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Everbridge and KeyCorp have been highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – March 16, 2023 – Zacks Equity Research shares Everbridge (EVBG - Free Report) as the Bull of the Day and KeyCorp (KEY - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ribbon Communications Inc. (RBBN - Free Report) , Universal Insurance Holdings, Inc. (UVE - Free Report) and JOYY Inc. (YY - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Everbridge (EVBG - Free Report) is a $1.3 billion provider of software communications and enterprise safety applications. After a strong beat and raise quarter reported in late February, analysts have significantly raised EPS estimates, looking for 124% growth this year and still +23% in 2024.

Everbridge applications include Mass Notification, Incident Management, IT Alerting, Safety Connection(TM), Community Engagement(TM), Secure Messaging and Internet of Things. It operates primarily in Boston, Los Angeles, San Francisco, Beijing and London.

Everbridge delivered quarterly earnings of $0.39 per share, beating the Zacks Consensus Estimate of $0.31 per share. This compares to loss of $0.05 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 25.81%. A quarter ago, it was expected that this software developer would post earnings of $0.17 per share when it actually produced earnings of $0.27, delivering a surprise of 58.82%. Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Everbridge, which belongs to the Zacks Internet - Software industry, posted revenues of $117.13 million for the quarter ended December 2022, surpassing the Zacks Consensus Estimate by 0.85%. This compares to year-ago revenues of $102.83 million. The company has topped consensus revenue estimates four times over the last four quarters.

Outlook and Guidance

Everbridge management sees FY23 EPS of 1.48-$1.52, vs the February consensus of $1.36, and FY23 revenue of $456.0M-$462.0M, vs. consensus of $457.69M. This makes the stock a relative bargain in Software on a price-to-sales basis of just 2.8 times vs. an industry range of 5-10X.

"The fourth quarter marked a strong finish to the year as we laid the groundwork for future growth and increased profitability," said David Wagner, Everbridge's President and CEO. "We delivered another steady sequential increase in ARR and solid growth in our adjusted EBITDA. In the fourth quarter we took meaningful steps forward to strengthen the company on our way to $1B in ARR."

Annual Recurring Revenue (ARR) is a key metric for Software companies as their large enterprise customers place quarterly contract subscriptions for multiple years.

Here was an analyst boosting his view after the report...

Stephens analyst Brian Colley raised his price target on Everbridge to $41 from $38 and kept an Overweight rating on the shares after the company reported Q4 results that exceeded expectations and posted what the firm calls out as "the strongest quarterly gross retention rate in greater than 2 years."

"Everbridge is showing encouraging progress on its strategic initiatives and profitability is inflecting meaningfully higher," wrote Colley.

Bottom line on Everbridge: Trading under 3X sales, and executing on its strategic goals toward $1 billion in ARR, EVBG shares are a relative Software value near $30.

Bear of the Day:

While rising interest rates are normally a boon for banks, the current banking crisis shows that faster rate hikes from ZIRP (the Fed's zero interest rate policy) have their negative impacts on the nation's hundreds of smaller banks.

And recently -- even before the current banking collapse ignited by the Silicon Valley Bank debacle --, revised its 2023 outlook for NIM (net interest margin) lower amid rising funding costs and "deposit betas."

I'll explain this NIM funding-deposit dilemma coming up. First let's check in with KEY after the SVB banking implosion...

KeyCorp CEO Chris Gorman was on CNBC's Squawk on the Street this week to discuss what his company is doing in light of the collapse of Silicon Valley Bank. He said that over the weekend, the bank actually had its biggest deposit growth year to date as cash deposits flowed to his $11 billion bank -- even after KEY shares lost over 30% in the past week -- as investors sought safer havens for their capital.

I don't want to pick on KEY just because it's currently a Zacks #5 Rank due to downward EPS revisions from Wall Street analysts. What I want to do is highlight the factors that are driving this systemic meltdown in a key infrastructure component of American business -- the Regional Bank.

Regional Bank Stress Puts Spotlight on Cash Management

Here was a note from PIMCO strategists this week...

Since the GFC (great financial crisis), the global financial system has undoubtedly become more resilient, thanks to new central banking facilities and regulations such as mandatory capital requirements. Thus under normal conditions, a bank can run a mismatched asset/liability maturity plan and lend its deposits out profitably.

It's when depositors demand their funds back en masse that problems arise. Such is the inherent risk of our "fractional reserve" banking system, where banks need keep only a fraction of their deposits on hand to create loans in excess of the size of those deposits.

(end of PIMCO notes)

Mis-Match: Therein Lies the Rub

The arcane problem that most investors aren't familiar with is how Fed policies that artificially suppressed interest rates for far too long -- combined with the pandemic shutdown stimulus cash flood to businesses and individuals -- forced banks flush with new deposits to invest in the highest yielding assets they could find at the time, since they couldn't lend it any faster.

It wasn't just a Silicon Valley Bank problem. It was happening for lots of smaller banks that catered to wealthy investors and venture capital (VC) investors, such as First Republic Bank.

Those assets they "had to choose" from were Treasury and Agency MBS yielding sub-2%. And so when the Fed began hiking rates rapidly in 2022, all of sudden these bank balance sheets were left with a new problem...

"How do we keep and attract depositors who can go elsewhere for 3-4% yields while we are invested in instruments that yield less than 2%?"

That's a major funding problem for banks trapped in long-term gov/agency securities.

I was on the BlackRock institutional morning call on Wednesday and all their strategists sounded somber, sober, and sublime about the situation. Too bad I didn't get to ask them any tough questions.

I like the direct honesty of the PIMCO team much better.

Remember, in the "fractional reserve" banking system... banks "borrow short and lend long." This means they often borrow by taking checking and savings deposits -- which must be paid back immediately whenever depositors ask for them.

On the other hand, most of the money they lend out is tied up in long-term loans, such as mortgages.

With the sudden and dramatic rise of ZIRP, instead of Net Interest Margin (NIM), most regional banks were staring into the abyss of Negative Interest Margin just to keep and attract deposit capital.

And there is a whole other realm of bank accounting rules where they can "silo" those gov assets as Hold-to-Maturity (HTM) and not have to acknowledge the unrealized losses on their balance sheet (remember as bond yields go up, their prices fall). But any of those securities they keep fresh for liquidation are called Available-for-Sale (AFS) and those do get "marked-to-market."

It's a complicated web of derivatives and leverage right now and that's why all regional and smaller banks are in the spotlight and the cross-hairs. As we've witnessed several bank implosions in the past week, the Wall Street sharks (short-sellers and their algo friends) will keep gunning for new blood.

I hope that doesn't happen for KeyCorp with its significance in small and medium-sized business lending.

Additional content:

3 Safe Stocks to Beat Market Uncertainty

The failure of the Silicon Valley banks sent shock waves through the investment community, with many investors fearing a repeat of the financial meltdown in 2008-9. Everyone was racing to offload their bank stock holdings, making Monday quite the bloodbath for banking stocks. Come Tuesday, the reality began to sink in about this year being very different from that time and analysts and market watchers did their bit convincing investors that no such catastrophe was likely, especially given the government's mitigating actions.

There was also other good news related to the CPI, which didn't disappoint. As a result, some ground was regained. Today it seems there is more of the same with Credit Suisse stock being punished after the Swiss bank's largest investor denied further financial assistance.

This is just an example of what could go wrong if sudden unforeseen events hit the market. The other situation, almost as depressing, could be negative news flow ensuring that the market continues to move sideways.

For example, the ongoing layoffs in tech that are spreading to other industries. It is not news any more that the tech sector is laying off big time. Facebook owner Meta Platforms has now announced a second round, and others like Alphabet, Microsoft, IBM, Spotify, Twitter, Lyft, Salesforce, HP, Workday, etc. are doing the same thing.

Tech layoffs are being taken with relative equanimity because of the excessive hiring during the pandemic. But job cuts at Goldman Sachs, Morgan Stanley, Citigroup, Coinbase, Tyson, as well as smaller operators from other sectors like Wayfair, Beyond Meat, Blue Apron and DoorDash are adding to the concern that we may have a recession after all.

Nobody can be blamed for a dash of pessimism about now. But as long as you're playing for the long term and have done the necessary homework, you should be able to get to the other side of this with relative ease.

So what are some of the things you should be looking for when selecting stocks?

It should be obvious but it's worth reminding that stocks with positive estimate revisions, those that are somehow positioned to grow this year and the next despite all the negatives, that belong to relatively attractive industries and also carry a Zacks #1 (Strong Buy) or #2 (Buy) rank could be considered. Especially when these stocks are also attractively valued. Let's take a look at some examples:

Ribbon Communications Inc.

Plano, TX-based Ribbon Communications offers communications technology in the U.S., Europe, the Middle East, Africa, and the Asia Pacific. It operates through the Cloud and Edge, and IP Optical Networks segments.

The Zacks Rank #1 stock belongs to the Communication - Network Software industry (top 7% of more than 250 Zacks-classified industries). Analysts expect the company to grow both its revenue and earnings in 2023 and 2024. Its earnings are set to grow 127.3% in 2023 and 24.7% in 2024. In the last 30 days, the 2023 estimate has increased a couple of cents on average. The 2024 estimate has increased 11 cents (52.4%).

The shares may also be considered cheap since the price-to-sales (P/S) ratio is 0.73 and any number below unity indicates that investors are undervaluing its sales potential. Similarly, its P/E of 19.96X is trading at a 78.2% discount to the industry although at a slight premium to its median value over the past year.

Universal Insurance Holdings, Inc.

Fort Lauderdale, FL-based Universal Insurance Holdings operates as an integrated insurance holding company in the United States. It develops, markets and underwrites insurance products for personal residential insurance.

Universal's revenue and earnings are both expected to increase this year and the next. Earnings are expected to go from a loss of 41 cents to a profit of a dollar and 65 cents in 2023. Thereafter, it's expected to grow another 45.5% in 2024. In the last 30 days, its 2023 estimate has increased 15 cents (10.0%) and 2024 estimate increased 40 cents (20.0%).

Universal trades at a P/S multiple of 0.44, which is very attractive both because it is below unity and because it is at a significant discount to the industry. Its P/E of 10.67X is at a 53% discount to the industry, although at a premium to its own median value over the past year.


Singapore-based JOYY operates social media platforms primarily in China, U.S., UK, Japan, South Korea, Australia, the Middle East Southeast Asia. Some of its platforms are Bigo Live, a live streaming platform; Likee, a short-form video social platform; Hago, a casual game-oriented social platform; and imo, a chat and instant messaging application

2024 estimates are not yet available but in 2023, the company is expected to grow both revenue and earnings. Estimates for this year are up $1.46 (184.8%) in the last 30 days and represent 20.3% growth from 2022.

JOYY is also attractively valued. Its P/S multiple is 0.89X, which like UVE makes the shares attractive both on its own and with respect to the industry. Its P/E of 16.16X is also at a significant discount to the industry and also to its own median value over the past year.

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