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Echo Global Logistics, Shift4 Payments, Applied Materials, MACOM Tech and ON Semiconductor highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – May 24, 2021 – Zacks Equity Research Shares of Echo Global Logistics, Inc. as the Bull of the Day, Shift4 Payments, Inc. (FOUR - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Applied Materials, Inc. (AMAT - Free Report) , MACOM Technology Solutions Holdings, Inc. (MTSI - Free Report) and ON Semiconductor Corp. (ON - Free Report) .
Echo Global Logistics is a Zacks Rank #1 (Strong Buy) that is a leading logistics provider, offering transportation and supply chain management solutions. The company utilizes a proprietary technology platform to compile and analyze data from its multi-modal network of transportation providers for transportation and logistics needs.
About the Company
Echo employs over 2,600 and is headquartered in Chicago, IL. The company was founded in 2005 and has since served manufacturing, construction, food and beverage, consumer products and retail industries.
ECHO is valued at $875 million and has a Forward PE of 17. The company holds a Zacks Style Score of “B” in Growth, but “C” in Value.
Q3 Earnings
In late April, the company reported strong earnings, seeing beats on both the top and bottom lines. Q1 came on at $0.61 v the $0.47 expected, a 30% beat above Zacks estimates. Revenues came in at $800.8M v the $702M expected.
Additionally, Echo guided Q2 revenues higher and raised FY21 revenues. Echo now sees the Q2 number in a range of $830-870M v the $729M expected. For FY21, the company now sees a range of $3.15-3.35B v the $2.85B expected.
Estimates and Upgrades
The guidance forced analysts to hike their estimates, which over the last month, are headed higher across all time-frames. For the current quarter, estimates have gone from $0.45 to $0.52, or 15.5%. For the current year, estimates have ticked 7% higher, from $1.82 to $1.95.
After earnings, the company saw a handful of analysts reiterating their bullish stance. Truist was out with positive commentary, saying the results were “Miles Ahead” and lifted its target to $37 from $35. Barrington Research is also bullish, giving the stock an Outperform rating and a $43 target. While Susquehanna reiterated its Neutral stance, the firm took its targets for ECHO to $36 from $31.
Strong Momentum
The dynamic of strong freight demand and tight capacity are providing ECHO with a positive market. Analysts see a combination of favorable market conditions and strong execution as factors for robust revenue growth.
Additionally, market share gains are helping the company’s strong performance. As evidence for this, analysts point to truckload shipments for Echo gaining 13% y/y vs C.H Robinson’s 6.5% decline.
The Technical Take
The stock shot higher after earnings, moving from the $31 level to $37, a gain of over 20%. The $37.65 print was the all-time highs, which have not come into play since late 2018. The stock has been volatile since EPS and has since pulled back to the 50-day MA at $33. This area is also the 61.8% retracement from the earnings move. If this spot holds, new highs will likely be tested in time.
Investors that want to be more patient can eye the 200-day MA, which is just above the $29 level.
In Summary
Earnings momentum has finally turned very positive for ECHO. The stock has pulled back to technical levels that make it attractive. If market conditions remain and management executes as they have, investors will be rewarded.
Shift4 Payments is a Zacks Rank #5 (Strong Sell) that provides integrated payment processing and technology solutions. The company provides a complete omnichannel ecosystem that includes payment and other commerce enabling services.
Here are some more details from the company’s website:
“The company’s technologies help power over 350 software providers in numerous industries, including hospitality, retail, F&B, eCommerce, lodging, gaming, and many more. With over 7,000 sales partners, the company securely processed more than $200 billion in payments volume for over 200,000 businesses in 2019.”
The stock has been a hot one since it’s IPO in July of 2020, up 200% from its debut price around $30 a share. However, investors should be concerned at the high valuations after an earnings miss.
More about FOUR
Shift4 Payments was founded in 1998, is headquartered in Allentown, PA and employs over 1,300. The company is valued just at $7.4 billion and has a PE of 208.
Valuation is the issue here, which is why the stock has a Zacks Style Score of “F” in Value. However, the stock is rated “A” in Growth, which is why the stock price is staying elevated.
Q1 Earnings
Earlier in the month, the company reported Q1 EPS that missed on both the top and bottom line. FOUR reported -$0.13 v the $0.00 expected and revenues came in at $97.5M v the $98.6M expected.
The company missed on EBITDA due to a risk loss from a specialty retailer that closed, but raised its FY21 End-to-End payment volume. The revenue outlook was increased by 7%, which isn’t great for a growth company with high valuations.
Estimates
Estimates are bouncing all over the place as analysts seem uncertain just when the company will have that impressive quarter investors are looking for. Some suggest that when hotels and restaurants fully reopen, payment growth will increase.
For next quarter, we see estimates ticking 21% higher over the last month, from $0.19 to $0.23. However, for the current year, estimates have fallen 12% over the same time frame.
Looking out to next year, there has been a dramatic drop in estimates over the last 60 days. Analysts have lowered numbers by 14% in that time frame, from $1.49 to $1.28.
Valuation
Growth stocks get a high valuation in today's market, but investors only give stocks so long to grow into the numbers before they give up. FOUR will need to show this growth in upcoming quarters or risk a more sustained drop than the one suffered after its recent earnings report.
The Technicals
The stock saw a dramatic fall after EPS, falling over 20% from the pre-earnings levels. It has slowly come back and filled that earnings gap to trade right at the 50-day MA. This is the level where the bulls and bears are fighting over the next direction.
If the bulls fail, longer term players might not want to step in until the $70 level, which is where the 200-day moving average resides.
In Summary
FOUR has a lot of great things going for its business, but the stock looks overvalued. Trading only 15% off all-time highs, investors are fighting over the next direction as they struggle with valuation.
Additional content:
Should You Buy Semis After AMAT's Big Beat?
Applied Materials reported strong second quarter results, with earnings beating the Zacks Consensus Estimate by 7.9% on revenue that beat by 3.5%. This was a 41% increase on the top line and an 83% increase on the bottom line.
Management laid out all the reasons behind the strong numbers and explained why the strength was likely to continue-
The pandemic did two things: First, it accelerated key technology trends that make semiconductors more pervasive and indispensable in people's lives. And second, it laid bare the highly efficient just-in-time semiconductor supply chain that therefore doesn’t have the flexibility or resilience that will be necessary to cater to the demands of the future.
Capacity additions are an obvious answer to this problem, which will be more regionally dispersed than in the past because of its strategic importance at the national level. This is of course very good news for equipment sales.
Then there are certain major positive secular trends that will play out over the next decade including digital transformation with obvious growth implications for both semiconductor manufacturers and equipment suppliers; AI computing that will drive demand for new silicon types and therefore fuel semiconductor and equipment sales; the new playbook (after Moore’s Law) to drive power, performance, area, cost, and time to market (PPACt) that will lead to industry-wide capex increases favoring equipment makers; and deeper collaborations across the industry going beyond the product-focused model to a model based on speed and time to market, thus necessitating retooling.
And in what may be a welcome new trend for equipment makers, customers are providing capex guidance for multiple years, providing better visibility into the future.
So, since many of the factors AMAT management talked about are positive for semiconductor manufacturers as well, one question we may be asking ourselves is whether this is a good time to get into semiconductor stocks.
But it isn’t quite that simple. Equipment stocks are the really hot ones at the moment, so although the industry is somewhat overvalued, it may be the best place to put in some money.
As far as semiconductor manufacturers are concerned, their strong growth will come hand in hand with high investments. So there may not be big gains on the horizon. Particularly because valuations are rather high across most semiconductor segments.
Another group that looks promising is analog/mixed signal because I see the same strong growth projections and reasonable valuations here. Stocks looking particularly good are MACOM Technology Solutions Holdings and ON Semiconductor.
More Stock News: This Is Bigger Than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
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.
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Echo Global Logistics, Shift4 Payments, Applied Materials, MACOM Tech and ON Semiconductor highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – May 24, 2021 – Zacks Equity Research Shares of Echo Global Logistics, Inc. as the Bull of the Day, Shift4 Payments, Inc. (FOUR - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Applied Materials, Inc. (AMAT - Free Report) , MACOM Technology Solutions Holdings, Inc. (MTSI - Free Report) and ON Semiconductor Corp. (ON - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Echo Global Logistics is a Zacks Rank #1 (Strong Buy) that is a leading logistics provider, offering transportation and supply chain management solutions. The company utilizes a proprietary technology platform to compile and analyze data from its multi-modal network of transportation providers for transportation and logistics needs.
About the Company
Echo employs over 2,600 and is headquartered in Chicago, IL. The company was founded in 2005 and has since served manufacturing, construction, food and beverage, consumer products and retail industries.
ECHO is valued at $875 million and has a Forward PE of 17. The company holds a Zacks Style Score of “B” in Growth, but “C” in Value.
Q3 Earnings
In late April, the company reported strong earnings, seeing beats on both the top and bottom lines. Q1 came on at $0.61 v the $0.47 expected, a 30% beat above Zacks estimates. Revenues came in at $800.8M v the $702M expected.
Additionally, Echo guided Q2 revenues higher and raised FY21 revenues. Echo now sees the Q2 number in a range of $830-870M v the $729M expected. For FY21, the company now sees a range of $3.15-3.35B v the $2.85B expected.
Estimates and Upgrades
The guidance forced analysts to hike their estimates, which over the last month, are headed higher across all time-frames. For the current quarter, estimates have gone from $0.45 to $0.52, or 15.5%. For the current year, estimates have ticked 7% higher, from $1.82 to $1.95.
After earnings, the company saw a handful of analysts reiterating their bullish stance. Truist was out with positive commentary, saying the results were “Miles Ahead” and lifted its target to $37 from $35. Barrington Research is also bullish, giving the stock an Outperform rating and a $43 target. While Susquehanna reiterated its Neutral stance, the firm took its targets for ECHO to $36 from $31.
Strong Momentum
The dynamic of strong freight demand and tight capacity are providing ECHO with a positive market. Analysts see a combination of favorable market conditions and strong execution as factors for robust revenue growth.
Additionally, market share gains are helping the company’s strong performance. As evidence for this, analysts point to truckload shipments for Echo gaining 13% y/y vs C.H Robinson’s 6.5% decline.
The Technical Take
The stock shot higher after earnings, moving from the $31 level to $37, a gain of over 20%. The $37.65 print was the all-time highs, which have not come into play since late 2018. The stock has been volatile since EPS and has since pulled back to the 50-day MA at $33. This area is also the 61.8% retracement from the earnings move. If this spot holds, new highs will likely be tested in time.
Investors that want to be more patient can eye the 200-day MA, which is just above the $29 level.
In Summary
Earnings momentum has finally turned very positive for ECHO. The stock has pulled back to technical levels that make it attractive. If market conditions remain and management executes as they have, investors will be rewarded.
Bear of the Day:
Shift4 Payments is a Zacks Rank #5 (Strong Sell) that provides integrated payment processing and technology solutions. The company provides a complete omnichannel ecosystem that includes payment and other commerce enabling services.
Here are some more details from the company’s website:
“The company’s technologies help power over 350 software providers in numerous industries, including hospitality, retail, F&B, eCommerce, lodging, gaming, and many more. With over 7,000 sales partners, the company securely processed more than $200 billion in payments volume for over 200,000 businesses in 2019.”
The stock has been a hot one since it’s IPO in July of 2020, up 200% from its debut price around $30 a share. However, investors should be concerned at the high valuations after an earnings miss.
More about FOUR
Shift4 Payments was founded in 1998, is headquartered in Allentown, PA and employs over 1,300. The company is valued just at $7.4 billion and has a PE of 208.
Valuation is the issue here, which is why the stock has a Zacks Style Score of “F” in Value. However, the stock is rated “A” in Growth, which is why the stock price is staying elevated.
Q1 Earnings
Earlier in the month, the company reported Q1 EPS that missed on both the top and bottom line. FOUR reported -$0.13 v the $0.00 expected and revenues came in at $97.5M v the $98.6M expected.
The company missed on EBITDA due to a risk loss from a specialty retailer that closed, but raised its FY21 End-to-End payment volume. The revenue outlook was increased by 7%, which isn’t great for a growth company with high valuations.
Estimates
Estimates are bouncing all over the place as analysts seem uncertain just when the company will have that impressive quarter investors are looking for. Some suggest that when hotels and restaurants fully reopen, payment growth will increase.
For next quarter, we see estimates ticking 21% higher over the last month, from $0.19 to $0.23. However, for the current year, estimates have fallen 12% over the same time frame.
Looking out to next year, there has been a dramatic drop in estimates over the last 60 days. Analysts have lowered numbers by 14% in that time frame, from $1.49 to $1.28.
Valuation
Growth stocks get a high valuation in today's market, but investors only give stocks so long to grow into the numbers before they give up. FOUR will need to show this growth in upcoming quarters or risk a more sustained drop than the one suffered after its recent earnings report.
The Technicals
The stock saw a dramatic fall after EPS, falling over 20% from the pre-earnings levels. It has slowly come back and filled that earnings gap to trade right at the 50-day MA. This is the level where the bulls and bears are fighting over the next direction.
If the bulls fail, longer term players might not want to step in until the $70 level, which is where the 200-day moving average resides.
In Summary
FOUR has a lot of great things going for its business, but the stock looks overvalued. Trading only 15% off all-time highs, investors are fighting over the next direction as they struggle with valuation.
Additional content:
Should You Buy Semis After AMAT's Big Beat?
Applied Materials reported strong second quarter results, with earnings beating the Zacks Consensus Estimate by 7.9% on revenue that beat by 3.5%. This was a 41% increase on the top line and an 83% increase on the bottom line.
Management laid out all the reasons behind the strong numbers and explained why the strength was likely to continue-
The pandemic did two things: First, it accelerated key technology trends that make semiconductors more pervasive and indispensable in people's lives. And second, it laid bare the highly efficient just-in-time semiconductor supply chain that therefore doesn’t have the flexibility or resilience that will be necessary to cater to the demands of the future.
Capacity additions are an obvious answer to this problem, which will be more regionally dispersed than in the past because of its strategic importance at the national level. This is of course very good news for equipment sales.
Then there are certain major positive secular trends that will play out over the next decade including digital transformation with obvious growth implications for both semiconductor manufacturers and equipment suppliers; AI computing that will drive demand for new silicon types and therefore fuel semiconductor and equipment sales; the new playbook (after Moore’s Law) to drive power, performance, area, cost, and time to market (PPACt) that will lead to industry-wide capex increases favoring equipment makers; and deeper collaborations across the industry going beyond the product-focused model to a model based on speed and time to market, thus necessitating retooling.
And in what may be a welcome new trend for equipment makers, customers are providing capex guidance for multiple years, providing better visibility into the future.
So, since many of the factors AMAT management talked about are positive for semiconductor manufacturers as well, one question we may be asking ourselves is whether this is a good time to get into semiconductor stocks.
But it isn’t quite that simple. Equipment stocks are the really hot ones at the moment, so although the industry is somewhat overvalued, it may be the best place to put in some money.
As far as semiconductor manufacturers are concerned, their strong growth will come hand in hand with high investments. So there may not be big gains on the horizon. Particularly because valuations are rather high across most semiconductor segments.
Another group that looks promising is analog/mixed signal because I see the same strong growth projections and reasonable valuations here. Stocks looking particularly good are MACOM Technology Solutions Holdings and ON Semiconductor.
More Stock News: This Is Bigger Than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>
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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.