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Synopsys is the backbone of innovation for global electronics and is a safe way to invest in the semiconductor and electronics space with less cyclicality then the underlying market. This company is the market leader in electronic design automation (EDA) tools, which is the foundation of all electronics in the world today. Synopsys has been able to able to consistently beat expectations and progressively risen guidance, driving analysts’ estimates up and SNPS into a Zacks Rank #1 (Strong Buy).
The world of electronics is proliferating with Moore’s Law, which was established 50 years ago by the co-founder of Intel (Gordon Moore), still holding today. The law hypothesizes that every two years the number of transistors on a microchip doubles and the cost halves. Today, integrated circuits or computer chips can hold billions of transistors on a chip the size of your fingernail.
The demand for the newest and fastest technology is always there, and we are on the brink of the next tidal wave of tech. 5G is going to drive the next tech surge as it will exponentially improve the speed and ability to connect. 5G infrastructure is just being put in place, and the world’s largest tech companies are preparing their turnkey solutions for the massive demand this improved infrastructure will spur. Synopsys is at the foundation of new technology and will ride this wave.
The Business
Synopsys’s core competency is its EDA tools (making up 60% of revenues) that help design chips as well as the systems that create these chips. Its EDA software serves hardware designers every step of the way from initial design to verification for quick and efficient turn arounds. The EDA market was worth almost $7 billion in 2018 and is expected to grow by nearly 8% annually for the next 5 years, according to IBS data.
Its duopoly with Cadence (controlling 85% of the EDA industry) and high barriers to entry gives the firm, strong pricing power. This high margin business is going to continue to drive robust profitability. Analysts are expecting these margins to expand as the company enjoys economies of scale.
Its IP products provide customers with ready to use chip designs that are proven, saving customers time. It is the 2nd largest global player in this $4.5 billion market, according to IBS’s 2018 data. Synopsys’s massive IP portfolio and over 15 years of investments give them a firm grip on this market.
Synopsys also offers products that improve software developers’ code, ensuring that there are no code defects and verifying that the code is secure. Its software integration revenue only makes up 10% of the topline but is the fastest-growing segment at healthy double-digit growth levels.
Synopsys illustrated free-cash-flows of roughly $600 million, $730 million in cash, and minimal amounts of debt on the balance sheet giving this company a large amount of financial flexibility to continue acquiring in its fragmented markets.
SNPS is trading at a sizable discount to its biggest competitor, Cadence, and in line with its 5-year forward P/E average. These shares have appreciated over 60% so far this year, and I am confident they have more room to run with 8/8 analysts calling this a buy right now.
Take Away
Synopsys’s diverse portfolio electronic device development products hedge against the cyclicality of the electronics markets, primarily the semiconductor space which this company is most exposed to. The company continues to beat its estimates, and I think this trend will continue with the 5G rollout driving the next wave of tech that will further require Synopsys’s core competencies.
Yet another product of the retail apocalypse, Children’s Place, has had a very disappointing year for investors, with its share price falling over 32% so far in 2019. This dying retailer saw massive profit declines bringing it close to loses for Q1 and Q2. Its topline is also declining as demand for this children’s apparel fades. Analysts have been dropping their expectations for PLCE for some time, and this stock is now sitting at a Zacks Rank #5 (Strong Sell).
The company has closed over 200 stores since 2013, with 42 store closures in 2018 and another 45 closure expected by the end of this year. The company is en route to close about 1/3 of its stores in less than 10 years. Management will not give up despite the obvious systemic issues in its business model.
Children’s Place just acquired children’s brand Gymboree for $76 million (this acquisition also included Crazy 8 brand) after the company filed for its second bankruptcy in less than two years. Gymboree was forced to close down ¾ fourths of its stores following its January bankruptcy as the brand goes seemingly obsolete. Children’s Place is attempting to revitalize the company through rebranding, which I expect will take a substantial amount of capital and may not be successful.
The acquisition brought on an extensive amount of debt to the firm’s balance sheet bringing its total debt-to-capital up to 72%. This is a concerning level for me to see, especially when the firm is experiencing a declining top and bottom-line. If consumer discretionary spending dries up, this combined company will find itself in bankruptcy court pretty quickly.
Children’s Place is hoping to rejuvenate Gymboree with its 200 remaining stores and the relaunch of Gymboree.com in 2020. This whole venture is a massive risk, and I personally don’t see it working out.
Take Away
Children’s Place appears to have systemic issues that this new acquisition of an obsolete brand will not improve. I think that the purchase of Gymboree will mark the beginning of the end for this enterprise. PLCE is a falling knife, and I would stay away from these shares.
Additional content:
3 Top-Ranked REITs for Dividend Investors to Buy for 2020
The Dow, S&P 500, and Nasdaq all jumped to new intraday highs Monday on the back of the initial U.S.-China trade war truce. In other trade news, House Democrats last week announced their support for the new United States, Mexico, Canada Agreement to replace NAFTA.
On top of that, corporate earnings growth is projected to return in 2020 and U.S. unemployment rests at 50-year lows. Therefore, stocks could continue to climb in 2020. Still, it never hurts to strengthen your portfolio with some dividend-paying stocks, and Real Estate Investment Trusts are a great place to look.
REITs are companies that own, operate, or finance real estate properties that produce income, such as apartment complexes or retail locations. These companies are heavily regulated and must meet a number of qualifications to be classified as a REIT.
We should note that instead of earnings, REITs report funds from operations or FFO, but investors can view them as essentially the same for our purposes. Meanwhile, one distinct advantage is that REITs must pay at least 90% of their taxable income in dividends to shareholders. Clearly, this means REITs are great options for income investors.
Now let’s dive into three highly-ranked REITs we found with our Zacks Stock Screener that dividend investors might want to buy heading into 2020…
Sun Communities, Inc.
Sun Communities is a REIT that operates in the manufactured home and recreational vehicle communities space and boasts a portfolio of over 389 communities as of the end of September. SUI, which operates across the U.S. and in Ontario, Canada, saw its sales surge 13% during the first nine months of 2019.
Sun Communities shares have surged 46% in the past 12 months and 100% in the last three years to crush its industry’s roughly 20% climb during both stretches. Despite the strong run, SUI stock closed regular trading Monday at $151.86 per share, which marked a roughly 9% discount against its 52-week highs. On the technical side, SUI stock recently slipped below its 50-day moving average, which it has rarely stayed for long over the last three-plus years.
Our Zacks estimates call for SUI’s full-year fiscal 2019 sales to jump nearly 8% above 2018’s 14.7% revenue growth. The REIT’s 2020 revenues are then projected to climb 7.1% above our current-year estimate to reach $1.3 billion. At the bottom end, SUI’s core FFO is projected to jump roughly 7% above last year’s 10% expansion, with 2020 expected to come in another 9% higher at $5.32 per share.
Sun Communities’ positive bottom-line revision activity helps it earn a Zacks Rank #2 (Buy) at the moment. SUI also sports “B” grades for both Growth and Momentum in our Style Scores system and its REIT and Equity Trust – Residential industry rests in the top 31% of our more than 250 Zacks industries. And the firm’s dividend currently yields 1.96%, which comes in above the 10-year U.S. Treasury note’s 1.89%.
VICI Properties Inc.
VICI Properties is a REIT that focuses on the gaming, hospitality, and entertainment space. The firm’s portfolio features “22 market-leading gaming properties,” which includes everything from Caesars Palace in Las Vegas to golf courses and nightclubs. The New York-based company said on December 6 that it officially completed the previously announced acquisition of three regional gaming properties from Eldorado Resorts and separately entered into a master lease agreement with Century Casinos.
VICI currently pays an annualized dividend of $1.19 per share, for a strong 4.89% yield. This payout looks even more impressive considering that it is not artificially inflated because shares of VICI have surged 31% in 2019 to outpace its industry’s 19% average. VICI stock closed regular trading Monday just off its 52-week highs at $24.61 a share. And its fiscal 2020 bottom-line revision activity helps VICI earn a Zacks Rank #2 (Buy).
The firm’s adjusted full-year FFO is projected to pop 3.5% to $1.48 per share, with its sales expected to slip 1% based on earlier declines since Q4’s sales are expected to climb over 3%. The firm’s Q1 fiscal 2020 revenue is projected to jump 13.5% from the prior-year quarter. VICI’s full-year 2020 sales are then expected to surge 27% to $1.13 billion to help lift the bottom-line by 12%.
Prologis, Inc.
Prologis is a logistics-focused REIT that leases distribution facilities mostly to retail/online fulfillment and business-to-business clients. The firm operates in what it calls “high-barrier, high-growth markets” throughout 19 countries. The company, which has over 5,000 customers, topped our bottom-line estimates last quarter and its longer-term FFO revision strength helps PLD hold a Zack Rank #1 (Strong Buy) right now.
Prologis operates in a market that looks poised to grow for years to come in the Amazon and e-commerce age. PLD stock has surged over 50% in 2019 and roughly 110% during the past five years to destroy its industry’s 11% average climb. Prologis also rocks a “B” grade for Momentum in our Style Scores system and it holds a 2.41% dividend yield.
PLD announced at the end of October that it entered into a definitive merger agreement with Liberty Property Trust that will help it expand in target markets including Chicago, Houston, and Southern California. Peeking ahead, PLD’s full-year sales are projected to jump 19%, with 2020 expected to come in over 13% higher at $3.21 billion. And Prologis FFO is expected to climb 9.3% this year and another 10.3% in 2020.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.
These 7 were selected because of their superior potential for immediate breakout.
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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Synopsys, Children's Place, Sun Communities, VICI Properties and Prologis highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – December 18, 2019 – Zacks Equity Research Shares of Synopsys (SNPS - Free Report) as the Bull of the Day, Children’s Place (PLCE - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Sun Communities, Inc. (SUI - Free Report) , VICI Properties Inc. (VICI - Free Report) and Prologis, Inc. (PLD - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Synopsys is the backbone of innovation for global electronics and is a safe way to invest in the semiconductor and electronics space with less cyclicality then the underlying market. This company is the market leader in electronic design automation (EDA) tools, which is the foundation of all electronics in the world today. Synopsys has been able to able to consistently beat expectations and progressively risen guidance, driving analysts’ estimates up and SNPS into a Zacks Rank #1 (Strong Buy).
The world of electronics is proliferating with Moore’s Law, which was established 50 years ago by the co-founder of Intel (Gordon Moore), still holding today. The law hypothesizes that every two years the number of transistors on a microchip doubles and the cost halves. Today, integrated circuits or computer chips can hold billions of transistors on a chip the size of your fingernail.
The demand for the newest and fastest technology is always there, and we are on the brink of the next tidal wave of tech. 5G is going to drive the next tech surge as it will exponentially improve the speed and ability to connect. 5G infrastructure is just being put in place, and the world’s largest tech companies are preparing their turnkey solutions for the massive demand this improved infrastructure will spur. Synopsys is at the foundation of new technology and will ride this wave.
The Business
Synopsys’s core competency is its EDA tools (making up 60% of revenues) that help design chips as well as the systems that create these chips. Its EDA software serves hardware designers every step of the way from initial design to verification for quick and efficient turn arounds. The EDA market was worth almost $7 billion in 2018 and is expected to grow by nearly 8% annually for the next 5 years, according to IBS data.
Its duopoly with Cadence (controlling 85% of the EDA industry) and high barriers to entry gives the firm, strong pricing power. This high margin business is going to continue to drive robust profitability. Analysts are expecting these margins to expand as the company enjoys economies of scale.
Its IP products provide customers with ready to use chip designs that are proven, saving customers time. It is the 2nd largest global player in this $4.5 billion market, according to IBS’s 2018 data. Synopsys’s massive IP portfolio and over 15 years of investments give them a firm grip on this market.
Synopsys also offers products that improve software developers’ code, ensuring that there are no code defects and verifying that the code is secure. Its software integration revenue only makes up 10% of the topline but is the fastest-growing segment at healthy double-digit growth levels.
Synopsys illustrated free-cash-flows of roughly $600 million, $730 million in cash, and minimal amounts of debt on the balance sheet giving this company a large amount of financial flexibility to continue acquiring in its fragmented markets.
SNPS is trading at a sizable discount to its biggest competitor, Cadence, and in line with its 5-year forward P/E average. These shares have appreciated over 60% so far this year, and I am confident they have more room to run with 8/8 analysts calling this a buy right now.
Take Away
Synopsys’s diverse portfolio electronic device development products hedge against the cyclicality of the electronics markets, primarily the semiconductor space which this company is most exposed to. The company continues to beat its estimates, and I think this trend will continue with the 5G rollout driving the next wave of tech that will further require Synopsys’s core competencies.
Bear of the Day:
Yet another product of the retail apocalypse, Children’s Place, has had a very disappointing year for investors, with its share price falling over 32% so far in 2019. This dying retailer saw massive profit declines bringing it close to loses for Q1 and Q2. Its topline is also declining as demand for this children’s apparel fades. Analysts have been dropping their expectations for PLCE for some time, and this stock is now sitting at a Zacks Rank #5 (Strong Sell).
The company has closed over 200 stores since 2013, with 42 store closures in 2018 and another 45 closure expected by the end of this year. The company is en route to close about 1/3 of its stores in less than 10 years. Management will not give up despite the obvious systemic issues in its business model.
Children’s Place just acquired children’s brand Gymboree for $76 million (this acquisition also included Crazy 8 brand) after the company filed for its second bankruptcy in less than two years. Gymboree was forced to close down ¾ fourths of its stores following its January bankruptcy as the brand goes seemingly obsolete. Children’s Place is attempting to revitalize the company through rebranding, which I expect will take a substantial amount of capital and may not be successful.
The acquisition brought on an extensive amount of debt to the firm’s balance sheet bringing its total debt-to-capital up to 72%. This is a concerning level for me to see, especially when the firm is experiencing a declining top and bottom-line. If consumer discretionary spending dries up, this combined company will find itself in bankruptcy court pretty quickly.
Children’s Place is hoping to rejuvenate Gymboree with its 200 remaining stores and the relaunch of Gymboree.com in 2020. This whole venture is a massive risk, and I personally don’t see it working out.
Take Away
Children’s Place appears to have systemic issues that this new acquisition of an obsolete brand will not improve. I think that the purchase of Gymboree will mark the beginning of the end for this enterprise. PLCE is a falling knife, and I would stay away from these shares.
Additional content:
3 Top-Ranked REITs for Dividend Investors to Buy for 2020
The Dow, S&P 500, and Nasdaq all jumped to new intraday highs Monday on the back of the initial U.S.-China trade war truce. In other trade news, House Democrats last week announced their support for the new United States, Mexico, Canada Agreement to replace NAFTA.
On top of that, corporate earnings growth is projected to return in 2020 and U.S. unemployment rests at 50-year lows. Therefore, stocks could continue to climb in 2020. Still, it never hurts to strengthen your portfolio with some dividend-paying stocks, and Real Estate Investment Trusts are a great place to look.
REITs are companies that own, operate, or finance real estate properties that produce income, such as apartment complexes or retail locations. These companies are heavily regulated and must meet a number of qualifications to be classified as a REIT.
We should note that instead of earnings, REITs report funds from operations or FFO, but investors can view them as essentially the same for our purposes. Meanwhile, one distinct advantage is that REITs must pay at least 90% of their taxable income in dividends to shareholders. Clearly, this means REITs are great options for income investors.
Now let’s dive into three highly-ranked REITs we found with our Zacks Stock Screener that dividend investors might want to buy heading into 2020…
Sun Communities, Inc.
Sun Communities is a REIT that operates in the manufactured home and recreational vehicle communities space and boasts a portfolio of over 389 communities as of the end of September. SUI, which operates across the U.S. and in Ontario, Canada, saw its sales surge 13% during the first nine months of 2019.
Sun Communities shares have surged 46% in the past 12 months and 100% in the last three years to crush its industry’s roughly 20% climb during both stretches. Despite the strong run, SUI stock closed regular trading Monday at $151.86 per share, which marked a roughly 9% discount against its 52-week highs. On the technical side, SUI stock recently slipped below its 50-day moving average, which it has rarely stayed for long over the last three-plus years.
Our Zacks estimates call for SUI’s full-year fiscal 2019 sales to jump nearly 8% above 2018’s 14.7% revenue growth. The REIT’s 2020 revenues are then projected to climb 7.1% above our current-year estimate to reach $1.3 billion. At the bottom end, SUI’s core FFO is projected to jump roughly 7% above last year’s 10% expansion, with 2020 expected to come in another 9% higher at $5.32 per share.
Sun Communities’ positive bottom-line revision activity helps it earn a Zacks Rank #2 (Buy) at the moment. SUI also sports “B” grades for both Growth and Momentum in our Style Scores system and its REIT and Equity Trust – Residential industry rests in the top 31% of our more than 250 Zacks industries. And the firm’s dividend currently yields 1.96%, which comes in above the 10-year U.S. Treasury note’s 1.89%.
VICI Properties Inc.
VICI Properties is a REIT that focuses on the gaming, hospitality, and entertainment space. The firm’s portfolio features “22 market-leading gaming properties,” which includes everything from Caesars Palace in Las Vegas to golf courses and nightclubs. The New York-based company said on December 6 that it officially completed the previously announced acquisition of three regional gaming properties from Eldorado Resorts and separately entered into a master lease agreement with Century Casinos.
VICI currently pays an annualized dividend of $1.19 per share, for a strong 4.89% yield. This payout looks even more impressive considering that it is not artificially inflated because shares of VICI have surged 31% in 2019 to outpace its industry’s 19% average. VICI stock closed regular trading Monday just off its 52-week highs at $24.61 a share. And its fiscal 2020 bottom-line revision activity helps VICI earn a Zacks Rank #2 (Buy).
The firm’s adjusted full-year FFO is projected to pop 3.5% to $1.48 per share, with its sales expected to slip 1% based on earlier declines since Q4’s sales are expected to climb over 3%. The firm’s Q1 fiscal 2020 revenue is projected to jump 13.5% from the prior-year quarter. VICI’s full-year 2020 sales are then expected to surge 27% to $1.13 billion to help lift the bottom-line by 12%.
Prologis, Inc.
Prologis is a logistics-focused REIT that leases distribution facilities mostly to retail/online fulfillment and business-to-business clients. The firm operates in what it calls “high-barrier, high-growth markets” throughout 19 countries. The company, which has over 5,000 customers, topped our bottom-line estimates last quarter and its longer-term FFO revision strength helps PLD hold a Zack Rank #1 (Strong Buy) right now.
Prologis operates in a market that looks poised to grow for years to come in the Amazon and e-commerce age. PLD stock has surged over 50% in 2019 and roughly 110% during the past five years to destroy its industry’s 11% average climb. Prologis also rocks a “B” grade for Momentum in our Style Scores system and it holds a 2.41% dividend yield.
PLD announced at the end of October that it entered into a definitive merger agreement with Liberty Property Trust that will help it expand in target markets including Chicago, Houston, and Southern California. Peeking ahead, PLD’s full-year sales are projected to jump 19%, with 2020 expected to come in over 13% higher at $3.21 billion. And Prologis FFO is expected to climb 9.3% this year and another 10.3% in 2020.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
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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.