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Highlighted as Zacks Bull and Bear of the Day Azure Power, Tata Motors, Micron, Nvidia and AMD
Read MoreHide Full Article
For Immediate Release
Chicago, IL – December 14, 2018 – Zacks Equity Research Azure Power as the Bull of the Day, Tata Motors as the Bear of the Day. In addition, Zacks Equity Research provides analysis onMicron (MU - Free Report) , Nvidia (NVDA - Free Report) and AMD (AMD - Free Report) .
“I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.”– Thomas Edison, 1931
Th Solar Power generation industry in the United States has seen multiple boom and bust cycles. Though the technology for turning solar energy into reliable electric power has continued to steadily improve, changes in the cost of competing fossil fuels as well as shifting political incentives have made predicting the success of solar manufacturing firms speculative at best.
In 2009 when President Obama took office, the US had approximately 1.2 gigawatts of solar electric capacity. Thanks to generous federal tax credits and $90 billion in investment in clean energy sources from the American Recovery and Reinvestment Act, that figure had grown to 31 Gigawatts by the beginning of 2017 – a 2500% increase. The fact that oil prices were considerably higher than they are currently for much of that period accelerated the adoption of alternative energy sources by making their price more competitive with fossil-fuel energy generation.
The rise of solar power in the US has mostly been in the residential market with homeowners in areas with reliable year-round sunshine generating most or all of their electricity needs using rooftop solar panels, while continuing to rely on the traditional power grid during times when solar generation wasn’t feasible. The cost of residential solar power generation is now low enough to make it a sound financial decision with the savings exceeding the cost of traditional utility electric power over the expected lifetime of the equipment - though it still does require an up-front investment in order to realize those savings.
Residential solar in the US has been a fickle and unpredictable investment with significant price competition and fossil fuel prices that have trended lower. Solar is often viewed as “expensive”, partly because the infrastructure for generation and delivery of fossil fuel-based electricity already exists across the US. Though the evidence that burning coal and oil has contributed meaningfully to undesirable climate change, the path of least resistance tends to be to continue using energy infrastructure that already exists.
That’s not necessarily the case in the developing world.
Azure Power, based in India, develops utility-scale solar energy generation systems and sells that energy to governments and independent industrial and commercial customers. Unlike in the US, large parts of India are not already connected to an electricity grid that is capable of providing the predictable delivery of energy to consumers and businesses. With a growing middle class and a thriving business community who now desire on-demand electricity to fuel their commercial activities and personal lives – as well as experiencing over 300 days of sunshine per year – India is a near-perfect environment for large scale solar power facilities.
Not only is Solar power cleaner than fossil fuels – reducing air pollution and global environmental impact – new solar facilities are actually cheaper and faster to build than coal plants. To provide further incentive to developers of alternative energy solutions, the Indian government launched the Jawaharlal Nehru National Solar Mission (NSM) in 2010. In addition to providing clean, reliable power to Indian homes and businesses, the initiative also seeks to address India’s trade deficits with other countries and helps stabilize the Indian rupee as the country imports less coal and oil from abroad.
The prices commercial customers in India pay for solar energy is now competitive with wind power and traditional coal fired electricity and less than diesel power – which has been used extensively, especially in remote areas that are far from the power grid. In fact, the distance issue is critical to Azure’s business, as quiet, non-polluting, utility-scale solar generation facilities can be built in close proximity to growing communities and business centers, alleviating the need to transmit power over long distances.
Azure has become expert at navigating the government system of fair and transparent auctions for municipal power projects. The company’s experience and financial stability give it the upper hand over most competitors in the bidding for contracts to build large scale facilities. They were the first company to build a utility-scale solar facility in India and now have 35 such plants in operation – with more to come.
Azure’s revenues have been rising steadily, expected to grow 18% in the current fiscal year and 48% next year.
It’s a difficult time for many automakers. Slowing global demand, competition from ride-sharing services and tariff issues on parts and supplies and finished products have put the squeeze on revenues and profits.
India’s largest carmaker, Tata Motors has certainly been feeling the pain lately. Traded as an ADR on the New York Stock Exchange, Tata traded as high as $43/share in 2016, yet shares now languish just barely in the double digits at $11.50/share.
Tata manufactures a wide range of passenger cars and light trucks as well as larger commercial vehicles throughout the world. English brand Jaguar Land-Rover is a wholly owed subsidiary of Tata.
The company’s declining performance - highlighted by big earnings misses in the past two quarters - has investors turning their backs on the shares even though the company operates and sells vehicles primarily in one of the world’s fastest growing markets.
In the most recent earnings release, the company cited challenging market conditions in China where demand has been impacted by duty changes and escalating trade tensions with the US. They also noted disappointing sales of sedans in the North American marketand weak demand for the company’s diesel vehicles in Europe as a result of emissions regulations and fuel taxes. They even cited currency uncertainty due to the Brexit situation.
Chairman Natarajan Chandrasekaran explained, "Market conditions, particularly in China have deteriorated further. To weather this volatile external scenario, we have launched a comprehensive turnaround plan to significantly improve our free cash flows and profitability.”
Analysts are skeptical however.
Revenue estimates for the current year are expected to decline 5% from the previous year but a slew of recent negative revisions now have the Zacks Consensus earnings estimate at $1.24/share, a whopping 47% lower than 2017.
That estimate had been $2.47/share just 60 days ago.
Tata is a Zacks Rank #5 (Strong Sell).
Rising costs have eviscerated gross margins at Tata and on Thursday they announced, presumably as part of the turnaround plan, that they would institute a series of across the board price increases.
Attempting to raise prices to bolster revenues in a weak market is a risky strategy.
Competition is fierce – especially in China – and selling the same products at increased prices could easily backfire and hurt customer demand.
Additional content:
Should You Buy Micron (MU - Free Report) on the Dip Ahead of Earnings?
Shares of Micron have plummeted over 40% in the last six months along with the broader semiconductor market. Now, the question is should investors consider buying beaten down Micron on the dip ahead of its upcoming earnings release Tuesday?
Overview
Micron was flying high not too long ago. Then investors began to worry about how the escalating trade war between the U.S. and China would impact the firm. Maybe more importantly, fears about the historically cyclical nature of the chip industry started to pop up, along with DRAM and NAND pricing headwinds.
In the long-run, demand for memory and storage solutions will almost certainly continue to trend upward. But short-term oversupply factors can hurt companies like Micron, which is what many analysts say is happening at the moment. Still, despite the recent downturn, Micron’s fiscal fourth quarter revenues surged 38% to reach $8.44 billion. In fact, the company set revenue records across all its major markets. Plus, its full-year revenues soared 50% to $30.39 billion.
On top of that, Micron in August announced its plans to invest $3 billion in a Virginia plant by 2030 in order to increase memory production. Plus, Micron hopes to lift its overall capital expenditure into the low 30s as a percentage of revenue over the long haul to help it catch up to rivals’ spending as chips become smaller, and often more expensive and complex to make.
Price
As we mentioned, the chip business can be very cyclical, as MU’s price chart below helps show us. The company’s stock price is still up roughly 160% over the last three years, which includes its 40% downturn in the past six months. Micron is also not alone, as the broader semiconductor market has tumbled 21% during this same stretch—Nvidia has tumbled 44%
MU saw its stock price dip 2.30% to $35.17 a share through morning trading Thursday. This marked a 45% downturn from its 52-week high of $64.66 per share.
Outlook & Earnings Trends
Looking ahead, our current Zacks Consensus Estimate is calling for Micron’s fiscal Q1 revenues to jump by 17.7% to reach $8.01 billion. Meanwhile, Micron’s adjusted quarterly earnings are projected to surge 19.6% to touch $2.93 per share. We should note that both of these top and bottom line estimates would mark a slowdown from Micron’s growth throughout much of the last year.
Micron’s Q1 earnings estimates have been mixed recently. But, the company’s fiscal 2019 and 2020 estimates have trended completely in the wrong direction during this same 60-day stretch.
Bottom Line
Micron is currently a Zacks Rank #4 (Sell) based, in large part, on its longer-term negative earnings trends. The company does sport a “B” grade for Value and an “A” for Growth in our Style Score system. Plus, MU is currently trading at 4.1X forward 12-month Zacks Consensus EPS estimates, which represents a massive discount compared to its industry’s 11.9X average—AMD is trading at 37.5X.
With all that said, it seems like investors might want to avoid Micron until the stock shows at least some ability to bounce back following its massive decline. The first chance will likely come when Micron reports its Q1 financial results, which are currently scheduled to be released after the market closes on Tuesday, December 18.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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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Highlighted as Zacks Bull and Bear of the Day Azure Power, Tata Motors, Micron, Nvidia and AMD
For Immediate Release
Chicago, IL – December 14, 2018 – Zacks Equity Research Azure Power as the Bull of the Day, Tata Motors as the Bear of the Day. In addition, Zacks Equity Research provides analysis onMicron (MU - Free Report) , Nvidia (NVDA - Free Report) and AMD (AMD - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
“I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.”– Thomas Edison, 1931
Th Solar Power generation industry in the United States has seen multiple boom and bust cycles. Though the technology for turning solar energy into reliable electric power has continued to steadily improve, changes in the cost of competing fossil fuels as well as shifting political incentives have made predicting the success of solar manufacturing firms speculative at best.
In 2009 when President Obama took office, the US had approximately 1.2 gigawatts of solar electric capacity. Thanks to generous federal tax credits and $90 billion in investment in clean energy sources from the American Recovery and Reinvestment Act, that figure had grown to 31 Gigawatts by the beginning of 2017 – a 2500% increase. The fact that oil prices were considerably higher than they are currently for much of that period accelerated the adoption of alternative energy sources by making their price more competitive with fossil-fuel energy generation.
The rise of solar power in the US has mostly been in the residential market with homeowners in areas with reliable year-round sunshine generating most or all of their electricity needs using rooftop solar panels, while continuing to rely on the traditional power grid during times when solar generation wasn’t feasible. The cost of residential solar power generation is now low enough to make it a sound financial decision with the savings exceeding the cost of traditional utility electric power over the expected lifetime of the equipment - though it still does require an up-front investment in order to realize those savings.
Residential solar in the US has been a fickle and unpredictable investment with significant price competition and fossil fuel prices that have trended lower. Solar is often viewed as “expensive”, partly because the infrastructure for generation and delivery of fossil fuel-based electricity already exists across the US. Though the evidence that burning coal and oil has contributed meaningfully to undesirable climate change, the path of least resistance tends to be to continue using energy infrastructure that already exists.
That’s not necessarily the case in the developing world.
Azure Power, based in India, develops utility-scale solar energy generation systems and sells that energy to governments and independent industrial and commercial customers. Unlike in the US, large parts of India are not already connected to an electricity grid that is capable of providing the predictable delivery of energy to consumers and businesses. With a growing middle class and a thriving business community who now desire on-demand electricity to fuel their commercial activities and personal lives – as well as experiencing over 300 days of sunshine per year – India is a near-perfect environment for large scale solar power facilities.
Not only is Solar power cleaner than fossil fuels – reducing air pollution and global environmental impact – new solar facilities are actually cheaper and faster to build than coal plants. To provide further incentive to developers of alternative energy solutions, the Indian government launched the Jawaharlal Nehru National Solar Mission (NSM) in 2010. In addition to providing clean, reliable power to Indian homes and businesses, the initiative also seeks to address India’s trade deficits with other countries and helps stabilize the Indian rupee as the country imports less coal and oil from abroad.
The prices commercial customers in India pay for solar energy is now competitive with wind power and traditional coal fired electricity and less than diesel power – which has been used extensively, especially in remote areas that are far from the power grid. In fact, the distance issue is critical to Azure’s business, as quiet, non-polluting, utility-scale solar generation facilities can be built in close proximity to growing communities and business centers, alleviating the need to transmit power over long distances.
Azure has become expert at navigating the government system of fair and transparent auctions for municipal power projects. The company’s experience and financial stability give it the upper hand over most competitors in the bidding for contracts to build large scale facilities. They were the first company to build a utility-scale solar facility in India and now have 35 such plants in operation – with more to come.
Azure’s revenues have been rising steadily, expected to grow 18% in the current fiscal year and 48% next year.
Bear of the Day:
It’s a difficult time for many automakers. Slowing global demand, competition from ride-sharing services and tariff issues on parts and supplies and finished products have put the squeeze on revenues and profits.
India’s largest carmaker, Tata Motors has certainly been feeling the pain lately. Traded as an ADR on the New York Stock Exchange, Tata traded as high as $43/share in 2016, yet shares now languish just barely in the double digits at $11.50/share.
Tata manufactures a wide range of passenger cars and light trucks as well as larger commercial vehicles throughout the world. English brand Jaguar Land-Rover is a wholly owed subsidiary of Tata.
The company’s declining performance - highlighted by big earnings misses in the past two quarters - has investors turning their backs on the shares even though the company operates and sells vehicles primarily in one of the world’s fastest growing markets.
In the most recent earnings release, the company cited challenging market conditions in China where demand has been impacted by duty changes and escalating trade tensions with the US. They also noted disappointing sales of sedans in the North American marketand weak demand for the company’s diesel vehicles in Europe as a result of emissions regulations and fuel taxes. They even cited currency uncertainty due to the Brexit situation.
Chairman Natarajan Chandrasekaran explained, "Market conditions, particularly in China have deteriorated further. To weather this volatile external scenario, we have launched a comprehensive turnaround plan to significantly improve our free cash flows and profitability.”
Analysts are skeptical however.
Revenue estimates for the current year are expected to decline 5% from the previous year but a slew of recent negative revisions now have the Zacks Consensus earnings estimate at $1.24/share, a whopping 47% lower than 2017.
That estimate had been $2.47/share just 60 days ago.
Tata is a Zacks Rank #5 (Strong Sell).
Rising costs have eviscerated gross margins at Tata and on Thursday they announced, presumably as part of the turnaround plan, that they would institute a series of across the board price increases.
Attempting to raise prices to bolster revenues in a weak market is a risky strategy.
Competition is fierce – especially in China – and selling the same products at increased prices could easily backfire and hurt customer demand.
Additional content:
Should You Buy Micron (MU - Free Report) on the Dip Ahead of Earnings?
Shares of Micron have plummeted over 40% in the last six months along with the broader semiconductor market. Now, the question is should investors consider buying beaten down Micron on the dip ahead of its upcoming earnings release Tuesday?
Overview
Micron was flying high not too long ago. Then investors began to worry about how the escalating trade war between the U.S. and China would impact the firm. Maybe more importantly, fears about the historically cyclical nature of the chip industry started to pop up, along with DRAM and NAND pricing headwinds.
In the long-run, demand for memory and storage solutions will almost certainly continue to trend upward. But short-term oversupply factors can hurt companies like Micron, which is what many analysts say is happening at the moment. Still, despite the recent downturn, Micron’s fiscal fourth quarter revenues surged 38% to reach $8.44 billion. In fact, the company set revenue records across all its major markets. Plus, its full-year revenues soared 50% to $30.39 billion.
On top of that, Micron in August announced its plans to invest $3 billion in a Virginia plant by 2030 in order to increase memory production. Plus, Micron hopes to lift its overall capital expenditure into the low 30s as a percentage of revenue over the long haul to help it catch up to rivals’ spending as chips become smaller, and often more expensive and complex to make.
Price
As we mentioned, the chip business can be very cyclical, as MU’s price chart below helps show us. The company’s stock price is still up roughly 160% over the last three years, which includes its 40% downturn in the past six months. Micron is also not alone, as the broader semiconductor market has tumbled 21% during this same stretch—Nvidia has tumbled 44%
MU saw its stock price dip 2.30% to $35.17 a share through morning trading Thursday. This marked a 45% downturn from its 52-week high of $64.66 per share.
Outlook & Earnings Trends
Looking ahead, our current Zacks Consensus Estimate is calling for Micron’s fiscal Q1 revenues to jump by 17.7% to reach $8.01 billion. Meanwhile, Micron’s adjusted quarterly earnings are projected to surge 19.6% to touch $2.93 per share. We should note that both of these top and bottom line estimates would mark a slowdown from Micron’s growth throughout much of the last year.
Micron’s Q1 earnings estimates have been mixed recently. But, the company’s fiscal 2019 and 2020 estimates have trended completely in the wrong direction during this same 60-day stretch.
Bottom Line
Micron is currently a Zacks Rank #4 (Sell) based, in large part, on its longer-term negative earnings trends. The company does sport a “B” grade for Value and an “A” for Growth in our Style Score system. Plus, MU is currently trading at 4.1X forward 12-month Zacks Consensus EPS estimates, which represents a massive discount compared to its industry’s 11.9X average—AMD is trading at 37.5X.
With all that said, it seems like investors might want to avoid Micron until the stock shows at least some ability to bounce back following its massive decline. The first chance will likely come when Micron reports its Q1 financial results, which are currently scheduled to be released after the market closes on Tuesday, December 18.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
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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.