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Align Technology, Qorvo, Oracle and FedEx as Zacks Bull and Bear of the Day

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For Immediate Release         

Chicago, IL – June 20, 2018 – Zacks Equity Research highlights Align Technology (ALGN - Free Report) as the Bull of the Day and Qorvo (QRVO - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Oracle Corp. (ORCL - Free Report) and FedEx (FDX - Free Report) .

Here is a synopsis of all four stocks:

Bull of the Day:                                              

The phenomenal growth story that is Align Technology, makers of the revolutionary Invisalign clear teeth straighteners, continues to make early investors smile while apparently catching the majority by surprise. 

In the past year, ALGN shares are up 155% vs the S&P 500 at +14%. That performance certainly made members of my Healthcare Innovators portfolio smile big where we owned the stock from $133 up to $333.

Now trading above $360, with an all-time high close of $370.10 hit on June 18, ALGN shares trade for over 75 times the consensus EPS estimate for this year of $4.73. And that explains why so many passed on boarding this one-way train to big gains.

What the majority missed was that the company's breakthrough dental technologies were going to maintain over 25% growth domestically and nearly 35% growth internationally as more dental professionals found the Invisalign system to be an extremely effective and highly desirable solution for their patients.

The Align Trajectory

Here's what I told my followers on May 28, a few days before we took some profits on our position...

One of our biggest success stories with Healthcare Innovators keeps on rolling based on the same catalysts that have kept us in the name every quarter since May of last year: wider adoption of the Invisalign technology by US consumers and dental professionals, low competitive threat, and 30%+ international growth.

The company held an Investor/Analyst Day on Wednesday (May 23) and wowed the crowd. Plus, competing products at this month's American Association of Orthodontists tradeshow were seen as limited in the type of malocclusions that can be treated, and many also lack supporting case management software for the orthodontist that is critical to the overall process in today's market.

The company provided long-term revenue guidance of 20%-30% growth, above expectations and the previous long-term guidance of 15%-25%. Key growth drivers remain in place from a geographic and product perspective and Align remains one of the most compelling growth stories in all of medical technology.

What got cut off on the bottom is the labels for the quarters. They are Q1'17, Q4'17, and Q1'18 so that you can see year-over-year and sequential growth as indicated by the brackets (in thousands of units shipped). 

And the top row of numbers in green circles (5.2, 5.4, 5.4) are the Utilization rates, calculated by # of cases shipped / # of doctors to whom cases were shipped. This measure indicates the trajectory of dental professional adoption vs. just new physicians trying the product once or twice.

Bear of the Day:

Qorvois a specialty maker of RF (radio frequency) semiconductors for mobile smartphones and the ubiquitous "Internet of Things" (IOT), which comprises devices from key fobs to jewelry for Internet-connected security and payments across millions of companies and billions of transactions annually and rising. 

But the company stock has seen a steep slide in earnings estimates this year that does not appear to stopping any time soon.

Part of the malaise for Qorvo is its revenue leverage to key customer Apple (AAPL) who has been seeking lately to become more self-reliant in the design and manufacture of its semiconductors components.

Downward Estimate Revisions

Analysts have become increasingly bearish on the stock in the past couple of months with all estimates moving south and no movement in the opposite direction for the ongoing quarter.

Moreover, the company’s first quarter of fiscal 2019 earnings estimates (the current June quarter) moved down from 80 cents to 76 cents in the past 30 days. Further, in the same time period, the company’s fiscal 2019 earnings estimates moved down from $5.97 to $5.92.

And estimates had already been on a downward trajectory in previous months as the current fiscal year started out at an EPS consensus of $6.31. 

Low Returns Across the Matrix

Given the other unattractive attributes like low return on equity (ROE), low return on capital (ROC) and low return on assets (ROA), makes the stock look very unappealing. Qorvo currently trades at a ROE of 13.8%, much lower than the industry’s average of 22.8%. Notably, the company has an ROC and ROA of 10.3% and 10.4% compared with the industry’s average of 20.8% and 18.5%, respectively.

The good news for Qorvo is that next fiscal year EPS estimates have actually risen from $6.87 to $6.95, granting the forward valuation an attractive sub-12X multiple.

Dependence on iPhone Sales

Qorvo depends on a handful of customers including Apple and Huawei to keep its revenues churning. To add to the woes, Apple’s self-reliance strategy is a looming threat. Moreover, the company operates in a competitive landscape that is becoming more complex with low barriers to entry for RF chip technology. The increased competition is exerting pricing pressure, which remains a matter of concern for the company.

In order to sustain its market position, Qorvo has to constantly come up with new products. Consequently, higher spending on product development is likely to keep margins under pressure at least in the near term. Hence, we recommend investors to be wary of Qorvo shares until its Zacks Rank and estimates improve.

Oracle, FedEx Report Strong Fiscal Q4 Earnings Results

Two market leaders in their respective industries -- software and cloud services giant Oracle Corp. and transportation logistics major FedEx-- also reported fiscal Q4 2018 earnings results after the bell today. Keeping in mind we're coming off a regular trading day rife with worry over a possible trade war brewing between China and the U.S., which may have some impact on stock price results even after earnings results are released.

Initially upon releasing fiscal Q4 results, Oracle shares had shot up 4%, though over the past several minutes the stock has begun to sell off from that point. Quarterly numbers were quite favorable, however: earnings of 99 cents beat the Zacks consensus estimate by 5 cents and beat the year-ago number by 11.2%. Revenues also topped expectations to $11.29 billion from the $11.19 billion analysts had been looking for.

Cloud services brought favorable year-over-year comps of 8% to $6.8 billion, which is good because Oracle had found itself slipping behind cloud-based services competitors of late. And following a robust surge in stock prices early this year, Oracle is still attempting to claw back. Guidance on the upcoming conference call ought to bring clear sentiment, especially regarding cloud-based expectations, but for now market reaction is fairly muted. For more on ORCL earnings, click here.

Zacks Rank #2 (Buy)-rated FedEx also outperformed expectations on the headlines: $5.91 per share vs. the $5.72 expected on $17.3 billion in sales vs. the $17.19 billion estimated were favorable for the global delivery firm. Earnings results, year over year, climbed roughly 40%, while operating margins grew 3.6%. This marks the third straight earnings beat for FedEx.

Due to adjustments being made on the company's retirement plan accounting, initial full-year 2019 guidance numbers were not released with the earnings data today. Also, with the shadow of a potential trade war creeping in, FedEx may be one of those companies most deeply affected by a major rift between shipping U.S. and Chinese goods. Shares are up moderately following the results, but, like Oracle, FedEx still has a ways to go to reach its 52-week highs realized in January of this year. For more on FDX's earnings, click here.

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Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

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