We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Tech’s recent volatility has some investors ditching the sector altogether, but with demand for many key products—including memory storage solutions—still on the rise, one needs to maintain some exposure to this growth. One great option is scooping up shares of the memory giants themselves, including the likes of Seagate Technology.
Seagate manufactures a portfolio of hard disc drives, solid state drives, and solid state hybrid drives. The company develops solutions for both the enterprise and consumer markets.
Secular trends are driving growth in the memory market, and Seagate certainly stands to benefit. Meanwhile, an improving earnings outlook has earned the stock a Zacks Rank #1 (Strong Buy), while several key valuation metrics remains attractive.
Latest Earnings & Outlook
Seagate most recently reported financial results on Jan. 29. The company posted adjusted earnings of $1.48 per share, beating the Zacks Consensus Estimate by eight cents and improving about 7.2% from the year-ago period. Revenues were also up slightly year over year, with net sales of $2.91 billion surpassing our consensus estimate of $2.83 billion.
Seagate is expected to report its latest quarterly financial results in late April. Analysts are expecting the company to report adjusted profits of $1.30 per share, which would represent year-over-year growth of more than 18%. Revenues are projected to be up 2.4% to hit $2.74 billion.
But these estimates have been trending higher over the past few months, suggesting that analysts are warming on the company’s prospects for both the near and long term.
Fresh volatility in the tech sector over the past two months has seen investors start to ditch previously-hot stocks with stretched valuations. One example of this trend is Cadence Design Systems, which has sold off significantly after a dramatic rise to all-time highs earlier this year. If this tech volatility sticks around, it could be best to avoid these stocks right now.
Cadence Design Systems offers products and tools that help customers to design electronic products. For example, the company’s core electronic design automation software and services enable engineers to develop different types of IC design blocks to electronic systems and semiconductor customers.
CDNS has slumped more than 21% since touching a new peak in late January, but the company’s valuation still seems stretched. Meanwhile, the stock is sporting a Zacks Rank #5 (Strong Sell) and recent analyst estimates might cause further hesitation.
Latest Earnings Outlook
Cadence is expected to release its latest quarterly financial results in late April. Based on our latest Zacks Consensus Estimates, we expect the company to post adjusted earnings of 38 cents per share and total revenues of $505.8 million.
These results would actually represent respectable year-over-year improvements of 19% and 6%, respectively. However, analyst sentiment for this period—and future fiscal periods—has been less optimistic recently.
When looking at the Most Accurate Estimate, which only considers the most recent analyst estimates, we see that Cadence’s earnings projection is one penny lower for the soon-to-be-reported quarter and three cents lower for the upcoming quarter. The Most Accurate Estimate is also a penny lower for the company’s full-year and next-year earnings estimates.
Since earnings estimates and analyst sentiment have such a profound effect on a stock’s momentum, this worsening outlook is not a great sign.
Key Valuation Metrics
As mentioned, CDNS has slumped more than 21% over the past two months, but the company’s valuation is still stretched. Based on Friday’s close, Cadence was trading at 23.5x forward 12-month earnings, which is a premium compared to the broader technology sector.
The stock also has a P/S of 5.4, which means its shares are looking overvalued based on the company’s revenue picture too. Investors love to look at the P/S ratio for these smaller software and tech firms because having a strong customer base is precious in this space, so it is discouraging to see this valuation metric at this level too.
The bottom line is that investors have been quick to ditch these companies with stretched valuations in the recent tech selloff, and stocks with sluggish earnings outlooks are likely to be punished even further.
Additional content:
Time to Learn from the Facts: Global Week Ahead
A first week of a month is always the most active for market-moving macro data.
Bond market economists and stock strategists alike consider the huge flow of macro data out in the first week of a month — particularly payrolls in the USA, inflation in Europe, and manufacturing PMIs everywhere — to be catalysts for changes to their quarterly and annual outlooks, on rates and on stock prices, respectively.
In turn, their updates become a big focus for informed traders and investors on their subscriber lists, in the Global Week Ahead.
There were a number of top ranked global themes to choose from; a mixture of Reuter’s in London, Scotia Bank in Canada and the Financial Times everywhere.
The headlines I wrote down, though, will look very familiar to you.
I put my five themes for the week ahead in a rank order. The most important is first.
(1) U.S. Non-Farm Payrolls Out Friday
On Friday, the release of the U.S. March nonfarm payroll report will be on traders' and investors' radar, in the wake of Fed Chair Powell’s first rate hike.
With inflation pressures brewing, wage growth figures will be important for world financial markets. Economists polled by the Financial Times have payrolls rising by +150K jobs in March and the U.S. unemployment rate falling to 4.0%.
Average hourly earnings are expected to increase 0.3% in March. The U.S. economy added a hefty +313K jobs in February. But a slowdown in wage growth pointed to only a gradual increase in inflation this year, which eased investor concerns.
The background to all of this will be the interest rate market. As longer-dated bond yields rise, banks which borrow short-term money and lend it on longer-term benefit.
(2) A Big Week for Global Macro Data
Spring is coming to large parts of the northern hemisphere. It seems fitting that so much global data is coming out.
World stock markets have just seen their first quarterly fall in two years. This will feed the view on how Q2-18 might play out.
On Wednesday, March inflation data from the Eurozone is expected to creep up and bolster bets on the end of ECB “QE” this year.
ISM and unemployment/jobs numbers in so many countries -- from the United States to India -- which most economists need, arrive all week long.
(3) Can Tech Stocks Get It Back Together?
Whether or not the world's biggest tech and social media firms can bounce back from the more than $400 billion wipeout of the last couple of weeks is going to be one of the big things to watch.
Facebook'stop brass might reveal when they will appear in front of lawmakers in the United States and Britain to answer questions about the misuse of 50 million users’ private data.
The heat is also likely to stay on online retail giant Amazon. President Trump is not happy. Its growing dominance is sending many small businesses to the wall.
(4) U.S.-China Trade Relations
U.S.-China trade frictions will remain a central focus. There are hopes there will be negotiations that end with everyone looking happy for the cameras. But for the time being everything remains uncertain.
The U.S. administration is expected to announce tariffs on China’s so-called ‘2025 industries’ that are new growth sectors such as robotics and artificial intelligence applications, alongside limits on Chinese investments in U.S. companies and technology transfers.
One background issue over the last couple of weeks has been a sizable appreciation of the Renminbi. In trade-weighted terms, the China currency has now risen more this year — 3% — than it did in the whole of 2017.
The Renminbi has been closely hugging the daily benchmark fixing set by the central bank. Markets are speculating that allowing the Renminbi to rise might be part of China's conciliatory offerings in the trade spat.
(5) NAFTA Percolates
Markets have largely reversed improved odds of a NAFTA deal this week.
Scotiabank in Canada says there is a high bar set for being able to deliver upon U.S. Trade Representative Robert Lighthizer’s earlier quest for at least a handshake agreement on NAFTA next week.
Top Zacks #1 Rank (STRONG BUY) Stocks—
NVIDIA: Incredibly, the Artificial Intelligence (AI) semiconductor chip company is now a $230 stock with a $140B market capitalization. With a Zacks Value score of F, this is all about the seemingly unlimited potential for future growth, set by equity strategists that cover the stock.
Micron: I find it easier to like this $60B market-cap stock as a strategist, and own it for any number of portfolio objectives. The Zacks Value score of A, Zacks Growth score of A, and Zacks momentum score of A are much more palatable.
Centene: If you don’t want to be in the hot chip plays, you may want to consider this HMO-Medical stock. It carries a Zacks VGM of A, with an A for Value and a B for Growth. It has a $19B market cap at the moment.
For major stock like these three, there are lots to look out for, in a busy first week of the month.
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
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.
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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Seagate Technology, Cadence Design Systems, NVIDIA, Micron and Centene highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – April 3, 2018 – Zacks Equity Research highlights Seagate Technology (STX - Free Report) as the Bull of the Day, Cadence Design Systems (CDNS - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on NVIDIA (NVDA - Free Report) , Micron (MU - Free Report) and Centene (CNC - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Tech’s recent volatility has some investors ditching the sector altogether, but with demand for many key products—including memory storage solutions—still on the rise, one needs to maintain some exposure to this growth. One great option is scooping up shares of the memory giants themselves, including the likes of Seagate Technology.
Seagate manufactures a portfolio of hard disc drives, solid state drives, and solid state hybrid drives. The company develops solutions for both the enterprise and consumer markets.
Secular trends are driving growth in the memory market, and Seagate certainly stands to benefit. Meanwhile, an improving earnings outlook has earned the stock a Zacks Rank #1 (Strong Buy), while several key valuation metrics remains attractive.
Latest Earnings & Outlook
Seagate most recently reported financial results on Jan. 29. The company posted adjusted earnings of $1.48 per share, beating the Zacks Consensus Estimate by eight cents and improving about 7.2% from the year-ago period. Revenues were also up slightly year over year, with net sales of $2.91 billion surpassing our consensus estimate of $2.83 billion.
Seagate is expected to report its latest quarterly financial results in late April. Analysts are expecting the company to report adjusted profits of $1.30 per share, which would represent year-over-year growth of more than 18%. Revenues are projected to be up 2.4% to hit $2.74 billion.
But these estimates have been trending higher over the past few months, suggesting that analysts are warming on the company’s prospects for both the near and long term.
Bear of the Day:
Fresh volatility in the tech sector over the past two months has seen investors start to ditch previously-hot stocks with stretched valuations. One example of this trend is Cadence Design Systems, which has sold off significantly after a dramatic rise to all-time highs earlier this year. If this tech volatility sticks around, it could be best to avoid these stocks right now.
Cadence Design Systems offers products and tools that help customers to design electronic products. For example, the company’s core electronic design automation software and services enable engineers to develop different types of IC design blocks to electronic systems and semiconductor customers.
CDNS has slumped more than 21% since touching a new peak in late January, but the company’s valuation still seems stretched. Meanwhile, the stock is sporting a Zacks Rank #5 (Strong Sell) and recent analyst estimates might cause further hesitation.
Latest Earnings Outlook
Cadence is expected to release its latest quarterly financial results in late April. Based on our latest Zacks Consensus Estimates, we expect the company to post adjusted earnings of 38 cents per share and total revenues of $505.8 million.
These results would actually represent respectable year-over-year improvements of 19% and 6%, respectively. However, analyst sentiment for this period—and future fiscal periods—has been less optimistic recently.
When looking at the Most Accurate Estimate, which only considers the most recent analyst estimates, we see that Cadence’s earnings projection is one penny lower for the soon-to-be-reported quarter and three cents lower for the upcoming quarter. The Most Accurate Estimate is also a penny lower for the company’s full-year and next-year earnings estimates.
Since earnings estimates and analyst sentiment have such a profound effect on a stock’s momentum, this worsening outlook is not a great sign.
Key Valuation Metrics
As mentioned, CDNS has slumped more than 21% over the past two months, but the company’s valuation is still stretched. Based on Friday’s close, Cadence was trading at 23.5x forward 12-month earnings, which is a premium compared to the broader technology sector.
The stock also has a P/S of 5.4, which means its shares are looking overvalued based on the company’s revenue picture too. Investors love to look at the P/S ratio for these smaller software and tech firms because having a strong customer base is precious in this space, so it is discouraging to see this valuation metric at this level too.
The bottom line is that investors have been quick to ditch these companies with stretched valuations in the recent tech selloff, and stocks with sluggish earnings outlooks are likely to be punished even further.
Additional content:
Time to Learn from the Facts: Global Week Ahead
A first week of a month is always the most active for market-moving macro data.
Bond market economists and stock strategists alike consider the huge flow of macro data out in the first week of a month — particularly payrolls in the USA, inflation in Europe, and manufacturing PMIs everywhere — to be catalysts for changes to their quarterly and annual outlooks, on rates and on stock prices, respectively.
In turn, their updates become a big focus for informed traders and investors on their subscriber lists, in the Global Week Ahead.
There were a number of top ranked global themes to choose from; a mixture of Reuter’s in London, Scotia Bank in Canada and the Financial Times everywhere.
The headlines I wrote down, though, will look very familiar to you.
I put my five themes for the week ahead in a rank order. The most important is first.
(1) U.S. Non-Farm Payrolls Out Friday
On Friday, the release of the U.S. March nonfarm payroll report will be on traders' and investors' radar, in the wake of Fed Chair Powell’s first rate hike.
With inflation pressures brewing, wage growth figures will be important for world financial markets. Economists polled by the Financial Times have payrolls rising by +150K jobs in March and the U.S. unemployment rate falling to 4.0%.
Average hourly earnings are expected to increase 0.3% in March. The U.S. economy added a hefty +313K jobs in February. But a slowdown in wage growth pointed to only a gradual increase in inflation this year, which eased investor concerns.
The background to all of this will be the interest rate market. As longer-dated bond yields rise, banks which borrow short-term money and lend it on longer-term benefit.
(2) A Big Week for Global Macro Data
Spring is coming to large parts of the northern hemisphere. It seems fitting that so much global data is coming out.
World stock markets have just seen their first quarterly fall in two years. This will feed the view on how Q2-18 might play out.
On Wednesday, March inflation data from the Eurozone is expected to creep up and bolster bets on the end of ECB “QE” this year.
ISM and unemployment/jobs numbers in so many countries -- from the United States to India -- which most economists need, arrive all week long.
(3) Can Tech Stocks Get It Back Together?
Whether or not the world's biggest tech and social media firms can bounce back from the more than $400 billion wipeout of the last couple of weeks is going to be one of the big things to watch.
Facebook'stop brass might reveal when they will appear in front of lawmakers in the United States and Britain to answer questions about the misuse of 50 million users’ private data.
The heat is also likely to stay on online retail giant Amazon. President Trump is not happy. Its growing dominance is sending many small businesses to the wall.
(4) U.S.-China Trade Relations
U.S.-China trade frictions will remain a central focus. There are hopes there will be negotiations that end with everyone looking happy for the cameras. But for the time being everything remains uncertain.
The U.S. administration is expected to announce tariffs on China’s so-called ‘2025 industries’ that are new growth sectors such as robotics and artificial intelligence applications, alongside limits on Chinese investments in U.S. companies and technology transfers.
One background issue over the last couple of weeks has been a sizable appreciation of the Renminbi. In trade-weighted terms, the China currency has now risen more this year — 3% — than it did in the whole of 2017.
The Renminbi has been closely hugging the daily benchmark fixing set by the central bank. Markets are speculating that allowing the Renminbi to rise might be part of China's conciliatory offerings in the trade spat.
(5) NAFTA Percolates
Markets have largely reversed improved odds of a NAFTA deal this week.
Scotiabank in Canada says there is a high bar set for being able to deliver upon U.S. Trade Representative Robert Lighthizer’s earlier quest for at least a handshake agreement on NAFTA next week.
Top Zacks #1 Rank (STRONG BUY) Stocks—
NVIDIA: Incredibly, the Artificial Intelligence (AI) semiconductor chip company is now a $230 stock with a $140B market capitalization. With a Zacks Value score of F, this is all about the seemingly unlimited potential for future growth, set by equity strategists that cover the stock.
Micron: I find it easier to like this $60B market-cap stock as a strategist, and own it for any number of portfolio objectives. The Zacks Value score of A, Zacks Growth score of A, and Zacks momentum score of A are much more palatable.
Centene: If you don’t want to be in the hot chip plays, you may want to consider this HMO-Medical stock. It carries a Zacks VGM of A, with an A for Value and a B for Growth. It has a $19B market cap at the moment.
For major stock like these three, there are lots to look out for, in a busy first week of the month.
Get today’s Zacks #1 Stock of the Day with your free subscription to Profit from the Pros newsletter:
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
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.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
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.