For Immediate Release
Chicago, IL – April 15, 2021 – Zacks Equity Research Shares of SMART Global Holdings, Inc. (
SGH Quick Quote SGH - Free Report) as the Bull of the Day, General Motors Company ( GM Quick Quote GM - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Moderna, Inc. ( MRNA Quick Quote MRNA - Free Report) , BioNTech SE ( BNTX Quick Quote BNTX - Free Report) and Johnson & Johnson ( JNJ Quick Quote JNJ - Free Report) . Here is a synopsis of all five stocks: SMART Global Holdings is a Zacks Rank #1 (Strong Buy) that designs and manufactures electronic products focused in the memory and computing technology areas. The company is engaged in the computer, industrial, networking, telecommunications, aerospace and defense markets.
SGH has been on a steady climb all year, but recent earnings took the stock to all time highs. Analysts are taking estimates higher as the stock looks to have a promising Q3 and FY2021 ahead.
More About the Company
SMART Global is headquartered in Newark, CA and has over 1700 full-time employees
. The company operates in the U.S., Europe, Asia and Latin America.
SGH primarily offers DRAM modules and flash memory products, but also provides supply chain services.
The company has a market cap of $1.3 Billion and has Zacks Style Scores of “A” in Momentum and “B” in Growth. The stock pays no dividend and has a Forward PE of 14.
Q2 Earnings and Guide
Earlier this month, the company reported Q2 earnings, seeing a 9% EPS surprise to the upside. The company saw $0.87 v the $0.80 expected and revenue came in at $304.0M v the $296M expected.
SGH also raised their Q3 guidance and now sees a range of $1.00-1.20 v the $0.88 expected. The revenue was guided up as well, now at a range of $400-430M v $314M expected. The company also guided gross margins 19-21% and EBITDA came in at $31M, up almost 39% year over year.
The earnings beat was the fifth in a row after the company struggled for the better part of 2019.
Estimates and Upgrades
Over the last 7 days, estimates have jumped higher. For the next quarter, we have seen estimates raised by 16%, from $1.05 to $1.22. For next year, we have seen a 27% move higher in that same time frame.
A couple of analysts have taken price targets higher since earnings, with Barclays resuming SGH with an Overweight rating and a $60 target. Additionally, Stifel hiked their target to $62.50 from $55.
Stifel cited Penguin Computing and the 30% sequential growth as reasoning for the hike. The firm believes that the strong commercial and Federal pipeline will allow momentum to continue.
The stock is already up over 50% on the year, so the recent earnings move higher is starting see some profit taking. If the stock can’t manage to get back to recent highs, investors should look for some levels to enter the stock on market pullbacks.
With the stock currently trading at $54, the momentum area to buy would be the 21-day moving average. This currently sits just over $48 and aligns with a 61.8% retracement level drawn from March lows to post-earnings highs.
For those looking for larger pullbacks, watch the 50-day MA at $46.50. The 200-day is way down at $34 and likely out of reach with a stock this strong.
SMART Global is well positioned for the back half of the year, both fundamentally and technically. The momentum and demand for its products and services are strong, which will cause investor interest going forward.
Investors should look for buying opportunities on pullbacks and look for the stock’s momentum to continue higher over the next couple quarters.
General Motors is a Zacks Rank #5 (Strong Sell) that is one of the largest automakers in the world and makes up 17% of the U.S market share. The company designs, builds and sells trucks, cars, crossovers and automobile parts worldwide.
The stock has had a nice run as of late after taking off in January. The company has transitioned well in EV, it continues to dominate traditional markets. However, the stock looks like it might have topped and analysts are lowering estimates.
As we approach the upcoming earnings season, investors should be tapping the breaks and possibly taking some profits.
More about GM
General Motors is an iconic American car company with a long history that goes back to 1908. Part of the “Big Three,” General Motors is headquartered in Detroit, Michigan and employs over 150,000.
The company is valued around $86 billion and has a PE of 12. GM has Zacks Style Scores of “A” in Value and “B” both Growth and Momentum. The company pays no dividend.
Since the company went bankrupt in 2009 and IPOs in 2010, General Motors has been profitable. Even so, the stock traded between $30 and $40 for the last decade. It was only recently that the stock broke out, but are investors getting ahead of themselves?
Earnings have been pretty impressive over the last couple years, with the company beating ten quarters in a row. The company reported Q4 in early February, seeing a 19% EPS beat. The company also beat on revenue seeing $37.5B v the $36.9B expected.
The bad news was that the company guided FY21 at $4.50-5.25 v the $5.92 expected. The reasoning behind the drop in guidance was the semiconductor shortage that the company was starting to experience. This has only gotten worse since the company guided.
At the time, GM expected the semi shortage to be temporary and thought that it would not impact the growth and EV initiatives. However, the headlines about semiconductor shortages keep coming.
Earlier this month GM announced cuts in production at several North American facilities due to the shortage. While some chip supply has been improved this week, the question is if the damage was done for the quarter and the year.
The guidance and risk of more shortages has estimates falling for FY21 and next FY22. For the current year, analysts have lowered estimates from $5.49 to $5.09, or 7%, over the last two months. For next year, analysts have dropped their numbers 5.5% over that same timeframe.
During the COVID crash, the stock dropped to $14, but rallied back to pre-COVID levels by October. At the beginning of 2021, the stock took off, making a 20% move higher to the $50 level. Since then, the stock has grinded higher, recently topping out over $63.
GM recently broke the 21-day moving average and the bulls have to take caution if that momentum level fails. The next stop lower and test of support would be the $56 level, right above the 50-day MA. The 200-day is all the way down under $41, so unless there is a broad market sell off, that test isn’t likely.
General Motors is a great American car company that we all root for. However, investors should be aware there are some flashing red lights as we approach the upcoming earnings season.
Additional content: Is J&J's Covid-19 Vaccine Setback a Boon for Other Players?
Shares of coronavirus vaccine makers including
Moderna and BioNTech as well as other companies whose COVID-19 vaccine is in late-stage development rose as the U.S. Centers for Disease Control and Prevention (CDC) and the FDA jointly recommended pausing of the use of Johnson & Johnson's COVID-19 vaccine.
The decision to pause J&J’s vaccine comes after the federal health officials noticed cases of ultra-rare blood clots following vaccination. Reportedly, the cases of blood clots seem similar to cases found in individuals vaccinated with AstraZeneca’s COVID-19 vaccine, Vaxzevria. Please note that Vaxzevria is yet to receive emergency approval in the United States but is already approved (temporary/conditional) for use in Europe, the United Kingdom and some other countries.
Health officials in the United States are now trying to figure out reasons for blood clots after vaccination and has recommended pausing administration of J&J’s vaccine until review of these blood clot cases are completed. A meeting is expected to be held today by the CDC’s Advisory Committee on Immunization Practices to discuss J&J’s case. J&J’s vaccine is also
under review for blood clots in Europe.
Please note that J&J received emergency/conditional use approval in the United States and Europe in February and March, respectively. However, the vaccine has not yet been rolled out in European countries.
Advantages for Other Vaccines
Stocks of J&J’s competitors gained following its setback due to an anticipated decrease in competitive pressure in the field of coronavirus vaccines that has attracted several players. Stocks of vaccine developers that rose on Wednesday include Moderna, Pfizer, BioNTech, Novavax, Inoviva and Vir Biotechnology that were up 7.4%, 0.5%, 6.7%, 10.8%, 6% and 4.1%, respectively.
We note that the temporary suspension of J&J’s vaccine boosts the prospect of other biotech players involved in development or commercialization of COVID-19 vaccines. Although other biotech companies have supply agreements related to their respective vaccines already in place, any continuation of the suspension for a longer term may see additional supply agreements for these companies.
Additional agreements mean more revenues for J&J’s competitors. We note that several countries have partially or completely restricted use of AstraZeneca’s Vaxzevria following similar blood clot events. Moreover, any setback in the United States for J&J’s vaccine may have a global impact as other countries may follow suit.
Currently, there are three available vaccines — Pfizer/BioNTech’s BNT162b, Moderna’s mRNA-1273 and Vaxzevria — in different countries in the world. Novavax is also developing its vaccine candidate in late-stage studies and may win an emergency use approval in a few months. Currently, BNT162b and mRNA-1273 are primarily being supplied in the United States. Supply to other countries have started or will begin later this year. Demand for these two vaccines is also increasing in other countries and additional supply agreements may follow.
However, it should be noted that cases of blood clots after vaccination with J&J’s vaccine are ultra-rare and U.S. health officials may allow vaccinations to resume, keeping benefits from the vaccine in mind. The risk-benefit ratio for both J&J’s vaccine and Vaxzevria seems favorable. Outcomes of today’s meeting on J&J’s vaccine will provide more clarityon the scenario. While negative news will be good for competitors, a positive development may hurt theirstocks.
While Moderna carries a Zacks Rank #2 (Buy), the other leading coronavirus vaccine makers — AstraZeneca, J&J, Pfizer and BioNTech — carry a Zacks Rank #3 (Hold). You can see
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