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Lam Research, Fitbit, Texas Instruments, Goldman Sachs and Caterpillar highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – May 1, 2018 – Zacks Equity Research highlights Lam Research (LRCX - Free Report) as the Bull of the Day, Fitbit as the Bear of the Day. In addition, Zacks Equity Research provides analysis onTexas Instruments (TXN - Free Report) , Goldman Sachs (GS - Free Report) and Caterpillar (CAT - Free Report) .
I last wrote about Lam Research as Bull of the Day in late January after another terrific earnings report. But shares sold off after the beat-and-raise quarter on fears about demand for their wafer fabrication equipment (WFE) from big memory chip makers like Micron. Here's what I wrote back then...
Always Looking for the Semi Cycle Top
The negative market reaction in Lam shares immediately following earnings is a bit of a puzzle. Until, that is, you think about the traditional fear in this industry: Technology investors are still prone to seeing a very cyclical industry with brief periods of boom followed by busts.
But this isn't the 1990s and we aren't talking about desktop computers driving demand.
This is the age of mobile, datacenters, automotive innovations, robotics and automation, and artificial intelligence. These areas are not slowing down and should provide investors enough visibility that they might think twice and give my Technology Super Cycle thesis the benefit of the doubt.
(The link above is to my special report for Zacks Confidential from December. Just scroll down to the 3rd report from 12/11/17)
But one of the big fears for Lam is that memory chip supply will saturate demand in 2019. Since supplying equipment to make DRAM and 3D NAND flash is about two-thirds of Lam's business, investors are probably somewhat justified in wondering if this is "as good as it gets" and the big double-digit growth rates we are accustomed to will drop hard and fast in the next year.
(end of my January 25 article excerpts)
For these reasons, I was an eager buyer of Lam shares into the February correction, even scooping some under $163. And other smart investor joined me on the stock's March rally to new all-time highs above $220.
But the volatility and doubt returned to the semiconductor industry and shares whipped back and forth across the $200 mark into and after the company's Q3 earnings report (FY18 ending in June).
Another Big Beat and Raise
On April 17, Lam Research reported Q3 EPS of $4.79, $0.43 better than the Zacks consensus estimate of $4.36, for a 10% beat. Revenue for the quarter came in at $2.89 billion, on shipments of $3.13 billion, versus the consensus estimate of $2.86 billion.
The company gave solid guidance for Q4 with revenues in a range of $2.95-$3.25 billion, versus the consensus of $2.93 billion. They saw Q4 non-GAAP EPS of $4.80-$5.20 versus the consensus of $4.67.
But there a fly in the ointment that caused investors once again to sell shares. This time it was concern about company guidance for lower shipments of $3 billion in the current June quarter, vs the record quarter they just delivered.
Within two days, LRCX shares dropped back 10% from $210 pre-earnings to $190. But several investment banks and their analysts saw this as a typical overreaction.
Evercore ISI analyst CJ Muse reiterated his Outperform rating and $300 price target, noting that beyond the beat and raise, gross margins came in at 46.8%, better than the consensus of 46.0%. And the June quarter GMs were guided to 47.5% at the midpoint, above consensus of 46.5%.
Goldman Sachs analyst Toshiya Hari said to buy Lam Research on any weakness given his positive view on semiconductor industry capex, Lam's strong competitive position in Etch and Deposition equipment. Hari reiterated his $252 price target on shares.
Stifel analyst Patrick Ho recommended investors use the post-earnings pullback in LRCX shares as an opportunity to buy. He acknowledged the shipment outlook and commentary that may have emboldened bears who think we are at the peak of the cycle, particularly on the memory front. However, he remains "steadfast" in the view that the market is not at or near an overcapacity situation and consequently raised his price target on the company to $295.
Needham analyst Edwin Mok reiterated his Buy rating on Lam after the company after the company reported a solid F3Q18, provided June quarter guidance above consensus, but also offered disappointing shipment guidance that will likely pressure the stock.
The analyst conceded "While we underestimated the magnitude of a NAND moderation, we believe the overall fundamental picture for WFE and for LRCX specifically remains healthy. Despite the lowered CY2H18 shipments outlook, its solid momentum continues to support this narrative of out-performance. We expect the shares to see some near-term volatility, but see any pullback as long-term buying opportunity". Mok reiterated his price target of $270.
JPMorgan analyst Harlan Sur raised his price target on LRCX to $275 from $260 saying that despite investor fears of peak spending in the first half of this year, the stock's setup is favorable for continued robust spending into next year. He maintains his view that memory makers remain disciplined in adding capacity. The analyst continues to see "significant upside" from current levels in shares of Lam and keeps an Overweight rating on the name.
At Deutsche Bank, analyst Sidney Ho raised his price target on LRCX to $260 from $250. He explained that the lack of an increase in full year WFE estimates and the forecast for its shipments to decline half-over-half in the second half likely disappointed higher buy-side expectations. The analyst believes, however, that the company's second half of 2018 has been de-risked. Ho reiterated his Buy rating on Lam Research.
The Technology Super Cycle
Even the company CEO felt compelled to clarify what investors thought they heard on the conference call. Speaking later on CNBC, Lam Research CEO Martin Anstice said the company's guidance implies 'solid' year-over-year growth. Anstice said overall secular and cyclical demand trends are strong, which is "getting lost in translation" amid the "ebbs and flows" of short-term trends.
In January, CEO Anstice said that "semiconductor innovation is contributing increased value in a data-driven economy and we believe that trend is quite fundamental, exciting and sustainable."
I last wrote about Fitbit as the Bear of the Day in February of 2017 when shares were trading around $6. Since then, the stock has traded between $4.50 and $7.30, never quite reaching the success that investors had hoped for.
After trailing 12-month revenues peaked at $2.3 billion in 2016, they have been flat-lined around $1.5 billion. And the stock is back to a Zacks #5 Rank on further erosion in earnings momentum.
90 days ago, the full-year 2018 EPS consensus was for FIT to lose only 11-cents. That has since moved back down to a loss of 29-cents.
New Hope from a Big Data Buddy
But Monday April 30 brought some good news and renewed hope for FIT bulls as the wearables company and Alphabet announced a partnership to explore the development of consumer and enterprise health solutions.
Fitbit and Google announced that they will work together to innovate and transform the future of digital health and wearables in an effort to create positive health outcomes for people around the world.
In their proposed partnership, Fitbit intends to use Google’s new Cloud Healthcare API to help the company integrate further into the healthcare system, such as by connecting user data with electronic medical records (EMR).
Combining Fitbit data with EMRs can provide patients and clinicians a more comprehensive view of the patient profile, leading to more personalized care. The companies will also look to help better manage chronic conditions like diabetes and hypertension by using services such as Fitbit’s recently acquired Twine Health.
Using Google’s Cloud Healthcare API, Twine can make it easier for clinicians and patients to collaborate on care, helping lead to better health outcomes and positive returns for employers, health plans and hospitals.
This alliance could be a game changer for FIT. While I write this report on the evening of the announcement, I have not yet seen any reports from Wall Street analysts about what they think.
If you are a FIT bull, or even thinking about buying some shares, this could be a very big week to watch for those reports.
If the investment bank analysts have a change of heart (or calculator) and start computing that Fitbit sales and profits could rise because of this deal, then the stock could indeed become a buy again.
The Zacks Rank will let you know as soon as the turnaround gets rolling.
Additional content:
Rates, Rates, Rates: Global Week Ahead
This Global Week Ahead is the last big week of the U.S. earnings season. 144 S&P 500 firms release results this week, followed by 38 the following week, and 18 the week after that. Then, the Q1 earnings releases fizzle out.
(1) The week’s key corporate names include Apple, Pfizer, Merck, Berkshire Hathaway, McDonald’s, Loews, Mastercard, MetLife, Kellogg and CBS.
(2) Of four main geopolitical risks to equities, two could see further constructive developments this week. These events would be centered upon NAFTA and North Korea. Iran nuclear deal recertification and the critical U.S./China tariff deadlines loom further out, roughly at the mid-month mark.
(3) The coming week holds two top-shelf U.S. macro events. The Fed’s latest policy decision comes out on Wednesday. April non-farm payroll data hits on Friday.
Reuter’s in London writes to us about the underlying situation in the global fixed income markets. Rates should continue to cause concern in equity markets this week too, as the key rates-related macro and a Fed policy decision hits the tape.
“As bond yields rise on expectations of higher interest rates, one thing that comes into focus is the equity risk premium (ERP) — the price paid to investors to compensate for the risk of investing in stocks rather than bonds.
It was this issue that was core to February’s global equity selloff — the sudden realization by investors: that government bonds could soon provide a viable safer alternative to equities.
Typically, first in line to be bruised by higher yields are consumer staples, which are known as “bond proxies” due to generous dividends and comfortable cash flows. So when U.S. 10-year yields rose above 3.0% last week, concerned clients called analysts asking what this meant for consumer staples stocks.
Indeed, higher yields have already caused an adjustment in the price-earnings ratios of firms such as Nestle and Unilever. And $100 million flowed out of consumer stocks and utilities — another bond-proxy sector — this week, EPFR figures showed.
But higher yields are not the only challenge: more salient might be the disruptive effect of Internet shopping, and companies’ waning pricing power in a more inflationary environment.”
It’s always good to read rate statements from London, for a global view—
Top Zacks #1 Rank (STRONG BUY) Stocks—
Texas Instruments:This $101B market cap stock is leading the semiconductor season into greener pastures. The Value score of D is concerning, though.
Goldman Sachs: Yes, the $240 a share investment bank makes our top list this week. But the Growth score of F is concerning.
Caterpillar: This $86B market cap stock looks like a lot better play than the former two stocks I mentioned this week. It has a B for Value and a B for Growth. With global growth stuttering, you might find a decent entry point here, in the coming weeks.
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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.
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Lam Research, Fitbit, Texas Instruments, Goldman Sachs and Caterpillar highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – May 1, 2018 – Zacks Equity Research highlights Lam Research (LRCX - Free Report) as the Bull of the Day, Fitbit as the Bear of the Day. In addition, Zacks Equity Research provides analysis onTexas Instruments (TXN - Free Report) , Goldman Sachs (GS - Free Report) and Caterpillar (CAT - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
I last wrote about Lam Research as Bull of the Day in late January after another terrific earnings report. But shares sold off after the beat-and-raise quarter on fears about demand for their wafer fabrication equipment (WFE) from big memory chip makers like Micron. Here's what I wrote back then...
Always Looking for the Semi Cycle Top
The negative market reaction in Lam shares immediately following earnings is a bit of a puzzle. Until, that is, you think about the traditional fear in this industry: Technology investors are still prone to seeing a very cyclical industry with brief periods of boom followed by busts.
But this isn't the 1990s and we aren't talking about desktop computers driving demand.
This is the age of mobile, datacenters, automotive innovations, robotics and automation, and artificial intelligence. These areas are not slowing down and should provide investors enough visibility that they might think twice and give my Technology Super Cycle thesis the benefit of the doubt.
(The link above is to my special report for Zacks Confidential from December. Just scroll down to the 3rd report from 12/11/17)
But one of the big fears for Lam is that memory chip supply will saturate demand in 2019. Since supplying equipment to make DRAM and 3D NAND flash is about two-thirds of Lam's business, investors are probably somewhat justified in wondering if this is "as good as it gets" and the big double-digit growth rates we are accustomed to will drop hard and fast in the next year.
(end of my January 25 article excerpts)
For these reasons, I was an eager buyer of Lam shares into the February correction, even scooping some under $163. And other smart investor joined me on the stock's March rally to new all-time highs above $220.
But the volatility and doubt returned to the semiconductor industry and shares whipped back and forth across the $200 mark into and after the company's Q3 earnings report (FY18 ending in June).
Another Big Beat and Raise
On April 17, Lam Research reported Q3 EPS of $4.79, $0.43 better than the Zacks consensus estimate of $4.36, for a 10% beat. Revenue for the quarter came in at $2.89 billion, on shipments of $3.13 billion, versus the consensus estimate of $2.86 billion.
The company gave solid guidance for Q4 with revenues in a range of $2.95-$3.25 billion, versus the consensus of $2.93 billion. They saw Q4 non-GAAP EPS of $4.80-$5.20 versus the consensus of $4.67.
But there a fly in the ointment that caused investors once again to sell shares. This time it was concern about company guidance for lower shipments of $3 billion in the current June quarter, vs the record quarter they just delivered.
Within two days, LRCX shares dropped back 10% from $210 pre-earnings to $190. But several investment banks and their analysts saw this as a typical overreaction.
Evercore ISI analyst CJ Muse reiterated his Outperform rating and $300 price target, noting that beyond the beat and raise, gross margins came in at 46.8%, better than the consensus of 46.0%. And the June quarter GMs were guided to 47.5% at the midpoint, above consensus of 46.5%.
Goldman Sachs analyst Toshiya Hari said to buy Lam Research on any weakness given his positive view on semiconductor industry capex, Lam's strong competitive position in Etch and Deposition equipment. Hari reiterated his $252 price target on shares.
Stifel analyst Patrick Ho recommended investors use the post-earnings pullback in LRCX shares as an opportunity to buy. He acknowledged the shipment outlook and commentary that may have emboldened bears who think we are at the peak of the cycle, particularly on the memory front. However, he remains "steadfast" in the view that the market is not at or near an overcapacity situation and consequently raised his price target on the company to $295.
Needham analyst Edwin Mok reiterated his Buy rating on Lam after the company after the company reported a solid F3Q18, provided June quarter guidance above consensus, but also offered disappointing shipment guidance that will likely pressure the stock.
The analyst conceded "While we underestimated the magnitude of a NAND moderation, we believe the overall fundamental picture for WFE and for LRCX specifically remains healthy. Despite the lowered CY2H18 shipments outlook, its solid momentum continues to support this narrative of out-performance. We expect the shares to see some near-term volatility, but see any pullback as long-term buying opportunity". Mok reiterated his price target of $270.
JPMorgan analyst Harlan Sur raised his price target on LRCX to $275 from $260 saying that despite investor fears of peak spending in the first half of this year, the stock's setup is favorable for continued robust spending into next year. He maintains his view that memory makers remain disciplined in adding capacity. The analyst continues to see "significant upside" from current levels in shares of Lam and keeps an Overweight rating on the name.
At Deutsche Bank, analyst Sidney Ho raised his price target on LRCX to $260 from $250. He explained that the lack of an increase in full year WFE estimates and the forecast for its shipments to decline half-over-half in the second half likely disappointed higher buy-side expectations. The analyst believes, however, that the company's second half of 2018 has been de-risked. Ho reiterated his Buy rating on Lam Research.
The Technology Super Cycle
Even the company CEO felt compelled to clarify what investors thought they heard on the conference call. Speaking later on CNBC, Lam Research CEO Martin Anstice said the company's guidance implies 'solid' year-over-year growth. Anstice said overall secular and cyclical demand trends are strong, which is "getting lost in translation" amid the "ebbs and flows" of short-term trends.
In January, CEO Anstice said that "semiconductor innovation is contributing increased value in a data-driven economy and we believe that trend is quite fundamental, exciting and sustainable."
Bear of the Day:
I last wrote about Fitbit as the Bear of the Day in February of 2017 when shares were trading around $6. Since then, the stock has traded between $4.50 and $7.30, never quite reaching the success that investors had hoped for.
After trailing 12-month revenues peaked at $2.3 billion in 2016, they have been flat-lined around $1.5 billion. And the stock is back to a Zacks #5 Rank on further erosion in earnings momentum.
90 days ago, the full-year 2018 EPS consensus was for FIT to lose only 11-cents. That has since moved back down to a loss of 29-cents.
New Hope from a Big Data Buddy
But Monday April 30 brought some good news and renewed hope for FIT bulls as the wearables company and Alphabet announced a partnership to explore the development of consumer and enterprise health solutions.
Fitbit and Google announced that they will work together to innovate and transform the future of digital health and wearables in an effort to create positive health outcomes for people around the world.
In their proposed partnership, Fitbit intends to use Google’s new Cloud Healthcare API to help the company integrate further into the healthcare system, such as by connecting user data with electronic medical records (EMR).
Combining Fitbit data with EMRs can provide patients and clinicians a more comprehensive view of the patient profile, leading to more personalized care. The companies will also look to help better manage chronic conditions like diabetes and hypertension by using services such as Fitbit’s recently acquired Twine Health.
Using Google’s Cloud Healthcare API, Twine can make it easier for clinicians and patients to collaborate on care, helping lead to better health outcomes and positive returns for employers, health plans and hospitals.
This alliance could be a game changer for FIT. While I write this report on the evening of the announcement, I have not yet seen any reports from Wall Street analysts about what they think.
If you are a FIT bull, or even thinking about buying some shares, this could be a very big week to watch for those reports.
If the investment bank analysts have a change of heart (or calculator) and start computing that Fitbit sales and profits could rise because of this deal, then the stock could indeed become a buy again.
The Zacks Rank will let you know as soon as the turnaround gets rolling.
Additional content:
Rates, Rates, Rates: Global Week Ahead
This Global Week Ahead is the last big week of the U.S. earnings season. 144 S&P 500 firms release results this week, followed by 38 the following week, and 18 the week after that. Then, the Q1 earnings releases fizzle out.
(1) The week’s key corporate names include Apple, Pfizer, Merck, Berkshire Hathaway, McDonald’s, Loews, Mastercard, MetLife, Kellogg and CBS.
(2) Of four main geopolitical risks to equities, two could see further constructive developments this week. These events would be centered upon NAFTA and North Korea. Iran nuclear deal recertification and the critical U.S./China tariff deadlines loom further out, roughly at the mid-month mark.
(3) The coming week holds two top-shelf U.S. macro events. The Fed’s latest policy decision comes out on Wednesday. April non-farm payroll data hits on Friday.
Reuter’s in London writes to us about the underlying situation in the global fixed income markets. Rates should continue to cause concern in equity markets this week too, as the key rates-related macro and a Fed policy decision hits the tape.
“As bond yields rise on expectations of higher interest rates, one thing that comes into focus is the equity risk premium (ERP) — the price paid to investors to compensate for the risk of investing in stocks rather than bonds.
It was this issue that was core to February’s global equity selloff — the sudden realization by investors: that government bonds could soon provide a viable safer alternative to equities.
Typically, first in line to be bruised by higher yields are consumer staples, which are known as “bond proxies” due to generous dividends and comfortable cash flows. So when U.S. 10-year yields rose above 3.0% last week, concerned clients called analysts asking what this meant for consumer staples stocks.
Indeed, higher yields have already caused an adjustment in the price-earnings ratios of firms such as Nestle and Unilever. And $100 million flowed out of consumer stocks and utilities — another bond-proxy sector — this week, EPFR figures showed.
But higher yields are not the only challenge: more salient might be the disruptive effect of Internet shopping, and companies’ waning pricing power in a more inflationary environment.”
It’s always good to read rate statements from London, for a global view—
Top Zacks #1 Rank (STRONG BUY) Stocks—
Texas Instruments:This $101B market cap stock is leading the semiconductor season into greener pastures. The Value score of D is concerning, though.
Goldman Sachs: Yes, the $240 a share investment bank makes our top list this week. But the Growth score of F is concerning.
Caterpillar: This $86B market cap stock looks like a lot better play than the former two stocks I mentioned this week. It has a B for Value and a B for Growth. With global growth stuttering, you might find a decent entry point here, in the coming weeks.
Get today’s Zacks #1 Stock of the Day with your free subscription to Profit from the Pros newsletter:
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
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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.