Back to top

Image: Bigstock

Photronics and Appian highlighted as Zacks Bull and Bear of the Day

Read MoreHide Full Article

For Immediate Release

Chicago, IL – January 21, 2022 – Zacks Equity Research Shares Photronics (PLAB - Free Report) of as the Bull of the Day, Appian (APPN - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Netflix (NFLX - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Photronics (PLAB - Free Report) is a Zacks Rank #1 (Strong Buy) that sports a B for Value and an A for Growth.  I never make an investment decision based solely on the belief that an acquisition is in the works, but it sure looks like that could be the case for this stock. Let’s explore more about that idea in this Bull of the Day article.

Description

Photronics is a leading worldwide manufacturer of photomasks. Photomasks are high precision quartz plates that contain microscopic images of electronic circuits. A key element in the manufacture of semiconductors and flat panel displays, photomasks are used to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits, a variety of flat panel displays and, to a lesser extent, other types of electrical and optical components. They are produced in accordance with product designs provided by customers at strategically located manufacturing facilities in Asia, Europe, and North America.

Possible Deal

With a market cap just over $1B, PLAB is a potential buyout target for many names in the semiconductor space.  Its growth and margin expansion would make an acquisition accretive to most buyers. 

The signal that tipped me off to the idea was the stock chart.  Here is a chip name that has seen strength throughout December while the rest of the market saw aggressive selling.  When a stock bucks a big selling trend – for an extended period of time – it tells us that there are still buyers for that name.  It could also signal that selling is limited and the end result is the same.

Photronics, Inc. price | Photronics, Inc. Quote

If you look at the chart for Activision Blizzard, which was recently acquired by Microsoft, you will notice that this stock was also rather strong throughout the month of December.

Activision Blizzard, Inc price | Activision Blizzard, Inc Quote

Just as a reminder, it is never a good idea to make an investment based on a potential acquisition.  That said, let’s look at the other criteria for making a possible investment in PLAB.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

For PLAB, I see a decent history of beating the Zacks Consensus Estimate.  There are two beats over the last four quarters.  The two quarters that were not beats were meets.

The average positive earnings surprise over the last fours quarters works out to be 12.5%. 

Earnings Estimates Revisions

The Zacks Rank tells us which stocks are seeing earnings estimates move higher.  For CMC, I see annual estimates moving higher.

Over the last 60 days, I see a few increases.

This quarter has increased from $0.22 to $0.31.

Next quarter has also seen a large increase from $0.24 to $0.34.

The full fiscal year 2022 has moved from $1.03 to $1.30.

Next fiscal year has just seen an initial estimate of $1.50.

Positive movement in earnings estimates like that is why this stock is a Zacks Rank #1 (Strong Buy).

Valuation

The forward earnings multiple for PLAB checks in at 14x, which is extremely low given topline growth last quarter came in at 21%. The price to book multiple is 1.1x, and that level will keep value investors interested. The price-to-sales multiple checks in at 1.6x.

Margins have moved higher for this stock over the last three quarters and that coupled with topline growth is fueling higher earnings estimates.  I see operating margins moving from 5.8% to 6.1% and then to 7.8% over the last three quarters.

Bear of the Day:

Appian (APPN - Free Report) is a Zacks Rank #5 (Strong Sell) following an earnings miss back in November. The stock was trading just over $100 before the print, but it has tumbled down to the $55 level. Let’s take a deeper look at this stock in this Bear of the Day article.

Description

Appian Corporation provides a low-code software development platform which enables organizations to develop various applications primarily in the United States and internationally. The company's products include business process management software, case management, mobile application development and platform as a service. It serves financial services, healthcare, government, telecommunications, media, energy, manufacturing and transportation organizations. Appian Corporation is headquartered in Reston, Virginia.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.

In the case of APPN, I see one miss followed by three straight beats of the Zacks Consensus Estimate over the last year. This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower. For GDS I see estimates moving lower.

This quarter has fallen from -$0.21 to -$0.23.

Next quarter dropped from -$0.17  to -$0.19.

The Zacks Rank is more heavily influenced by the move in the annual numbers, and the movement is mixed for those numbers.

The current year 2021 consensus number has dropped 2 cents to  a loss of $0.75.

The next year has dropped from a loss of $0.76 to a loss of $0.84 over the last 60 days.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a majority of stocks in the Zacks universe are seeing positive earnings estimate revisions. That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).

Additional content:

Markets Keep Selling, Netflix (NFLX - Free Report) Tumbles Hard on Q4 Guide

We had a feeling, Thursday morning, when pre-market indexes once again looked ready for a rebound, that things might turn south at some point as the trading day progressed — and that it did. In fact, it’s something we’ve seen growing into a near-term trend: a deep sell-off in the final hour of the regular session. The Dow lost -315 points, -0.90%; the Nasdaq was -1.30%, -186 points; the S&P 500 dropped -50 points to -1.11% and the beleaguered small-cap Russell 2000 was down another -1.88% — to a new 52-week LOW.

This all happened after the Dow was +462 points at its intra-day high point yesterday, even with jobless claims data shooting back up closer to 300K than 200K and an Existing Home Sales figure that missed expectations by about 300K units. Even still, heavy selling over the past week of trading — plus mellowing bond yields on the 10-year (1.818%) and 2-year (1.043%) — seemed to suggest a path of lesser resistance higher.

But the plug was pulled and the gains drained out; markets closed at session lows. For the Dow, it was the fifth straight day in the red, and the Nasdaq sinks deeper into correction, now -12% from peaks. The S&P is now at its lowest point in the past three months. On the Russell, analysts will need to plumb the depths to find its next resistance level to the downside — the index is now more than -20% lower than its all-time highs set not 10 weeks ago.

Market participants are still working through their various portfolio valuations after two years of mostly unchecked exuberance. They had been willing to keep their positions relatively high even as the Fed announced changes coming to monetary policy based on heavy and longer-than-expected inflation reads. But now the time has come to pay the piper, it would seem, and flushing out P/E multiples across sectors (not just high-growth tech) looks to be the dominant position to take — and it’s taking a while.

Treasury Secretary and former Fed Chair Janet Yellen appeared on CNBC Thursday afternoon to give her take on what Americans might expect from the domestic economy over the next year. She considered it highly likely we’d see inflation above the optimum +2%, though gathering control over that time would make it much more likely that 2% inflation becomes the norm. Over the past decade, this has been one of the goals of Fed policy; now that we may have it in hand, market indexes are freaking out.

There seems to be a particular figure stuck in investors’ craw at the moment, and it’s something current Fed Chair Jay Powell might quell himself during his press conference after next week’s two-day Federal Open Market Committee meeting. That figure is: 4, as in four interest rates taking place over the course of 2022.

Because the Fed is not finished drawing down its asset purchase program via the taper until the end of February, the earliest, this would amount to four quarter-point moves (to +1.00-1.25%) in 10 months, by December of this year. Should he find reason to assure markets this is less likely than currently felt, it may go some ways toward drying up this bloody bearishness.

To add insult to injury, Netflix released Q4 earnings results after Thursday’s closing bell, with a solid beat on the bottom line — earnings of $1.33 per share and swinging to positive yearly growth from an expected 82 cents — and a very modest beat on the top line to $7.71 billion in quarterly revenues. But the reason shares fell -10% immediately upon the release and nearly doubled their losses since is due to downhearted guidance.

For next quarter, new expectations from the company for earnings of $2.36 per share on $7.9 billion in revenues were both way off the Zacks consensus $3.43 per share and $8.11 billion, respectively. But it’s the growth in net subscription additions, particularly overseas, that has spooked investors: guidance for 2.5 million net new adds next quarter pales in comparison to the consensus 6.9 million.

Analysts had been looking for a Netflix rebound in subscriptions that may simply not be there, with lots of competition now from Amazon Prime, Disney+, HBO, Hulu and others. The Europe, Middle East and Africa (EMEA) region had been Netflix’s fastest-growing region, but appears to have fallen way off, perhaps due to a price hike installed by the company during the quarter. NFLX shares are down nearly -20% in a day for the first time in more than a decade.

Questions or comments about this article and/or its author? Click here>>

Zacks Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

As one investor put it, “curing and preventing hundreds of diseases…what should that market be worth?” This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Netflix, Inc. (NFLX) - free report >>

Photronics, Inc. (PLAB) - free report >>

Appian Corporation (APPN) - free report >>