For Immediate Release
Chicago, IL – April 23, 2021 – Zacks Equity Research Shares of Interactive Brokers Group, Inc. (
IBKR Quick Quote IBKR - Free Report) as the Bull of the Day, Greenlane Holdings, Inc. ( GNLN Quick Quote GNLN - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on NVIDIA Corporation ( NVDA Quick Quote NVDA - Free Report) , Adobe Inc. ( ADBE Quick Quote ADBE - Free Report) and Advanced Micro Devices, Inc. ( AMD Quick Quote AMD - Free Report) .
Here is a synopsis of all five stocks:
Interactive Brokers is a true "rags to riches" story. Founder Thomas Peterffy wasn't born with a silver spoon in his mouth and he didn't start in the business with a bunch of high-powered connections. Instead, he reimagined how the financial markets could work better and then created an institution to make it happen, innovating over and over to make it all happen.
Originally named "TP &Co" and subsequently "Timber Hill," Interactive Brokers started as the first truly technologically innovative options market making firm. In the mid 1970's options traders on the exchange floors mostly used their own intuition to quote prices, but utilized little or no little advanced pricing theory or the technology to implement it on a scale larger than what one single trader at a time could do on a calculator.
Peterffy hired floor traders and provided them with printed pages of options theoretical values that they could use to make accurate verbal price quotes in the "open-outcry" trading environment. The company later moved on to using portable computers on the exchange floors and then to advanced networks and proprietary software to power their analytics.
Facing opposition from established players who (understandably) were quite comfortable in the low-tech niches they had built for themselves (and saw Timer Hill as a threat), the company continually had to overcome the hurdles that were being erected before them with increasingly sophisticated technological solutions.
Soon trading - and having significant success - on essentially every financial exchange in the US and around the globe, Timber Hill realized that the channels they had created for accessing price data, sending orders and receiving fills would be valuable to customers who wanted professional-level access to the markets. In 1993, they formed the Interactive Brokers broker-dealer to offer their services to those customers.
The market making business is gone now – Interactive Brokers sold it in 2017 – but the brokerage business is as strong as ever, as evidenced by the company's history of earnings beats and highlighted by Q1 2021 profits of $0.98/share. That was 10% higher than the Zacks Consensus Estimate and IBKR's fifth consecutive beat.
Early in 2021, the trading app Robinhood got a lot of press for their appeal to newer and younger investors and supposedly "democratizing" the markets. That company is expected to go public soon with a valuation somewhere around $40 billion. It's almost certain to be a popular IPO because of excellent brand recognition, but investors who want to own the company that has truly had a role in revolutionizing finance for the average investor would be wise to take a look at Interactive Brokers instead.
Want to trade virtually every listed security in the world in a single interface? Interactive Brokers has you covered. Want a bare-bones interface with zero-commissions? IBKR virtually invented zero-commissions. Willing to pay a small bit more for comprehensive service? They offer that, too. Trade on your phone? No problem. Currencies? Commodities? Crypto? Sure! And on and on...
In fact, when asked in a television interview about high-profile service outages at Robinhood during periods of high market volatility, Peterffy politely implied that that's exactly what he would expect from a firm that hadn't made a significant investment in data services and systems redundancy. The layman's interpretation – Robinhood still has a lot to learn.
Anyone hoping to buy Robinhood at somewhere near the eventual IPO price is making a mistake by not paying closer attention to the 44-year old company that has already "been there, done that" at 135 exchange venues around the globe. A company that already makes solid net profits and trades at a very reasonable P/E ratio of 26X.
That company is Interactive Brokers.
Today's Bear of the Day is in the hotseat for one main reason – I simply don't think that selling things that people inhale is a growth industry. In fact, I personally think that using one's lungs as the delivery method for most substances is going to look pretty archaic sooner rather than later. Smoking cigarettes has become socially unacceptable in almost every setting. It's hard to imaging that other inhaled drugs won't go the same way soon.
You may have guessed already that I'm talking about cannabis smoking and vaping.
Greenlane sells a wide variety of (primarily) smoking and vaping accessories to smoke shops and cannabis stores. It's not a "cannabis" stock per se because they don't "touch the plant," but the demand for their products is significantly dependent on people wanting to get the active ingredients from the cannabis plant into their bodies.
I'll spot you that the lungs are actually a very efficient way to ingest a pharmaceutical or psychoactive substance. The huge number of blood vessels meant to help your body take in oxygen and expel carbon dioxide are also an effective pathway for getting other things into your blood besides oxygen. The effects of cannabis compounds (mostly THC, but increasingly also CBD, CBN and terpines) can be felt nearly immediately when inhaled and many users are accustomed to that feeling.
(The rapid uptake of nicotine is a big part of what makes tobacco cigarettes so addictive. Users get their "fix" almost immediately.)
I'll also spot you that Greenlane has an excellent mix of products, many of which they are the exclusive distributor of. Except for the respiratory concerns, it could be a great business. Especially after a year in which much of the world was shut down to prevent the spread of a respiratory virus, I think the demand for ways to put cannabis into your lungs has peaked.
As the editor of the Zacks Marijuana Innovators service, understand that I'm
bullish on the future of cannabis products, I'm simply bearish on inhalation of them. (At one point, I owned Greenlane in that portfolio, but I don't anymore.)
It's also not going to help that well-capitalized food, beverage and alcohol companies have a countless number of edible and drinkable products on the way that will allow users to ingest exactly the mix of THC, CBD and other cannabis compounds that they wish. They'll taste good - just like your favorite candy, beer, wine or soft drink - while leaving the lungs up to the important primary business of oxygen transfer.
Medicinal cannabis researchers are perfecting transdermal and sublingual delivery methods of precise doses.
It won't surprise me if many of the currently dedicated consumers of recreational cannabis that actually
enjoy smoking or vaping will continue to do so indefinitely – but I also don't think that's where the growth in the industry will come from. A huge number of brand new customers isn't interested in inhaling it, but they're going to love other products.
Picking profitable holdings is challenging enough, please don't handicap yourself with companies that depend heavily on yesterday's technology.
Additional content: 3 Sales and Earnings Growth Winners
Here's a great screen to run during a solid earnings season like we're having right now. Literally thousands of companies will be giving us an update over the next few weeks. So far, so good! Stocks are recovering from the pandemic and mostly beating on the top and bottom lines. But you can't buy them all. However, there's a tool that can pinpoint the strongest and most stable growth stocks.
We're talking about the
screen. Of course, it starts with Zacks Rank #1s (Strong Buys) and Zacks Rank #2s (Buys), but seeks out companies with a Zacks Style Score of A or B for growth as well. It also looks for effective management through ROE and good liquidity through the current ratio. Sales & Earnings Growth Winners
Learn about three stocks that recently passed the test:
Could you imagine going through this pandemic without GPUs? Actually, that's not a hypothetical question. The answer is "no"... you really couldn't imagine it. Because it's 2021 and not 1921. Those little chips are essential ingredients to working, learning and playing from home.
So it makes sense that GPU pioneer NVIDIA would be experiencing broad-based strength amid all of its market platforms, which include gaming, data center, professional visualization and automotive. In fact, last week the company stated that first-quarter total revenue is now tracking above its earlier outlook of $5.3 billion.
The news pushed earnings estimates even higher. The Zacks Consensus Estimate for this fiscal year (ending January 2022) is up 16.7% in two months to $13.56, while next fiscal year (ending January 2023) advanced 14.9% in that time to $15.28. Therefore, year-over-year profit growth is at 12.7%.
NVDA is the worldwide leader in visual computing technologies and boasts of being the "inventor" of the GPU (graphic processing unit). Over the years, it has gone from strength to strength, evolving from PC graphics to artificial intelligence (AI)-based solutions that support high performance computing (HPC), gaming and virtual reality (VR) platforms.
The company is part of the semiconductor – general space, which is in the top 28% of the Zacks Industry Rank. Shares are up 17.5% so far this year and approximately 114% over the past 12 months.
NVDA has bettered the Zacks Consensus Estimate for nine straight quarters now. Most recently, it reported earnings per share of $3.10 in its fiscal fourth quarter, which beat our expectation by more than 10.7%. The four-quarter average beat is also right around 10.7%. The result jumped 64% year over year.
Revenue of $5 billion exceeded the Zacks Consensus Estimate by 3.6% and jumped 61% from the same time last year. Robust data center and gaming performances more than offset negatives from covid. Gaming revenues (50% of revenues) soared 67%, while Data Center (38%) jumped by 97%.
Looking forward, NVDA is a company that's always in motion and looking to break new ground. It has numerous growth opportunities, including in ray-traced gaming, rendering, high-performance computing, AI and self-driving cars. In other words, it's part of all the flashy, futuristic stuff that we'll be using in the years ahead.
Adobe knows a few things about graphics too... but from the software side. The company's subscription-based Photoshop platform revolutionized digital creation and design, while a PDF is one of the most basic file formats on the planet. However, that was then. These days ADBE has its head in the clouds... in a good way.
In late March, the company reported strong fiscal first quarter results. But more importantly, it also raised its annual targets. A few of the big reasons for such success was Adobe's Creative Cloud, Document Cloud and Experience Cloud products, which are helping this name blaze new trails for future generations.
ADBE is part of the computer – software space, which is in the top 37% of the Zacks Industry Rank. Shares are up more than 48% over the past 12 months. It operates in three segments: Digital Media Solutions (72% of 2020 revenues), Digital Marketing Solutions (24%) and Publishing (4%).
The company beat the Zacks Consensus Estimate for a ninth straight time in its fiscal first quarter. Earnings per share of $3.14 beat our expectations by 12.5%, while also improving 38% year over year. Revenues of $3.91 billion surpassed our estimate by more than 3.5% and soared 26% from last year.
Revenues for Creative Cloud were up 31% to $2.4 billion, while Document Cloud rose 37% to $480 million and Digital Experience rose 24% to $934 million.
But the best news in the report was its outlook for the future. ADBE now sees fiscal 2021 revenues at $15.45 billion and non-GAAP earnings of $11.85. Both of these forecasts were higher than expectations at the time and, therefore, led to upward revisions in earnings estimates.
The Zacks Consensus Estimate for this fiscal year (ending November 2021) is up 5.5% in the past 30 days to $11.88, while next fiscal year (ending November 2022) advanced 3.5% to $13.70. In other words, expectations are for profit growth of more than 15% year over year, which could move even higher given ADBE's market position, innovative product lines and Creative Cloud adoption.
You don't get to stay a technology powerhouse for long without evolving. We saw it with NVIDIA and Adobe above, and it's also true with chipmaker AMD. Being a pure-bred consumer-PC chip provider was cool back in the early 2000s, while everyone was downloading Backstreet Boys songs on Napster. But it's not enough in today's hyper-competitive semiconductor space, which is why AMD has become an enterprise-focused company.
Over the past eight quarters, AMD has beaten the Zacks Consensus Estimate five times and matched thrice. No misses. And now it's scheduled to report again on Tuesday. As part of the electronics – semiconductors space, AMD is in the top 41% of the Zacks Industry Rank with shares that are up approximately 54% over the past 12 months.
In its fourth quarter report from late January, AMD reported earnings per share of 52 cents. The result soared 63% year over year and beat the Zacks Consensus Estimate 10.6%, which makes three straight positive surprises. Revenue of $3.24 billion improved 53% from last year and topped our expectation by 7.5%.
The Computing and Graphics segment (60.4% of total revenues) was one of the big drivers of that top line growth. Revenues jumped 18% to $1.96 billion. Meanwhile, the Enterprise, Embedded & Semi-Custom segment (39.6% of total revenues) rose 176% to $1.28 billion.
For full yar 2021, AMD sees revenue growth of approximately 37% over 2020. Before the end of this year, the company expects to complete its acquisition of Xilinx (XLNX), which is a $35 billion-deal that will significantly help in expanding AMD's data center business.
Over the past three months, the Zacks Consensus Estimate for this year has advanced 10.8% to $1.95, while expectations for next year are up 7.9% to $2.46. That makes year-over-year profit growth of more than 26%.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the "Internet of Money" and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we're still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks' has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
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