For Immediate Release
Chicago, IL – September 31, 2020 –
Zacks Equity Research Shares of Aspen Technology, Inc. ( AZPN Quick Quote AZPN - Free Report) as the Bull of the Day, Cedar Fair, L.P. ( FUN Quick Quote FUN - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on WillScot Mobile Mini Holdings Corp. ( WSC Quick Quote WSC - Free Report) , DouYu International Holdings Limited ( DOYU Quick Quote DOYU - Free Report) and At Home Group Inc. ( HOME Quick Quote HOME - Free Report) . Here is a synopsis of all five stocks: Aspen Technology, aka AspenTech, is an $8.5 billion provider of industrial software that helps manufacturers and engineering firms monitor and optimize their operations in a process commonly referred to as asset performance management.
Their most recent quarterly report on August 12 blew away all expectations and launched the stock 30%. More on that coming up after we learn about their business.
AspenTech solutions aid in optimizing process manufacturing by supporting real-time decision making, predicting equipment failure, and providing the ability to forecast and simulate potential actions.
Asset management solutions not only assist manufacturers in understanding the operating conditions of their assets but also to take appropriate actions to increase their productivity in an efficient way.
In the era of automation and artificial intelligence (AI), AspenTech talks of the "self-optimizing plant" that can use Industrial AI technology to enable companies to make plants increasingly autonomous and optimize across functions.
After a strong "beat & raise" June quarter report (their Q4 for FY20), analysts raised estimates significantly for FY21 and are forecasting 23.5% revenue growth to $729 million and 37% earnings growth as the company breaches $5 EPS.
Old School Modeling Gets AI Facelift
AspenTech is the oldest industrial software company you've never heard of. They got their start over four decades ago modeling chemical processes for oil and gas companies during the energy crisis that began in the 1970s.
As their PR video says "Not long after that, we started moving companies away from the dials and knobs and kicked off a digital revolution in the process industries."
AspenTech was put on my radar not merely because of its frequent visits to the upper realms of the Zacks Rank earnings momentum model, but also because of a significant AI acquisition they made almost four years ago. Here was the press release...
AspenTech Acquires Mtell
October 27, 2016
Will Add Predictive and Prescriptive Maintenance Technology to aspenONE® Software; Extends Company’s Asset Optimization Offerings
Bedford, MA -
Aspen Technology, a leading provider of software and services to the process industries, announced it has acquired Mtelligence Corporation (known as Mtell), a San Diego, California-based pioneer in the field of predictive and prescriptive maintenance for asset performance optimization.
Mtell products enable companies to increase asset utilization and avoid unplanned downtime by accurately predicting when equipment failures will occur, understanding why they will occur, and prescribing what to do to avoid the failure.
The products provide a low-touch, rapidly deployable, end-to-end solution that combines a deep understanding of operations and maintenance processes, real-time and historical equipment data and cutting-edge machine learning technologies. As a result, customers can:
Monitor the health of equipment, detect early failure symptoms, diagnose their root-cause and recommend the best responses to avoid the failure
Continually learn and automatically adapt to changing equipment and process behaviors
Automatically share findings across a network of similar equipment to improve the overall process performance.
Some of the world’s largest process manufacturing companies use Mtell software to detect and avoid failures well in advance of an actual breakdown, optimizing the performance of their assets. Customer results have shown significant benefits including improved industrial safety, removal of risk, reduced failures, enhanced productivity and increased profitability.
(end of PR excerpt)
The co-founder of Mtell was Alex Bates who performed DARPA-funded research in neural networks as an undergrad, as well as research in memory and computational diagnostics. Next he jumped into the private sector, applying analytics on some of the world’s largest data warehouses at Teradata, a pioneer in big data / MPP database technology.
A lead inventor on 3 patents in the area of sensor networks and machine learning, in 2006 Bates co-founded Mtelligence (Mtell) to harness the deluge of sensor data in the industrial IoT, with a mission to create a world that doesn’t break down. Mtell’s machine learning platform is used to monitor global fleets of offshore drilling rigs, railroad engines, and process equipment, in effect creating a distributed immune system to protect equipment and personnel.
The AspenTech website describes a case study where Mtell technology examined pump and compressor assets for a major oil & gas refinery with hundreds of sensors in play at once. Aspen Mtell analyzed 220 million sensor values to identify the top 10 maintenance cost failures and predicted a compressor breakdown 49 days in advance.
This is similar to what Alteryx allowed Royal Dutch Shell to do, helping them create predictive analytics for forecasting asset failures on off-shore drilling rigs.
Here's how AspenTech describes the evolution of Industrial AI for modern asset performance management...
Traditional preventive maintenance alone cannot solve the problems of unexpected breakdowns. With asset performance management powered by low-touch machine learning, it’s now possible to extract value from decades of process, asset and maintenance data to optimize asset performance.
Since Bates was clearly ahead of the curve with machine learning, I'm eager to learn more from him and currently reading his book
Augmented Mind: AI, Humans, and the Superhuman Revolution that he published in 2019 through his investment and research firm Neocortex Ventures. Big Beat & Raise Quarter
Clearly, the downturn in oil and gas markets impacted AspenTech business and the company had to lower expectations in their Q3 report in May. But you'd never know it looking at what just happened, causing shares to jump from $98 to $128 this month.
On August 12, AspenTech reported Q4 adjusted EPS of $1.54, beating the consensus of $1.18 by 30%. And they delivered Q4 revenue of $199.3M vs. consensus of $176.57M for a .
"AspenTech delivered solid fourth quarter results that exceeded expectations in the midst of unprecedented economic conditions," said Antonio Pietri, President and Chief Executive Officer of Aspen Technology. "Customers in our core markets continued to make significant investments in AspenTech products despite the challenges facing their own businesses. Companies in the process and other capital intensive industries increasingly recognize that investing in digitalization initiatives is essential to long-term financial and operational success and we believe we are well-positioned to benefit from this trend."
The company also offered outstanding upside guidance with FY21 adjusted EPS projected in a range of $4.78-$5.32 vs consensus of only $3.70 and FY21 revenue of $704M-$754M vs. consensus of $600.43M.
One analyst who saw this recovery coming was KeyBanc's Jason Celino who raised the firm's price target on AspenTech to $120 from $110 in May. Celino noted that the company posted Q3 annual spend growth of 9.3% year-over-year and revised its fiscal year 2020 annual spend guidance to 7%-9%, both above his previewed expectations. While the downturn in oil end markets presented near-term headwinds, the analyst was confident in the company's "best in class execution and more durable business model."
And so after his thesis about AZPN was confirmed in the June quarter, Celino felt compelled to raise his outlook again. On August 13, he raised his price target on AZPN to $137 from $120. Most impressive to him was the 6%-9% 2021 annual spend guidance, which was much higher than his previewed expectations of 3%-5% year-over-year growth. Celino also pointed out that despite a tough end market backdrop, the company's continued execution reinforces his long-term confidence that Aspen remains a core name to own.
While that spend metric is important to the KeyBanc analyst, I'm more focused on the company growth in a total addressable market for big data and machine learning analytics in the tens of billions. AZPN's projected surge of 23.5% in revenues to $729 million this fiscal year will exceed the last TTM peak of $618M by 18%.
And the 37% expected jump in profits is just icing on that Industrial AI cake. While the valuation at nearly 12X sales is rich, I would look to be a long-term buyer on pullbacks under $120.
Cedar Fair is an amusement parks management company that owns five venues, including Cedar Point, Knott’s Berry Farm, Dorney Park & Wildwater Kingdom, Vallyefair and Worlds of Fun/Oceans of Fun.
The company also owns and operates four hotel facilities, as well as the Cedar Point Marina, one of the largest full-service marinas on the Great Lakes.
My colleague Jeremy Mullin wrote about FUN as the Bear of the Day in early April and here's what he had to say...
A combination of bad earnings running into a season of lockdowns make a recipe for disaster for this company. While lockdowns might not last throughout the summer, the stigma of social distancing will likely lead to extreme pressure on business operations.
At the time, sales and profits were already plummeting. And they just took another plunge after earnings in early August.
Quarterly Results on August 5
Earnings per share decreased approximately 300% over the past year to ($2.35), which missed the estimate of ($2.23).
Revenue of $6.586 million declined by 98.49% year over year, which missed the estimate of $32.9M.
Analyst reactions to the quarter and outlook were grim, with 2020 revenues expected to decline 88% from $1.47 billion to just $175 million.
The September quarter, traditionally the strongest seasonally, is projected to see an 88.5% drop in sales from $714.5 million last year to just $82.2M.
The bottom line estimate revisions -- the nuts and bolts of the Zacks Rank -- were crushed from EPS of ($4.81) to ($10.15) for this year.
And next year's EPS projections were also thrown into negative territory with the Zacks Consensus moving from a profit of $0.04 per share to ($2.19).
While many restaurants and hotels are suffering, some have managed to adapt with new food delivery, entertainment, and leisure options that can observe social distancing requirements and preferences.
It's hard to see those options for amusement parks which thrive on visitors entering the facility and engaging in the festive community and market atmosphere of the parks.
Crucial Analyst Notes
A downgrade from Janney Montgomery Scott on July 9 highlighted what investors have come to count on in terms of consistent cash flow from amusement park operators.
Analyst Tyler Batory downgraded Cedar Fair to Neutral from Buy with a $29 fair value estimate, voicing concern that he believes the stock has become "the consensus long in the space." Batory noted that the company is heavily reliant on two parks -- Knott's and Cedar Point -- for EBITDA and the latter is a difficult day trip for many people. He also believes the company is unlikely to reinstate the dividend until 2022, which is a negative for a stock where distribution is a key part of the investment thesis.
The impact of the pandemic on many leisure, dining, travel, and entertainment businesses has been devastating. People who have built their lives around these industries are suffering and it brings me no joy to highlight the pain of this sales and earnings destruction.
I would much prefer that Cedar Fair and its operations see a turn-around in their business outlook and profitability. We can only hope that this happens into next year. The Zacks Rank will let us know as it signals when earnings estimates stop going down and start heading back up.
Additional content: 3 Cheap Stocks Under $20 to Buy for September
The market keeps on humming along to new highs, with the tech-heavy Nasdaq and the S&P 500 both continuing to close at records over the last week. Wall Street remains focused on the positive signs of economic recovery, which includes solid PMI data, an improving earnings outlook, and more.
Businesses and consumers are learning every day how to further adapt to the coronavirus. Meanwhile, investors have been relatively choosy in their stock picking during the market’s comeback from its March lows. Tech stocks have soared, as have big retailers, and other firms that have proven they can grow during the economic downturn.
Unknowns do lurk ahead in the form of the upcoming election, trade, and what’s next on the virus front. But the Fed is providing support and Jerome Powell officially announced Thursday its new policy that will see the Fed non longer preemptively lift rates to curb higher inflation.
This means that historically low interest rates will likely be with us for some time. The prospect of prolonged low rates, coupled with an improving earnings outlook, could present further runway for the stock market, even if it experiences some pullbacks along the way.
Therefore, investors might want to remain on the hunt for stocks to add to their portfolios. So today we dive into a niche that is attractive to many investors: low-priced stocks that trade for under $20 that also boast strong fundamentals…
WillScot Mobile Mini
Prior Close: $18.22 USD
WillScot Corporation and Mobile Mini officially closed their merger at the start of July, and now operates under WillScot Mobile Mini, while trading under the WillScot ticker. WSC offers “turnkey office space and storage solutions for temporary applications.” The Phoenix-based firm is a portable storage and modular space giant that can be found everywhere from construction sites and other outdoor-focused and temporary work environments across the U.S., Canada, the UK, and Mexico.
WSC’s business is vital and never really goes out of style even though it has to deal with broader economic cycles. Shares of WSC have soared 130% since the market’s March lows and over 25% in the last month. Despite the climb, they still have a bit of room to run before they hit their February, pre-COVID highs.
Our Zacks estimates call for the newly combined company’s sales to surge over 50% in both Q3 and Q4. The company’s adjusted fiscal 2020 earnings are projected to soar 204% to $0.70 per share on 27% stronger sales. Looking further ahead to give a sense of more normalized operations, WSC’s revenue is projected to jump another 27% in FY21 to help lift its EPS figure 26% higher.
WSC’s positive earnings revisions help it earn a Zacks Rank #2 (Buy) at the moment, alongside its “A” grade for Growth in our Style Scores system. The stock is also part of a space that rests within the top 1% of our over 250 Zacks industries. Investors should also note that WSC management announced on August 7 a $250 million “indefinite-lived” share repurchase program.
Prior Close: $16.18 USD
DouYu is a live streaming firm that focuses mostly on the video gaming and e-sports market in China. The company went public in July 2019 and it’s drawn comparisons to Twitch for its ability to allow people to watch video games live. DouYu is backed by Chinese social media and gaming powerhouse Tencent and its stands to grow within the booming gaming global video space that is
projected to soar from $159 billion in 2020 to over $200 billion by 2023
DOYU operates across both PC and mobile apps and it says it “has gained coveted access to a wide variety of premium eSports content.” DOYU is up 40% in the last month and 130% since the market’s March lows to crush its Gaming industry’s 55% average climb. And the stock trades right in line with its industry that includes Activision Blizzard and Electronic Arts.
The company’s Q2 earnings, which it reported on August 10, topped our Zacks estimate and its sales climbed roughly 30%. Our current Zacks estimates call for DouYu’s adjusted fiscal 2020 earnings to jump from $0.04 in the year-ago period to $0.51 on 26% stronger sales. The Chinese gaming firm is then projected to see its sales climb another 30% higher next year to help raise its bottom-line by 45%. And DOYU holds a Zacks Rank #2 (Buy) at the moment, as well as a “B” grade for Growth.
At Home Group
Prior Close: $18.84 USD
At Home, as its name might suggest, is a budget-friendly home décor retailer with over 200 stores in around 40 states. The Plano, Texas-based firm has seen its stock price skyrocket well over 600% during the stay-at-home environment, up from under $2 a share in March to its current price tag of roughly $18. Some recent selling has pushed HOME off its highs of nearly $20 per share, which might set up a better buying opportunity for those high on the stock.
At Home is part of the Retail - Home Furnishings industry that rests in the top 11% of our Zacks industries. The company stands to benefit greatly, alongside the likes of Lowe’s, Home Depot and others, from do-it-yourself and home improvement spending that has boomed during the pandemic. “We are emerging from this pandemic stronger and even better positioned, and we believe we are gaining meaningful market share,” CEO Lee Bird said in prepared remarks when it released its preliminary Q2 results at the end of July.
At Home’s Q2 revenue is projected to climb over 50% to reach $515 million, with its third-quarter revenue expected to jump 18%. On top of that, HOME’s adjusted second quarter earnings are projected to soar roughly 640%. At Home’s strong earnings revisions help it grab a Zacks Rank #1 (Strong Buy) at the moment.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
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