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Micron, Barrick Gold, Progress Software, Appfolio and Paycom Software highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – April 18, 2018 – Zacks Equity Research highlights Micron (MU - Free Report) as the Bull of the Day, Barrick Gold as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Progress Software Corporation (PRGS - Free Report) , Appfolio, Inc. (APPF - Free Report) and Paycom Software, Inc. (PAYC - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Micron delivered another exceptional quarter of record revenue and profits on March 22 and analysts responded with further boosts to their estimates for coming quarters.

The upward EPS estimate revisions weren't especially dramatic in the past few weeks, with the current fiscal year (ending August) only rising 3.4% from $10.63 to $10.99.

But that's because the analysts were already busy before the company's report moving the consensus from $10.13 to $10.63 on Micron's updated guidance for fiscal Q2 released on February 5.

My colleague Tracey Ryniec, editor of the Zacks Value Investor where she's owned MU shares since March of 2017 at $29, wrote on Feb 9 about the company's update that offered promises for another terrific quarter. And here were the goods...

Fiscal Q2 2018 Highlights

  • Revenues of $7.35 billion, up 58 percent compared with the same period last year

  • GAAP net income of $3.31 billion, or $2.67 per diluted share

  • Non-GAAP net income of $3.50 billion, or $2.82 per diluted share

  • Operating cash flow of $4.35 billion, compared with $1.77 billion for the same period last year

"Micron executed exceptionally well in the second quarter, delivering record results and strong free cash flow driven by broad-based demand for our memory and storage solutions. Our performance was accentuated by an ongoing shift to high-value solutions as we grew sales to our cloud, mobile and automotive customers and set new records for SSDs and graphics memory," said Micron President and CEO Sanjay Mehrotra. "Secular technology trends are driving robust demand for memory and storage, and Micron is well-positioned to address these growing opportunities."

Extreme Value, Concerns About Supply

While the outlook for this fiscal year is no doubt fantastic -- that $10.99 EPS represents 121.6% growth while the top line comes in at $29.16 billion for a whopping 43.5% sales advance -- next fiscal year isn't as bright.

Full-year 2019 EPS (starting in September) has risen 13.7% from $8.67 to $9.86 in the past 60 days. But that represents a decline of 10% year-over-year on the bottom line.

What's the problem? It basically revolves around supply. Many experienced semiconductor analysts have seen this part of the cycle before where memory becomes abundant and prices drop.

But currently, the story is just the opposite for Micron. They can't keep up with demand for DRAM and NAND flash products.

The alternative bearish view is that customers will cancel orders that can't be filled.

Either way, the analysts aren't willing to stick their necks out on next year's prospects, no matter how cheap the stock looks.

Memory suppliers typically trade with value P/Es in the single digits and Micron is currently trading at just 5 times current estimates, even into next year.

Memory Creates the Future

Until analysts have a firmer grasp on the supply and demand outlook for next year, let's just focus on the business outlook according to the company.

Micron is an industry leader in innovative memory and storage solutions. Backed by nearly 40 years of technology leadership, their memory and storage solutions enable disruptive trends, including artificial intelligence, machine learning, and autonomous vehicles in key market segments like cloud, data center, networking, and mobile.

This description from the company website helps put their business into the context of the larger technology world...

The world is moving to a new economic model, where data is driving value creation in ways we had not imagined just a few years ago. Data is today’s new business currency, and memory and storage are emerging as strategic differentiators that will redefine how we extract value from data to learn, explore, communicate and experience.

You may have noticed that this Technology/Semiconductor cycle seems longer and more robust than those before mobile, before the cloud, before the ramp in automation and AI.

In November I did a subscriber-only video presentation for Zacks Ultimate members where I debated our Director of Research Sheraz Mian on the merits of the idea that "This Time is Different." I argued in the affirmative and called the current rally a function of The Technology Super Cycle. That link will take you to my December Zacks Confidential, a full written report on the phenomenon.

Bear of the Day:

I've written about large-cap gold miners like Barrick Gold many times over the years for the Bear of the Day feature.

The steadily eroding earnings outlook for these companies is no surprise, even as the price of gold rallies.

Since a summer of 2016 peak for the yellow metal near $1375, it has fallen to support at $1125 and rallied back to $1350.

Meanwhile, Barrick Gold shares have fallen over 40% from $23 to $13.

The top line isn't much better with this year's expected $8.03 billion revenue haul posting as a 4% decline over last year -- and this when the average price of gold is holding higher than 2017 and looking technically robust.

The Monetary Myth of the Barbarous Relic

The cost of producing an ounce of gold is over $800 for the majority of miners. And one element besides the high cost of production that always hurts the miners is past hedging.

If a miner has obligations via futures, options, or OTC forward contracts to sell gold at say $1300, $1200, or even $1100, then rising spot prices don't have the direct margin leverage one would think.

And I remain bearish on gold, believing nothing in monetary policy or the inflation outlook will much help it get back to $1500 and above.

In October I wrote a special report for Zacks Confidential titled The Monetary Myth of Gold where I explained why the barbarous relic was soon doomed in the high-tech age of fiat currencies, digital finance, and artificial intelligence.

Additional content:

3 Cloud Stocks to Buy Right Now

In a matter of just a few years, “the Cloud” has evolved from a budding new tech feature to one of the main factors driving growth in the technology sector. Cloud computing is now an essential focus for software-related companies, and cloud stocks have piqued the interest of many tech-focused investors.

New technologies and changing consumer behavior have changed the shape of the technology landscape, and an industry that was once centered on the personal computer has adapted to survive in the world of mobile computing and the Cloud. The markets have been paying attention, and some of the best tech stocks have been those that are either primarily cloud-based companies, or those that have shown growth in their cloud operations.

With this in mind, we’ve highlighted three stocks that are not only showing strong cloud-related activity, but also strong fundamental metrics. Check out these three cloud stocks to buy right now:

1. Progress Software Corporation

Progress develops software and cloud-based products that assist clients with application deployment, application management, data connectivity, web content management, and predictive analytics. The company has shifted its focus to cloud computing and is looking to expand its cloud subscription offerings. Currently, PRGS is a Zacks Rank #2 (Buy).

In its recently-reported quarter, the firm surpassed earnings estimates for the six-consecutive period, inspiring some positive estimate revisions for upcoming quarters. This is a stock to love based on its earnings growth, with consensus estimates calling for EPS expansion of 29% this quarter and 24% for the full fiscal year. But shares are also trading at an attractive 15.8x forward 12-month earnings.

2. Appfolio, Inc.

AppFolio offers cloud-based software solutions for the property management and legal industries. The company’s AppFolio Property Manager is a leading solution for property management, while its MyCase application is ideal for practitioners and small law firms. AppFolio has found consistent profitability, and investors have rewarded the stock with 66% gains over the past year.

APPF is currently sporting a Zacks Rank #2 (Buy), as well as an “A” grade for Growth in our Style Scores system. The stock will hope to maintain its momentum with continued bottom-line expansion, with current consensus estimates projecting EP growth of 37% on net sales growth of 26% this year.

3. Paycom Software, Inc.

Paycom Software is a provider of a cloud-based human capital management software solution delivered as Software-as-a-Service. Paycom was one of the first fully online payroll options out there, so this is a really interesting example of a company that has that first-mover advantage and industry leading product that still has a mountain of growth ahead of it.

PAYC is currently sporting a Zacks Rank #1 (Strong Buy). Based on our latest consensus estimates, we expect the company to witness EPS growth of 89% and revenue growth of 26% in its current fiscal year. Looking further ahead, Paycom is projected to improve its bottom line at an annualized rate of nearly 25% over the next three to five years. Shares are trading at an expensive 45x forward 12-month earnings, but its PEG ratio of 1.8 is actually quite attractive.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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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.

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