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Veeva, Changyou, Amazon and eBay highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – October 22, 2018 – Zacks Equity Research Veeva Systems (VEEV - Free Report) as the Bull of the Day, Changyou.com as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon (AMZN - Free Report) and eBay (EBAY - Free Report) .
Stocks struggled for direction last week as investors hoped for a rebound from the toughest stretch of trading in months. Risk is back on the table on Wall Street, but that does not mean investors should ignore previously-hot stocks that are now on sale. In the tech world, our model is saying Veeva Systems could be one of those plays right now.
Veeva makes cloud-based solutions for the pharmaceutical and life sciences industries. Its main offerings are presented in a software-as-a-service model and delivers industry-specific tools for CRM, content management, and many other enterprise applications.
Shares of VEEV have outperformed our software group over the past year, largely because of the company's unique industry-specific business model. Veeva's strategic initiatives have also been fruitful, as it has gained analyst favor through key client wins in Europe, expansion of offerings, and growth in its subscription business.
Sure, the life sciences industry has been slow to adopt cloud computing in comparison to other industries, but that has put Veeva in the perfect position to capitalize on new growth right now. Take the company's most recent earnings report, for example.
When Veeva posted its Q2 fiscal 2019 results in late August, the company reported adjusted earnings of 39 cents per share, beating the Zacks Consensus Estimate by 15% and improving more than 62% on a year-over-year basis.
Total revenue increased 25% from the year-ago period, with subscription service revenue adding about 25% on the year. Management also cited the strong performance of Veeva Vault R&D as a key reason for the revenue growth.
Moreover, adjusted operating margin in the second quarter was 35.5%, which represented an improvement of 360 basis points. Margin expansion was delivered despite an 18.5% uptick in operating expenses, so it is encouraging to see Veeva successfully improve profitability while also investing in research and development.
It is tough to say exactly where stocks are heading next, as the bears grew even louder last week despite relatively strong earnings results for our market bellwethers. That said, it does seem prudent to continue avoiding underperformers in volatile businesses. One example right now would be Changyou.com.
Changyou is a Chinese video game company. It is primarily involved in developing what are called MMOs, or massive multiplayer online games. This is an interesting model because it means Changyou derives a lot of its revenue from in-game purchases and the sale of virtual goods.
While this is solid growth trend driving the broader video game industry right now, Changyou has not recently seen the type of results we would like to see.
CYOU's struggles started about a year ago. In October 2017, the company reported earnings which missed consensus estimates by more than 100%. Changyou went on to miss estimates in the next two quarters as well, leading to one-year losses of about 70% for the stock.
Changyou is expected to report its latest quarterly results soon, and hopes for a rebound are muted right now. That is because earnings estimates for the soon-to-be-reported quarter have fallen significantly in recent weeks. In fact, the Zacks Consensus Estimate for the period now sits at $0.26 per share, down from $0.43 that was expected just over a week ago.
Changes made to earnings estimates shortly before report dates are powerful indicators because analysts typically have more information about current business conditions.
We also believe changes made to forward-look earnings estimates can be indicators of near-term share price performance. The Zacks Consensus Estimate for CYOU's current full-year and next-year earnings has also been lowered recently, and that has earned the stock a Zacks Rank #4 (Sell).
It is possible that one would look at CYOU's huge decline over the past year and assume that it is now a value play. After all, the stock is now sporting an “A” grade in the Value category of our Style Score system, and valuation metrics like its P/E of 11.3 and P/S of 1.2 are certainly interesting.
But we believe that these metrics are only value indicators when a company's earnings outlook is also trending higher. Buying a sluggish stock with a poor earnings outlook is risky, even if it looks to be on the cheap.
Moreover, investors looking for value should also be looking for companies with healthy balance sheets. Changyou has witnessed a significant deterioration of its cash position this year, with total cash and equivalents falling from $978 million at the start of 2018 to just $571 million at the end of the most-recently-reported quarter. Liabilities have increased from $607 million to $791 million in that time.
Additional content:
Amazon (AMZN - Free Report) Faces Lawsuit, Q3 Earnings Just Around Corner
Amazon stock dipped almost 2% Thursday after facing a lawsuit filed by eBay. Amazon is accused of illegally poaching sellers to its marketplace through eBay's internal messaging system, according to the Wall Street Journal. Amazon and eBay are head to head competitors when it comes to both sellers and consumers.
Amazon focuses more on its buyers and invites them to check the website and make purchases based on their own needs. Whereas, eBay relies on its sellers to make a profit through their sales on eBay’s marketplace.
With its quarterly report coming out soon, will this incident make any difference to how investors view Amazon?
Let’s list out the different accusations eBay set out in the lawsuit against Amazon and see if they will have any impact on the company.
1. EBay accused Amazon of having perpetrated a scheme over the years to infiltrate and get all of the information on eBay's internal member email system.
2. The scheme is so widespread that it: involves Amazon representatives spanning over many different countries, all targeting eBay employees.
3. The accounts that were used to send messages came from devices linked to Amazon IP addresses, as the scheme was coordinated through Amazon's headquarters.
4. Amazon intentionally interfered with contractual and economic relations. They also committed fraud and violation of the California penal and business professions codes.
These are only some of the main points and it seems as though eBay had a lot more to say in relation to their competitor. Currently, Amazon has not said anything in response to this situation, but note that it is investigating the claim. Both companies’ shares were down through afternoon trading Thursday. However, does all of this really make any difference to Amazon in the long run?
We are aware that Amazon dominates the e-commerce space day by day. According to the Wall Street Journal, roughly 50% of U.S. online sales come from Amazon. It is certain that no matter what there will be rivalry and competition between companies within the same industry. EBay has made efforts throughout the years to catch up to Amazon with an easier to navigate website and selling 80% new products.
Plus, Amazon has faced many lawsuits in different areas over the years, so it is no surprise the company has not said anything yet as they are aware of how to handle these situations. Yes, it is deteriorating to a company to face a lawsuit and all of these accusations which may or may not be true in the short-run. However, if we look at this from a long-term perspective, the most Amazon will have to do is settle for monetary relief and, as stated in the lawsuit, permanently stop misusing eBay’s messaging system.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius. Click for details >>
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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Veeva, Changyou, Amazon and eBay highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 22, 2018 – Zacks Equity Research Veeva Systems (VEEV - Free Report) as the Bull of the Day, Changyou.com as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon (AMZN - Free Report) and eBay (EBAY - Free Report) .
Here is a synopsis of all four stocks:
Bull of the Day:
Stocks struggled for direction last week as investors hoped for a rebound from the toughest stretch of trading in months. Risk is back on the table on Wall Street, but that does not mean investors should ignore previously-hot stocks that are now on sale. In the tech world, our model is saying Veeva Systems could be one of those plays right now.
Veeva makes cloud-based solutions for the pharmaceutical and life sciences industries. Its main offerings are presented in a software-as-a-service model and delivers industry-specific tools for CRM, content management, and many other enterprise applications.
Shares of VEEV have outperformed our software group over the past year, largely because of the company's unique industry-specific business model. Veeva's strategic initiatives have also been fruitful, as it has gained analyst favor through key client wins in Europe, expansion of offerings, and growth in its subscription business.
Sure, the life sciences industry has been slow to adopt cloud computing in comparison to other industries, but that has put Veeva in the perfect position to capitalize on new growth right now. Take the company's most recent earnings report, for example.
When Veeva posted its Q2 fiscal 2019 results in late August, the company reported adjusted earnings of 39 cents per share, beating the Zacks Consensus Estimate by 15% and improving more than 62% on a year-over-year basis.
Total revenue increased 25% from the year-ago period, with subscription service revenue adding about 25% on the year. Management also cited the strong performance of Veeva Vault R&D as a key reason for the revenue growth.
Moreover, adjusted operating margin in the second quarter was 35.5%, which represented an improvement of 360 basis points. Margin expansion was delivered despite an 18.5% uptick in operating expenses, so it is encouraging to see Veeva successfully improve profitability while also investing in research and development.
Bear of the Day:
It is tough to say exactly where stocks are heading next, as the bears grew even louder last week despite relatively strong earnings results for our market bellwethers. That said, it does seem prudent to continue avoiding underperformers in volatile businesses. One example right now would be Changyou.com.
Changyou is a Chinese video game company. It is primarily involved in developing what are called MMOs, or massive multiplayer online games. This is an interesting model because it means Changyou derives a lot of its revenue from in-game purchases and the sale of virtual goods.
While this is solid growth trend driving the broader video game industry right now, Changyou has not recently seen the type of results we would like to see.
CYOU's struggles started about a year ago. In October 2017, the company reported earnings which missed consensus estimates by more than 100%. Changyou went on to miss estimates in the next two quarters as well, leading to one-year losses of about 70% for the stock.
Changyou is expected to report its latest quarterly results soon, and hopes for a rebound are muted right now. That is because earnings estimates for the soon-to-be-reported quarter have fallen significantly in recent weeks. In fact, the Zacks Consensus Estimate for the period now sits at $0.26 per share, down from $0.43 that was expected just over a week ago.
Changes made to earnings estimates shortly before report dates are powerful indicators because analysts typically have more information about current business conditions.
We also believe changes made to forward-look earnings estimates can be indicators of near-term share price performance. The Zacks Consensus Estimate for CYOU's current full-year and next-year earnings has also been lowered recently, and that has earned the stock a Zacks Rank #4 (Sell).
It is possible that one would look at CYOU's huge decline over the past year and assume that it is now a value play. After all, the stock is now sporting an “A” grade in the Value category of our Style Score system, and valuation metrics like its P/E of 11.3 and P/S of 1.2 are certainly interesting.
But we believe that these metrics are only value indicators when a company's earnings outlook is also trending higher. Buying a sluggish stock with a poor earnings outlook is risky, even if it looks to be on the cheap.
Moreover, investors looking for value should also be looking for companies with healthy balance sheets. Changyou has witnessed a significant deterioration of its cash position this year, with total cash and equivalents falling from $978 million at the start of 2018 to just $571 million at the end of the most-recently-reported quarter. Liabilities have increased from $607 million to $791 million in that time.
Additional content:
Amazon (AMZN - Free Report) Faces Lawsuit, Q3 Earnings Just Around Corner
Amazon stock dipped almost 2% Thursday after facing a lawsuit filed by eBay. Amazon is accused of illegally poaching sellers to its marketplace through eBay's internal messaging system, according to the Wall Street Journal. Amazon and eBay are head to head competitors when it comes to both sellers and consumers.
Amazon focuses more on its buyers and invites them to check the website and make purchases based on their own needs. Whereas, eBay relies on its sellers to make a profit through their sales on eBay’s marketplace.
With its quarterly report coming out soon, will this incident make any difference to how investors view Amazon?
Let’s list out the different accusations eBay set out in the lawsuit against Amazon and see if they will have any impact on the company.
1. EBay accused Amazon of having perpetrated a scheme over the years to infiltrate and get all of the information on eBay's internal member email system.
2. The scheme is so widespread that it: involves Amazon representatives spanning over many different countries, all targeting eBay employees.
3. The accounts that were used to send messages came from devices linked to Amazon IP addresses, as the scheme was coordinated through Amazon's headquarters.
4. Amazon intentionally interfered with contractual and economic relations. They also committed fraud and violation of the California penal and business professions codes.
These are only some of the main points and it seems as though eBay had a lot more to say in relation to their competitor. Currently, Amazon has not said anything in response to this situation, but note that it is investigating the claim. Both companies’ shares were down through afternoon trading Thursday. However, does all of this really make any difference to Amazon in the long run?
We are aware that Amazon dominates the e-commerce space day by day. According to the Wall Street Journal, roughly 50% of U.S. online sales come from Amazon. It is certain that no matter what there will be rivalry and competition between companies within the same industry. EBay has made efforts throughout the years to catch up to Amazon with an easier to navigate website and selling 80% new products.
Plus, Amazon has faced many lawsuits in different areas over the years, so it is no surprise the company has not said anything yet as they are aware of how to handle these situations. Yes, it is deteriorating to a company to face a lawsuit and all of these accusations which may or may not be true in the short-run. However, if we look at this from a long-term perspective, the most Amazon will have to do is settle for monetary relief and, as stated in the lawsuit, permanently stop misusing eBay’s messaging system.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius. Click for details >>
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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.