For Immediate Release
Chicago, IL – July 6, 2018 – Zacks Equity Research highlights Zendesk Inc. (ZEN - Free Report) as the Bull of the Day and 8x8 (EGHT - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Micron (MU - Free Report) .
Here is a synopsis of all three stocks:
Bull of the Day:
Based in San Francisco, CA, Zendesk Inc. is a software development company that provides a software-as-a-service (SAAS) customer service platform. With its various applications, clients get to manage incoming support requests from end customers in many different industries, from business technology, telecommunications, and education/non-profit to consumer technology, media/entertainment, and retail & e-commerce.
This Zacks Rank #1 (Strong Buy) stock is set to see strong earnings growth in the near-term, with triple digit earnings expansion expected for fiscal 2018.
Shares Pop on Q1 Earnings Beat
Back in May, Zendesk reported strong first quarter 2018 earnings results. Net loss per share came in at 24 cents, topping the Zacks Consensus of a loss of 29 cents per share.
Revenues of $130 million surged 38% year-over-year, and the company’s paid customer account growth increased a healthy 23% from the prior year period.
Looking at Zendesk’s operating metrics, its percentage of Support MRR generated by customers with 100 or more Support agents remained solid at 38% in Q1, up from 34% in Q1 2017.
Additionally, the number of contracts the company closed with an annual value of $50,000 or greater was 60% higher than in the first quarter of 2017. And, the average size of these transactions was bigger when compared to the same period last year as well.
As a result, shares were up about 7% right after the report was released.
Earnings Outlook & Guidance
The company expects continued revenue and customer account growth throughout this year thanks to its product portfolio expansion and omnichannel offerings.
Zendesk also recently launched the Zendesk Guide Enterprise, an AI-powered self-service product for bigger companies that should help boost future momentum and grow the size of new customer deals.
As for earnings, ZEN projects its bottom line to surge 100% for the current quarter, and almost 170% for 2018 versus last year. What’s more, the current Zacks Consensus for 2018 is sitting in positive territory, a good sign for a company that’s nearing profit potential.
Next year is looking promising as well, with anticipated earnings growth topping 267%.
Bear of the Day:
Headquartered in San Jose, CA, 8x8 is company that provides cloud-based phone, meeting, collaboration, and contact center solutions. With its applications, the company hopes to reduce complexity and cost, as well as improve individual and team productivity and performance, and enhance the overall customer experience. 8x8 also has data located in sites around the globe.
The company is currently sitting at a #5 (Strong Sell) on the Zacks Rank after analysts cut their outlook as a result of disappointing earnings results in its last quarter. Can this cloud company turn things around?
Shares Plunge After Q4 Earnings
In late May, 8x8 reported fourth quarter fiscal 2018 results.
The company reported a net loss per share of 11 cents, falling short of the Zacks Consensus of a loss of 5 cents per share.
Despite this miss, the company did see some nice growth in revenues. Total revenues of $79.3 million increased 19% year-over-year and beat our consensus estimate.
Service revenue jumped 20% from the prior year to $75.3 million. Additionally, service revenues from mid-market and enterprise customers increased 29% year-over-year and represented 60% of total service revenue.
Non-GAAP gross margin was 77% in Q4, down from 79% in the same period last year.
As a result, EGHT plunged over 14% after the report was released.
Estimates took a hit in the days following the report.
For the current quarter, five analysts cut their outlook in the last 60 days, and the consensus has dipped six cents from $0.01 to a loss of 4 cents per share. Earnings are now expected to decline 300% for the period. Investors should note that EGHT reports its next quarterly report at the end of this month.
Nine analysts have revised their estimates downward for the current fiscal year, and earnings are projected to fall for the year as well, down 350% versus the last fiscal year. The Zacks Consensus has decreased from $0.11 to a loss of 15 cents per share.
Looking at the next fiscal year, earnings could bounce back and grow about almost 63%; the current consensus sits at a loss of 6 cents per share, falling 24 cents in the past 60 days.
What the “China Ban” Actually Means for Micron (MU - Free Report) Stock
Shares of Micron opened higher on Thursday after the company went on the defensive in the wake of reports that it has been temporarily banned from selling 26 different semiconductor products in China.
News that a Chinese court had ordered Micron to stop selling some memory chips and solid state drives in the country following a patent infringement complaint sent shares of the popular tech stock down more than 5.5% on Tuesday.
The complaint came from Micron rivals United Microelectronics Corporation and Fujian Jinhua Integrated Circuit Co., highlighting the rise of domestic competition for chipmakers in China as the nation continues to build up its own semiconductor industry.
The ruling also spooked investors who have grown weary of relations between American and Chinese companies in the midst of an ongoing “trade war” involving the governments of both countries.
Micron responded to the ruling on Thursday, delivering its own official confirmation that the company has, in fact, been temporarily barred from selling certain products in China. Management said Micron will comply with the decision but firmly declared its innocence from any patent-related wrongdoing.
“Micron is disappointed with the ruling by the Fuzhou Intermediate People’s Court. We strongly believe that the patents are invalid and that Micron’s products do not infringe the patents,” wrote Micron’s Joel Poppen, senior vice president of legal affairs and general counsel, in a statement.
“Micron has a long-standing history of successful business operations in China, including a significant assembly and test manufacturing facility in Xi’an, as well as deep relationships with many valued China customers. Micron will continue to aggressively defend against these unfounded patent infringement claims while continuing to work closely with its customers and partners,” the statement added.
Micron also attempted to down play the effect that the ban would have on its financial results. The firm said the affected products would represent just “slightly more than” 1% of its annual sales, while the injunction will hurt Q4 revenue by about 1%.
Micron continues to expect Q4 revenue to fall within its previously-guided range of $8 billion to $8.4 billon. This reiteration is likely to keep downward analyst estimate revisions at bay, which should encourage investors who had hoped for Micron’s solid revision trend to continue.
The company’s sales guidance and overall bullishness has resulted in Zacks Consensus Estimates of $8.22 billion in revenue and $3.30 per share in adjusted earnings for the fourth quarter. These results would represent year-over-year growth of 33.9% and 63.4%, respectively.
Within the past 30 days, Micron has seen six positive revisions to its earnings estimates for the current quarter and eight positive revisions to its full-year estimates. The company has seen no downward estimate revisions for these periods in that time.
A 1% hit to revenue might inspire slight adjustments to earnings estimates, but it is unlikely to have a material effect on Micron’s bottom line. Meanwhile, existing positive estimate revision trends have earned the company a Zacks Rank #1 (Strong Buy).
Continued regulatory headaches in China could be a cause for concern, but for now, investors should note that this roadblock will have a relatively minor impact.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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