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Zacks Industry Outlook Highlights: International Business Machines, ZoomInfo, Hewlett Packard and NCR Corp
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For Immediate Release
Chicago, IL – July 6, 2021 – Today, Zacks Equity Research discusses Technology Solutions, including International Business Machines Corporation (IBM - Free Report) , ZoomInfo Technologies Inc. (ZI - Free Report) , Hewlett Packard Enterprise Company (HPE - Free Report) and NCR Corporation .
The coronavirus pandemic-led macroeconomic downturn has impacted the Zacks Computer – Integrated Systems industry negatively. Supply chain disruptions, destabilization of international trade and significant delays in customer acceptance have resulted in high levels of backlog and cast a shadow on the industry’s prospects.
Nonetheless, International Business Machines, ZoomInfo, Hewlett Packard Enterprise and NCR Corp. are a few industry participants to watch as they are expected to benefit from the rise in advanced forms of data management, rapid shift from traditional silos, increased demand for integration of deployment techniques, as well as modern application development.
Industry Description
The Zacks Computer – Integrated Systems industry comprises companies that provide advanced information technology solutions, including computer systems, software, storage systems and microelectronics. Notably, these industry players are increasing investments in data modernization and analytics, cyber defense, remote work, automation and contact-less services, customer & employee experience, and supply chain modernization, which accelerate growth in digital transformation services.
Some of the industry participants also provide technological solutions (both products and services) to aid organizations in connecting, interacting and transacting with customers as they move towards pre-pandemic operational mode. Moreover, there are others that develop and market information recognition, data entry software, systems, as well as technologies.
4 Computer - Integrated Systems Industry Trends to Watch Out For
Integrated Solutions Driving Demand: The industry is benefiting from rising demand for integrated solutions across small, medium and large-scale enterprises, along with increasing investments in IoT, big data, AI and blockchain software technologies. Moreover, business analytics, cloud computing, mobile, and security and social businesses present significant opportunities to increasing number of remote workers in the wake of the coronavirus-induced work-from-home wave. Moreover, the industry players are anticipated to benefit from slow yet recovering global IT spending, as predicted by Gartner.
Solid Adoption of Multi-Cloud Model: Growing adoption of the multi-cloud model to achieve better scalability and attain improved resource utilization is also expanding the scope of the industry participants. Cloud and hardware/software virtual technologies are anticipated to favorably impact the industry. As growth and investment opportunities in developed countries continue to slow down, we believe that emerging economies will play a crucial role in the days ahead.
Coronavirus Hurts Supply and Demand: Due to coronavirus-led uncertainty over global economic and business activities, industry participants are likely to witness supply constraints, softness in server demand and cognitive applications, as well as delays in customer acceptance, in turn resulting in high levels of backlog, particularly in Compute, High Performance Computing & Mass Storage Class and Storage. Moreover, volatility in foreign exchange — primarily due to the current macro-economic scenario and headwinds in the emerging markets — does not bode well for the industry.
Semiconductor Chip Shortage Mars Prospects: Industry participants are facing challenges owing to the ongoing and heavily time-consuming business model transition to cloud. Further, lower spending across Data-Center Systems — primarily due to component shortages like memory and CPUs, as well as deceleration in hyperscale spending — is likely to dampen the prospects of the industry participants.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Computer – Integrated Systems industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #238, which places it in the bottom 5% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates continued underperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic on this group’s earnings growth potential. Since Dec 31, 2020, the industry’s earnings estimate for 2021 has moved down 1.3%.
Despite the gloomy industry outlook, a few stocks have the potential to outperform the market based on a strong earnings outlook. Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector and S&P 500
The Zacks Computer – Integrated Systems industry has underperformed the broader Computer and Technology sector and Zacks S&P 500 composite over the past year.
The industry has risen 24% over this period compared with the S&P 500 and broader Computer and Technology sector’s respective rally of 39.1% and 48.4%.
Industry's Current Valuation
On the basis of trailing 12-month P/S, which is a commonly used multiple for valuing computer integrated systems stocks, we see that the industry is currently trading at 1.56X compared with the S&P 500’s 5.3X. It is also below the sector’s trailing 12-month P/S of 5.94X.
Over the past five years, the industry has traded as high as 1.59X and as low as 1.02X, with the median being at 1.27X.
4 Computer-Integrated Systems Providers to Watch
International Business Machines: This Zacks Rank #2 (Buy) company is benefiting from solid adoption and robust pipelines across hybrid cloud and data platform, AI solutions, in Cognitive Apps business driven by strength in Cloud Paks and Security, cloud-based transformation services in the Global Business Services (GBS) segment and App modernization offerings. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The addition of Red Hat to the IBM portfolio has helped the company in strengthening its competitive position in the hybrid cloud market. Owing to the buyout, the company offers Linux operating system — Red Hat Enterprise Linux — and hybrid cloud platform — Red Hat OpenShift — that aids enterprises with digital transformation.
Recently, the company expanded its ecosystem with over 30 new partners including Capgemini, HP, Lumen Technologies, Lenovo, mimic Technology, NetApp and Wipro among others to enhance client operations with edge technology, leveraging hybrid cloud, artificial intelligence (AI) and 5G.
Further, IBM has been striving to enhance efficiency of blockchain solutions, and quantum computing systems as well as services. In this respect, the growing clientele of IBM Q Network is a positive.
The Zacks Consensus Estimate for 2021 earnings has remained stable at $10.86 per share over the past 60 days. IBM’s shares have rallied 16.6% year to date.
NCR Corporation: This Zacks Rank #3 (Hold) company offers payments processing, multi-vendor connected-device services, automated teller machines, point of sale terminals and self-service technologies. NCR’s shares have risen 23.2% year to date.
The coronavirus-induced rapid adoption of digital banking solutions bodes well for NCR. Notably, the company has received positive feedback from customers on the new features and functionality of its solutions. It has also begun witnessing higher growth.
Moreover, the recent acquisition of Cardtronics is anticipated to drive the acceleration of NCR-as-a-service strategy. Cardtronics’ robust debit network will further expand NCR’s payments platform and help it connect to retail and bank customers, thereby facilitating customer acquisition.
Further, the addition of Freshop’s e-commerce solutions to NCR’s platform earlier this year, will enable faster deployment of buy-online, pickup-in-store capabilities for retailers, including regional and small grocery chains.
Freshop’s e-commerce solution will become a key element of NCR’s Next-Generation Retail Store Architecture, including NCR Emerald. Notably, NCR Emerald simplifies store operations for retailers.
However, growing competition from companies like Diebold and Fidelity makes us cautious about the segment’s near-term performance.
The Zacks Consensus Estimate for 2021 earnings has been upwardly revised by 3.4% over the past 60 days to $2.76 per share.
ZoomInfo Technologies: Growing traction of this Zacks Rank #3 company’s go-to-market intelligence platform due to elevated consumer demand for data and insights is a major positive.
ZoomInfo is benefiting from several enhancements introduced to its platform such as a real-time intelligence feed, mobile experience improvements to Quick Search, and redesigns of contact profile alerts and the homepage. The company anticipates these innovations to fuel further user engagement on its platform.
The company also benefits from its resilient subscription-based model amid the coronavirus outbreak.
Further, the company recently acquired Clickagy, an AI-powered buyer intent signals provider and EverString, a provider of NLP and ML-driven company data for sale and marketing teams. These acquisitions are likely to drive long-term growth for the company and expand its enterprise clientele.
The Zacks Consensus Estimate for 2021 earnings has increased 2% to 50 cents per share over the past 60 days. ZoomInfo’s shares have increased 6.6% year to date.
Hewlett Packard Enterprise: HPE is benefiting from improved supply-chain execution and higher demand for its cloud services owing to the ongoing digital transformation.
HPE’s efforts to shift focus on higher-margin offerings like Intelligent Edge and Aruba Central Hyperconverged Infrastructure are aiding the bottom line. HPE’s shares have risen 24.1% year to date.
The acquisition of Silver Peak, an SD-WAN (Software-Defined Wide Area Network) leader, has strengthened the company’s Aruba Edge Services platform and aided expansion of the company’s enterprise clientele.
Additionally, its target of saving at least $800 million annually by fiscal 2022-end through the cost optimization plan is a positive. Moreover, its multi-billion-dollar investment plan across expanding networking capabilities will help diversify the business from server and hardware storage markets, as well as boost margins in the long run.
However, organizations have been shifting to cloud computing owing to their maintenance-free and cost-effective structure compared with standalone servers, which can undermine this Zacks Rank #3 company’s near-term prospects.
Notably, the Zacks Consensus Estimate for 2021 earnings has increased 3.3% to $1.89 per share over the past 60 days.
Zacks' Top Picks to Cash in on Artificial Intelligence
In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.
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.
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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Zacks Industry Outlook Highlights: International Business Machines, ZoomInfo, Hewlett Packard and NCR Corp
For Immediate Release
Chicago, IL – July 6, 2021 – Today, Zacks Equity Research discusses Technology Solutions, including International Business Machines Corporation (IBM - Free Report) , ZoomInfo Technologies Inc. (ZI - Free Report) , Hewlett Packard Enterprise Company (HPE - Free Report) and NCR Corporation .
Link: https://www.zacks.com/commentary/1756960/4-stocks-to-watch-in-a-challenging-technology-solutions-industry
The coronavirus pandemic-led macroeconomic downturn has impacted the Zacks Computer – Integrated Systems industry negatively. Supply chain disruptions, destabilization of international trade and significant delays in customer acceptance have resulted in high levels of backlog and cast a shadow on the industry’s prospects.
Nonetheless, International Business Machines, ZoomInfo, Hewlett Packard Enterprise and NCR Corp. are a few industry participants to watch as they are expected to benefit from the rise in advanced forms of data management, rapid shift from traditional silos, increased demand for integration of deployment techniques, as well as modern application development.
Industry Description
The Zacks Computer – Integrated Systems industry comprises companies that provide advanced information technology solutions, including computer systems, software, storage systems and microelectronics. Notably, these industry players are increasing investments in data modernization and analytics, cyber defense, remote work, automation and contact-less services, customer & employee experience, and supply chain modernization, which accelerate growth in digital transformation services.
Some of the industry participants also provide technological solutions (both products and services) to aid organizations in connecting, interacting and transacting with customers as they move towards pre-pandemic operational mode. Moreover, there are others that develop and market information recognition, data entry software, systems, as well as technologies.
4 Computer - Integrated Systems Industry Trends to Watch Out For
Integrated Solutions Driving Demand: The industry is benefiting from rising demand for integrated solutions across small, medium and large-scale enterprises, along with increasing investments in IoT, big data, AI and blockchain software technologies. Moreover, business analytics, cloud computing, mobile, and security and social businesses present significant opportunities to increasing number of remote workers in the wake of the coronavirus-induced work-from-home wave. Moreover, the industry players are anticipated to benefit from slow yet recovering global IT spending, as predicted by Gartner.
Solid Adoption of Multi-Cloud Model: Growing adoption of the multi-cloud model to achieve better scalability and attain improved resource utilization is also expanding the scope of the industry participants. Cloud and hardware/software virtual technologies are anticipated to favorably impact the industry. As growth and investment opportunities in developed countries continue to slow down, we believe that emerging economies will play a crucial role in the days ahead.
Coronavirus Hurts Supply and Demand: Due to coronavirus-led uncertainty over global economic and business activities, industry participants are likely to witness supply constraints, softness in server demand and cognitive applications, as well as delays in customer acceptance, in turn resulting in high levels of backlog, particularly in Compute, High Performance Computing & Mass Storage Class and Storage. Moreover, volatility in foreign exchange — primarily due to the current macro-economic scenario and headwinds in the emerging markets — does not bode well for the industry.
Semiconductor Chip Shortage Mars Prospects: Industry participants are facing challenges owing to the ongoing and heavily time-consuming business model transition to cloud. Further, lower spending across Data-Center Systems — primarily due to component shortages like memory and CPUs, as well as deceleration in hyperscale spending — is likely to dampen the prospects of the industry participants.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Computer – Integrated Systems industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #238, which places it in the bottom 5% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates continued underperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic on this group’s earnings growth potential. Since Dec 31, 2020, the industry’s earnings estimate for 2021 has moved down 1.3%.
Despite the gloomy industry outlook, a few stocks have the potential to outperform the market based on a strong earnings outlook. Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector and S&P 500
The Zacks Computer – Integrated Systems industry has underperformed the broader Computer and Technology sector and Zacks S&P 500 composite over the past year.
The industry has risen 24% over this period compared with the S&P 500 and broader Computer and Technology sector’s respective rally of 39.1% and 48.4%.
Industry's Current Valuation
On the basis of trailing 12-month P/S, which is a commonly used multiple for valuing computer integrated systems stocks, we see that the industry is currently trading at 1.56X compared with the S&P 500’s 5.3X. It is also below the sector’s trailing 12-month P/S of 5.94X.
Over the past five years, the industry has traded as high as 1.59X and as low as 1.02X, with the median being at 1.27X.
4 Computer-Integrated Systems Providers to Watch
International Business Machines: This Zacks Rank #2 (Buy) company is benefiting from solid adoption and robust pipelines across hybrid cloud and data platform, AI solutions, in Cognitive Apps business driven by strength in Cloud Paks and Security, cloud-based transformation services in the Global Business Services (GBS) segment and App modernization offerings. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The addition of Red Hat to the IBM portfolio has helped the company in strengthening its competitive position in the hybrid cloud market. Owing to the buyout, the company offers Linux operating system — Red Hat Enterprise Linux — and hybrid cloud platform — Red Hat OpenShift — that aids enterprises with digital transformation.
Recently, the company expanded its ecosystem with over 30 new partners including Capgemini, HP, Lumen Technologies, Lenovo, mimic Technology, NetApp and Wipro among others to enhance client operations with edge technology, leveraging hybrid cloud, artificial intelligence (AI) and 5G.
Further, IBM has been striving to enhance efficiency of blockchain solutions, and quantum computing systems as well as services. In this respect, the growing clientele of IBM Q Network is a positive.
The Zacks Consensus Estimate for 2021 earnings has remained stable at $10.86 per share over the past 60 days. IBM’s shares have rallied 16.6% year to date.
NCR Corporation: This Zacks Rank #3 (Hold) company offers payments processing, multi-vendor connected-device services, automated teller machines, point of sale terminals and self-service technologies. NCR’s shares have risen 23.2% year to date.
The coronavirus-induced rapid adoption of digital banking solutions bodes well for NCR. Notably, the company has received positive feedback from customers on the new features and functionality of its solutions. It has also begun witnessing higher growth.
Moreover, the recent acquisition of Cardtronics is anticipated to drive the acceleration of NCR-as-a-service strategy. Cardtronics’ robust debit network will further expand NCR’s payments platform and help it connect to retail and bank customers, thereby facilitating customer acquisition.
Further, the addition of Freshop’s e-commerce solutions to NCR’s platform earlier this year, will enable faster deployment of buy-online, pickup-in-store capabilities for retailers, including regional and small grocery chains.
Freshop’s e-commerce solution will become a key element of NCR’s Next-Generation Retail Store Architecture, including NCR Emerald. Notably, NCR Emerald simplifies store operations for retailers.
However, growing competition from companies like Diebold and Fidelity makes us cautious about the segment’s near-term performance.
The Zacks Consensus Estimate for 2021 earnings has been upwardly revised by 3.4% over the past 60 days to $2.76 per share.
ZoomInfo Technologies: Growing traction of this Zacks Rank #3 company’s go-to-market intelligence platform due to elevated consumer demand for data and insights is a major positive.
ZoomInfo is benefiting from several enhancements introduced to its platform such as a real-time intelligence feed, mobile experience improvements to Quick Search, and redesigns of contact profile alerts and the homepage. The company anticipates these innovations to fuel further user engagement on its platform.
The company also benefits from its resilient subscription-based model amid the coronavirus outbreak.
Further, the company recently acquired Clickagy, an AI-powered buyer intent signals provider and EverString, a provider of NLP and ML-driven company data for sale and marketing teams. These acquisitions are likely to drive long-term growth for the company and expand its enterprise clientele.
The Zacks Consensus Estimate for 2021 earnings has increased 2% to 50 cents per share over the past 60 days. ZoomInfo’s shares have increased 6.6% year to date.
Hewlett Packard Enterprise: HPE is benefiting from improved supply-chain execution and higher demand for its cloud services owing to the ongoing digital transformation.
HPE’s efforts to shift focus on higher-margin offerings like Intelligent Edge and Aruba Central Hyperconverged Infrastructure are aiding the bottom line. HPE’s shares have risen 24.1% year to date.
The acquisition of Silver Peak, an SD-WAN (Software-Defined Wide Area Network) leader, has strengthened the company’s Aruba Edge Services platform and aided expansion of the company’s enterprise clientele.
Additionally, its target of saving at least $800 million annually by fiscal 2022-end through the cost optimization plan is a positive. Moreover, its multi-billion-dollar investment plan across expanding networking capabilities will help diversify the business from server and hardware storage markets, as well as boost margins in the long run.
However, organizations have been shifting to cloud computing owing to their maintenance-free and cost-effective structure compared with standalone servers, which can undermine this Zacks Rank #3 company’s near-term prospects.
Notably, the Zacks Consensus Estimate for 2021 earnings has increased 3.3% to $1.89 per share over the past 60 days.
Zacks' Top Picks to Cash in on Artificial Intelligence
In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.
See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>
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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.