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Despite the best efforts of a few market-wide headwinds, many of the leading tech behemoths which have been at the forefront of our historic bull run continue to climb higher. Of these, several—including Microsoft —have been flagged by the Zacks Rank recently and could be poised for even more gains thanks to key initiatives and positive sentiment.
Microsoft is obviously a pioneer in the PC software market, but the driving force behind its nearly 31% year-to-date surge has been its efforts beyond that traditional business. For instance, Microsoft has witnessed remarkable growth in its Azure division, which provides one of the world’s most popular public cloud computing platforms.
Elsewhere, Microsoft has benefitted from the growth of Office 365, innovation at Xbox, and strategic acquisitions like that of GitHub and LinkedIn. This positivity has translated into positive analyst sentiment, upward earnings estimate revisions, and further growth potential.
Latest Earnings and Outlook
Microsoft most recently reported earnings on July 19. The tech giant notched adjusted earnings of $1.13 per share, beating the Zacks Consensus Estimate by six cents and improving nearly 7% year over year. Revenue for the quarter came in at $30.1 billion, handily beating our consensus estimate and surging 17.5% from the year-ago period.
Microsoft’s commercial business was the key business catalyst, with total commercial revenues advancing 10% year over year. Commercial cloud revenue was up 53%, while Office 365 revenue gained 38%. Azure revenue climbed 85% on from the comparable period last year.
Other key growth areas for Microsoft were Gaming, where revenue grew 39% year over year, and LinkedIn, which saw total revenue growth in excess of 37%.
The success of growth-minded investing over the past few years has made many people quick to overlook volatility and risk in favor of potential. This is all well and good, but there remains a number of red flags which should compel investors to stay away from even the most hopeful companies during periods of uncertainty. I think that’s exactly what we have in MercadoLibre right now.
MercadoLibre is an e-commerce company. It is the largest online shopping platform in Latin America and is based in Argentina. The website attracts hundreds of millions of visitors and serves as the market leading e-commerce option in countries such as Argentina, Brazil, Chile, Mexico, and more.
Founded just 19 years ago, MercadoLibre is a young company that should continue to develop as access to the internet, delivery availability, and purchasing power improves in its key markets. However, in the short-term, increased costs are putting a massive dent in the company’s profits, and investors are displaying caution.
Notably, MercadoLibre is struggling in Brazil, its biggest market, due to an uptick in shipping costs. The e-commerce giant has also been hurt by other mounting expenses, including interest accrual on convertible bonds and higher income taxes.
Margins are also under pressure due to increased investments in free shipping and loyalty programs. While we take things like Amazon’s (AMZN) Prime program for granted now, free shipping and loyalty subscriptions are still in the early stages for MercadoLibre, and those things take time to get off the ground.
But perhaps most detrimental to the company’s financial results is its high foreign exchange risk. MercadoLibre operates in almost 20 counties with different currencies and must convert money earned into dollars, per SEC rules.
The U.S. dollar has been getting much stronger against MercadoLibre’s key currencies, and that has not been a good thing for the online retailer’s profits.
Additional content:
3 Growth Stocks to Pick from the Discount Retail Industry
There seems to be a lot of cheer in the Retail – Discount Stores industry that has surged close to 46% in a year’s time, with quite a few companies cutting a promising figure. The industry, which comfortably crushed the S&P 500’s rise of almost 19%, is riding on strategic endeavors by companies and a flattering economic scenario.
The economic landscape is being shaped by a strong labor market, improving consumer sentiment and benefits from tax reforms. It also goes without saying that consumer spending — which accounts for more than two-third of the economic activity — is likely to remain strong. For obvious reasons, retailers are the direct beneficiaries. In fact, the National Retail Federation’s projection of a tick-up in U.S. retail sales of at least 4.5% this year is quite reassuring for retailers.
Such trends along with companies’ efforts to keep pace with evolving shopping patterns are likely to keep players in the Retail – Discount Stores industry (ranked among the top 22% out all Zacks industries) in the win-win zone.
Arrows in Discount Retailers’ Quiver
Markedly, discount retailers are trying all means to retain and strengthen customer base in the face of mounting competition, through effective pricing, brand enhancements, store expansion and remodeling, and efforts to bolster online sales. Significant among the omnichannel efforts is the companies’ focus on expanding in the online grocery space through same-day deliveries and upgraded payment systems. However, efforts to combat competition entails high promotional costs, which along with an aggressive pricing strategy, escalated wage expenses and increased merchandise costs have been eating into margins.
Nonetheless, there are some renowned industry players which have countered these hurdles and performed even better than the industry, courtesy of the aforementioned positives. To top it, these firms have raised their views for the current fiscal, which instills hope on the companies’ prospects.
3 Musketeers
On that note, we have brought into focus three major Retail – Discount Stores players, which have delivered a solid bull run on strong fundamentals and encouraging outlooks. These stocks not only carry a Zacks Rank #2 (Buy) but also flaunt a Growth Style Score of A. Growth stocks have solid earnings or revenue growth potential, which should lead to higher stock prices.
Minnesota-based Target Corp. is a solid bet. The company, which has delivered an average positive earnings surprise of 1.3% in the trailing four quarters, is trying all means to rapidly adapt to the changing retail ecosystem. Toward this end, Target is deploying resources to enhance omni-channel capacities, coming up with new brands, remodeling or refurbishing stores and expanding same-day delivery options to expedite the shopping process. All these bode well for the stock that has soared 52.3% in a year. Notably, Target carries a long-term growth rate of 6.7% and has seen its estimates for the current fiscal go up by 7 cents to $5.37 over the past 30 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
You may also consider Burlington Stores, Inc., which has seen its stock go up a whopping 80% over the past year. This New Jersey-based retailer flaunts a robust long-term growth rate of 20.2% and has topped earnings estimates consistently for 19 straight quarters. Further, we are optimistic about Burlington, given its superb strategic initiatives, which have been driving its impressive comparable store sales and margins trend. Estimates of this company have gone up by 3.7% to $6.21 for the current fiscal over the past 30 days.
Investors can also bet on The TJX Companies, Inc., which has returned close to 51% over the past year. This off-price retailer has been riding on its spectacular comps record, which in turn is benefiting from continued rise in consumer traffic and strong merchandising policies. These factors along with TJX Companies’ off-price model, strategic store locations and impressive brands have been driving its store and online performance. These strategies have helped the company deliver positive earnings surprises for three consecutive quarters now. Also, the company, which has seen its estimates for the current fiscal go up by 4 cents to $4.89 over the past 30 days, carries a long-term growth rate of 10.6%.
5 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2018 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs. A bonus Zacks Special Report names this breakthrough and the 5 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains.
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/performance for information about the performance numbers displayed in this press release.
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Microsoft, MercadoLibre, Target, Burlington Stores and TJX highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – September 19, 2018 – Zacks Equity Research highlights Microsoft (MSFT - Free Report) as the Bull of the Day, MercadoLibre (MELI - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Target Corp. (TGT - Free Report) , Burlington Stores, Inc. (BURL - Free Report) and The TJX Companies, Inc. (TJX - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Despite the best efforts of a few market-wide headwinds, many of the leading tech behemoths which have been at the forefront of our historic bull run continue to climb higher. Of these, several—including Microsoft —have been flagged by the Zacks Rank recently and could be poised for even more gains thanks to key initiatives and positive sentiment.
Microsoft is obviously a pioneer in the PC software market, but the driving force behind its nearly 31% year-to-date surge has been its efforts beyond that traditional business. For instance, Microsoft has witnessed remarkable growth in its Azure division, which provides one of the world’s most popular public cloud computing platforms.
Elsewhere, Microsoft has benefitted from the growth of Office 365, innovation at Xbox, and strategic acquisitions like that of GitHub and LinkedIn. This positivity has translated into positive analyst sentiment, upward earnings estimate revisions, and further growth potential.
Latest Earnings and Outlook
Microsoft most recently reported earnings on July 19. The tech giant notched adjusted earnings of $1.13 per share, beating the Zacks Consensus Estimate by six cents and improving nearly 7% year over year. Revenue for the quarter came in at $30.1 billion, handily beating our consensus estimate and surging 17.5% from the year-ago period.
Microsoft’s commercial business was the key business catalyst, with total commercial revenues advancing 10% year over year. Commercial cloud revenue was up 53%, while Office 365 revenue gained 38%. Azure revenue climbed 85% on from the comparable period last year.
Other key growth areas for Microsoft were Gaming, where revenue grew 39% year over year, and LinkedIn, which saw total revenue growth in excess of 37%.
Bear of the Day:
The success of growth-minded investing over the past few years has made many people quick to overlook volatility and risk in favor of potential. This is all well and good, but there remains a number of red flags which should compel investors to stay away from even the most hopeful companies during periods of uncertainty. I think that’s exactly what we have in MercadoLibre right now.
MercadoLibre is an e-commerce company. It is the largest online shopping platform in Latin America and is based in Argentina. The website attracts hundreds of millions of visitors and serves as the market leading e-commerce option in countries such as Argentina, Brazil, Chile, Mexico, and more.
Founded just 19 years ago, MercadoLibre is a young company that should continue to develop as access to the internet, delivery availability, and purchasing power improves in its key markets. However, in the short-term, increased costs are putting a massive dent in the company’s profits, and investors are displaying caution.
Notably, MercadoLibre is struggling in Brazil, its biggest market, due to an uptick in shipping costs. The e-commerce giant has also been hurt by other mounting expenses, including interest accrual on convertible bonds and higher income taxes.
Margins are also under pressure due to increased investments in free shipping and loyalty programs. While we take things like Amazon’s (AMZN) Prime program for granted now, free shipping and loyalty subscriptions are still in the early stages for MercadoLibre, and those things take time to get off the ground.
But perhaps most detrimental to the company’s financial results is its high foreign exchange risk. MercadoLibre operates in almost 20 counties with different currencies and must convert money earned into dollars, per SEC rules.
The U.S. dollar has been getting much stronger against MercadoLibre’s key currencies, and that has not been a good thing for the online retailer’s profits.
Additional content:
3 Growth Stocks to Pick from the Discount Retail Industry
There seems to be a lot of cheer in the Retail – Discount Stores industry that has surged close to 46% in a year’s time, with quite a few companies cutting a promising figure. The industry, which comfortably crushed the S&P 500’s rise of almost 19%, is riding on strategic endeavors by companies and a flattering economic scenario.
The economic landscape is being shaped by a strong labor market, improving consumer sentiment and benefits from tax reforms. It also goes without saying that consumer spending — which accounts for more than two-third of the economic activity — is likely to remain strong. For obvious reasons, retailers are the direct beneficiaries. In fact, the National Retail Federation’s projection of a tick-up in U.S. retail sales of at least 4.5% this year is quite reassuring for retailers.
Such trends along with companies’ efforts to keep pace with evolving shopping patterns are likely to keep players in the Retail – Discount Stores industry (ranked among the top 22% out all Zacks industries) in the win-win zone.
Arrows in Discount Retailers’ Quiver
Markedly, discount retailers are trying all means to retain and strengthen customer base in the face of mounting competition, through effective pricing, brand enhancements, store expansion and remodeling, and efforts to bolster online sales. Significant among the omnichannel efforts is the companies’ focus on expanding in the online grocery space through same-day deliveries and upgraded payment systems. However, efforts to combat competition entails high promotional costs, which along with an aggressive pricing strategy, escalated wage expenses and increased merchandise costs have been eating into margins.
Nonetheless, there are some renowned industry players which have countered these hurdles and performed even better than the industry, courtesy of the aforementioned positives. To top it, these firms have raised their views for the current fiscal, which instills hope on the companies’ prospects.
3 Musketeers
On that note, we have brought into focus three major Retail – Discount Stores players, which have delivered a solid bull run on strong fundamentals and encouraging outlooks. These stocks not only carry a Zacks Rank #2 (Buy) but also flaunt a Growth Style Score of A. Growth stocks have solid earnings or revenue growth potential, which should lead to higher stock prices.
Minnesota-based Target Corp. is a solid bet. The company, which has delivered an average positive earnings surprise of 1.3% in the trailing four quarters, is trying all means to rapidly adapt to the changing retail ecosystem. Toward this end, Target is deploying resources to enhance omni-channel capacities, coming up with new brands, remodeling or refurbishing stores and expanding same-day delivery options to expedite the shopping process. All these bode well for the stock that has soared 52.3% in a year. Notably, Target carries a long-term growth rate of 6.7% and has seen its estimates for the current fiscal go up by 7 cents to $5.37 over the past 30 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
You may also consider Burlington Stores, Inc., which has seen its stock go up a whopping 80% over the past year. This New Jersey-based retailer flaunts a robust long-term growth rate of 20.2% and has topped earnings estimates consistently for 19 straight quarters. Further, we are optimistic about Burlington, given its superb strategic initiatives, which have been driving its impressive comparable store sales and margins trend. Estimates of this company have gone up by 3.7% to $6.21 for the current fiscal over the past 30 days.
Investors can also bet on The TJX Companies, Inc., which has returned close to 51% over the past year. This off-price retailer has been riding on its spectacular comps record, which in turn is benefiting from continued rise in consumer traffic and strong merchandising policies. These factors along with TJX Companies’ off-price model, strategic store locations and impressive brands have been driving its store and online performance. These strategies have helped the company deliver positive earnings surprises for three consecutive quarters now. Also, the company, which has seen its estimates for the current fiscal go up by 4 cents to $4.89 over the past 30 days, carries a long-term growth rate of 10.6%.
5 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2018 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs. A bonus Zacks Special Report names this breakthrough and the 5 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains.
Click to see them right now >>
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/performance for information about the performance numbers displayed in this press release.