusing on autonomous and electric cars. But that’s just the tip of the microchip when it comes to up-and-coming technologies.
FLEX is also positioned to gain from momentum in artificial intelligence, augments & virtual reality and industrial automation.
Getting back to earnings estimates, the Zacks Consensus Estimate for this fiscal year (ending March 2021) jumped 14.3% to $1.44 in the past week. For next fiscal year (ending March 2022) the advance has been 10.8% to $1.54.
Therefore, analysts are currently expecting year-over-year growth of 6.9%, which is likely to rise amid improving demand in an economy that’s, hopefully, getting back to normal in the months ahead.
When Huntsman boasted “positive momentum entering the fourth quarter” in its October report, the chemicals company wasn’t kidding around. Last month, it stated that adjusted EBITDA would be better than its prior guidance and above the prior year by between 20% and 25%.
So it’s no wonder earnings estimates are on the rise as we head toward that fourth-quarter report on February 12.
HUN is one of the world’s largest manufacturers of differentiated and commodity chemical products. It’s biggest reportable segment is Polyurethanes (57% of 2019 sales), which are used in making rigid foams, coatings, adhesives, sealants and elastomers. The other segments include Performance Products (17%), Advanced Materials (15%) and Textile Effects (11%).
As a chemical – diversified company, HUN is part of a space in the Top 10% of the Zacks Industry Rank. Shares are up 10.7% so far this year and 39.2% over the past 12 months.
The third-quarter report saw improving conditions across most of the company’s businesses, except commercial aircraft. Earnings per share of 32 cents eclipsed the Zacks Consensus Estimate by 28%. That marks four straight beats with an average surprise of more than 28.5%.
Revenue of more than $1.51 billion topped our expectations by nearly 3%. This was also the fourth straight beat.
Other recent news included HUN completing the purchase of Gabriel Performance Products on January 15, which will provide commercial synergies for the expansion of its specialty products portfolio.
The Zacks Consensus Estimate for 2020 is at 91 cents, which marks an improvement of 15.2% over the past two months. However, the most impressive stuff is coming up. HUN is expected to earn $1.94 in 2021, which is up 12.1% in the same amount of time.
Therefore, analysts currently expect earnings growth of over 113% in 2021 over 2020.
Abercrombie & Fitch
Under normal conditions, you probably wouldn’t get too excited about a company pre-announcing a narrower loss than previously expected. It’s good news, of course, but nobody’s throwing a party.
However, if an apparel company struggling through this pandemic offers such a forecast, then its at least worth a virtual happy hour because most are still wary of looking too far into the future.
And yet, that’s exactly what Abercrombie & Fitch did last month. The global specialty retailer of apparel and accessories said it now expects fourth-quarter net sales to decline between 5% and 7%, instead of its previous expectation for a slip of 5% to 10%.
As you’d expect, ANF is managing to stay strong in a difficult time because of “robust” digital sales, though its also taking efficient expense management actions to deal with the disruptions in its stores.
The company will report that fourth quarter along with most other retail stocks in early March, which would be the tail end of earnings season. Shares of ANF are up 24.2% so far in 2021 and more than 56% over the past year.
Late November saw ANF report fiscal third-quarter earnings of 76 cents per share, which trounced the Zacks Consensus Estimate at a five-cent loss. Yes, that comes to a surprise of more than 1600%, which you can probably chalk up to unpredictability during this pandemic. Nevertheless, the company has beaten our expectations in three of the past four quarters.
Net sales of $819.7 million topped the Zacks Consensus Estimate by 11.5% but were down 5% year over year. Perhaps most importantly, though, digital net sales increased 43% to $382 million.
Earnings estimates have been pretty erratic as well, but are still very positive. The Zacks Consensus Estimate for last fiscal year (ended January 2021) has narrowed in the past 30 days to a loss of $1.11 from a loss of $1.37.
However, the pandemic will hopefully be under control sometime this year, which explains why expectations soared to a profit of $1.12 for the year ending January 2022. So a loss of $1 to a gain of $1 in one year… not bad!
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
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