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Bull of the Day: Carbonite Inc. (CARB)

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The technology sector is constantly witnessing innovation after innovation, and one of the biggest areas of growth has been in cloud solutions.  The cloud solutions enable businesses, and or people to store and access data on the internet rather on their specific hard drives.  This is where the Zacks Bull of the Day, Carbonite Inc. comes into the equation, they back up, and protect the data stored in the cloud. 

This Zacks Rank #1 (Strong Buy) company is a computer service company which provides online backup solutions for consumers and small and medium sized businesses to retrieve files if lost on the internet. The Company's backup solutions work automatically and continuously uploading encrypted copies of its customer's files to the servers known as Carbonite Personal Cloud. Carbonite Inc. is headquartered in Boston, Massachusetts.

Recent Earnings

In early August, Carbonite announced Q2 earnings where they easily beat both the Zacks Consensus Earnings and Revenue estimates. The company saw year over year gains in Revenues +57%, Net income +450%, Bookings +50%, and Cash flow from operations +27.5%. 

Due to their impressive bookings, and growth, management is expecting revenues to grow between 29-43% in their third quarter 2016, and EPS to be in a range of $0.06-$0.10 (ahead of the expected $0.06).  Further, management increased FY 16 revenue and EPS guidance; revenues are now expected to be in a range of $192.7 million to $202.7 million (above previous expectations of $177.5-$192.5 million), and EPS is now expected to be in a range of $0.48-$0.52 from a previous expectation of $0.31-$0.35. 

Management’s Take

According to Mohamad Ali, President and CEO, “I am very pleased with our progress, especially the expansion of our SMB business which grew approximately 150%. The EVault integration is exceeding expectations, yielding faster and better-than-expected synergies. Market demand for our expanded set of solutions is strong and growing, and I am confident in the team’s ability to continue to drive results.” 

Further, Anthony Folger, CFO, stated that, “We delivered strong revenue and bookings growth that drove record profitability in the quarter and resulted in our raised outlook for 2016.  Our rapidly growing SMB business now represents the majority of total bookings and the strength of that business is a key driver of our improving financial results.”

Price and Consensus Graph

As you can see in the graph below, Carbonite’s current stock price and future earnings expectations have risen in the near term, and are expected to continue to grow through 2017.

CARBONITE INC Price and Consensus

CARBONITE INC Price and Consensus | CARBONITE INC Quote

Increasing Estimates

Due to the strong earnings and increased guidance, estimates for Q3 16, Q4 16, FY 16 and FY 17 have all increased over the past two weeks.  Q3 16 rose from -$0.03 to -$0.02, Q4 16 improved from -$0.02 to $0.01, FY 16 jumped up from -$0.05 to $0.15, and FY 17 vaulted up from -$0.01 to $0.09. 

Bottom Line

In the second quarter, Carbonite’s small to medium business (SMB) segment, and the faster than expected integration of their new acquisition of Evault helped drive their better than expected performance.  Further, both of these segments are expected to be growth drivers for the foreseeable future. 

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