For Immediate Release
Chicago, IL – September 3, 2020 – Zacks Equity Research Shares of Crocs, Inc. (CROX - Free Report) as the Bull of the Day, Illumina, Inc. (ILMN - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis onMicrosoft Corporation (MSFT - Free Report) , Walmart Inc. (WMT - Free Report) and Oracle Corporation (ORCL - Free Report) .
Here is a synopsis of all five stocks:
Headquartered in Niwot, CO, Crocs is a leading specialty footwear retailer for men, women, and children. All Crocs shoes feature Croslite, a proprietary material that gives each pair of shoes a soft, comfortable, lightweight, non-marking, and odor-resistant quality that consumers know and love.
Q2 Earnings Recap
Back in July, Crocs reported better-than-expected second quarter results, and delivered huge beats on both the top and bottom lines.
Global revenues reached $331.5 million, and four out of five of the company’s key geographies delivered growth: U.S., Korea, China, and Germany. E-commerce revenue soared 67.7% year-over-year, with strong growth in all regions.
Adjusted earnings per share hit $1.01, easily beating the Zacks Consensus Estimate of $0.12 per share.
Cash flow from operations almost doubled; cash and cash equivalents were $151.4 million as of June 30.
"Amidst unprecedented market conditions globally, we delivered exceptional performance in our Americas and e-commerce businesses and increased profit despite a very challenging environment,” said president and CEO Andrew Rees.
“Our performance demonstrates the strength of the Crocs brand and underscores the work we've done expanding the desirability, relevance, and consideration of our brand and product offering globally,” he continued.
Since March 23, shares of CROX have surged over 277% compared to the S&P 500’s 54% increase. Earnings estimates have been rising too, and CROX is a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, four analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up over one dollar to $1.95 per share. Earnings are expected to grow about 21% compared to the prior year period. 2021 looks strong too, and earnings should see double-digit year-over-year growth.
Like many other retailers, the coronavirus pandemic has taken a toll on Crocs; its brick-and-mortar stores were forced to close earlier this year (most have now reopened), and its supply chain has certainly been affected.
But, Crocs is seeing a resurgence in demand, and more people are turning to its comfort-forward shoes, especially as working from home becomes the norm. Even though the growth rates seen during the Covid crisis are beginning to temper, the retailer expects to resume pre-pandemic growth levels next year.
If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep CROX on your shortlist.
Bear of the Day:
Illumina is a life sciences company that offers tools and integrated systems for genetic variation analysis. The company also provides innovative sequencing- and array-based solutions for genotyping, copy number variation analysis, methylation studies, and gene expression profiling of DNA and RNA.
Q2 Earnings Disappoint Wall Street
Illumina reported second quarter financial numbers last month, and results fell short of expectations. ILMN dropped as much as 13% the day of its earnings release.
Revenue of $633 million declined 25% year-over-year, though this is what analysts had been anticipating. Non-GAAP earnings were $0.62 per share, missing analysts’ expectations.
R&D expenses were $155 million for the quarter.
Cash flow from operations, however, improved over the prior-year period to $240 million; free cash flow was $202 million, also improving year-over-year.
"As expected, the second quarter was significantly impacted by pandemic-related disruption in our customers' operations and was particularly challenging for many of our research customers who remain closed or operating at limited scale,” said CEO Francis deSouza.
ILMN withdrew its full-year fiscal 2020 guidance earlier this year, and uncertainty around the coronavirus pandemic still remains.
ILMN is now a Zacks Rank #5 (Strong Sell).
Seven analysts cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen well over one dollar to $4.39 per share; earnings are expected to decline about 33% for fiscal 2020.
Shares have actually gained more than 44% since the March lows, but ILMN still lags the S&P 500’s 55+% rebound during the same time frame.
ILMN will likely have a long, hard road ahead of it, since the Covid-19 crisis will continue to be a growth obstacle for a while now. But, the broader genome sequencing market has huge growth opportunities, and Illumina could be poised for a big rebound once the pandemic subsides.
Is TikTok Worth the Price?
TikTok has become one of the fastest-growing social media applications in the world today, and the Trump administration is worried that this Chinese owned enterprise knows too much about our domestic users. Washington is calling on Silicon Valley to bring this Beijing-based social media giant to the homeland.
TikTok is the most recent battleground for the Trump administration's reheating trade war with China. The Whitehouse is threatening to ban the use of this meme video app in the US if a domestic entity doesn't acquire it.
Those in the running for this forced acquisition have rotated with bids around valuation being broad-based. ByteDance is asking for $30 billion to purchase its social media behemoth, but the acquirers are still in negotiations, according to those familiar with the deal.
As of now, Microsoft and Walmart are teaming up in a peculiar dual acquisition bid, while Oracle is partnering with private equity investors.
The Chinese government is not going to let TikTok go without a fight, and this was made clear on Friday when Beijing released a new constraint on exports of artificial intelligence technology. This novel restriction may include TikTok's proprietary algorithm's sale and could require a sign off from the Chinese government.
All in all, this new restriction has reduced the chances of a deal.
Value to Acquires
I have been attempting to wrap my head around the added value & synergies of this acquisition to the current bidders. Some speculate that Walmart could leverage the app for digital sales, while Microsoft and Oracle could utilize the user data.
I am skeptical about this user data's value and don't think the app would be nearly as attractive if a Walmart ad popped up every 30 seconds.
This looks like it is a play to appease the 80 million users in the US today. I think the acquirer would be in good favor with both the government and the younger population who are driving a growing portion of the economy.
My concerns are the same as every other analyst: that TikTok will not generate sufficient long-term returns.
This application has all the makings of a fad. It is almost identical to the late Vine with its short video clips and meme-worthy trends. TikTok could die the same slow obsolescent death that Vine did if it doesn't continue to captivate its audience.
Still, TikTok is already 4 times bigger than Vine ever was, with 800 million active monthly users and over 2 billion downloads worldwide. Whether this is just fad or not remains to be seen, but I still don't see strong synergies with any of its acquisitions, so I would be apprehensive about buying into this acquisition.
The declaration of TikTok's "national security threat" is subject to controversy, but there is no question that the Trump administration is fueling the fire of the trade war once again.
As of now, it looks likely that Microsoft and Walmart are likely to be the acquirers of TikTok, but what they plan to do with this meme machine remains a mystery.
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