For Immediate Release
Chicago, IL – June 4, 2019 – Zacks Equity Research Shares of Qualys, Inc. (QLYS - Free Report) as the Bull of the Day, Nordstrom, Inc. (JWN - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Alphabet Inc. (GOOGL - Free Report) , Amazon.com Inc. (AMZN - Free Report) and Facebook (FB - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Shares of Qualys, Inc. have been on a roller coaster ride over the last 12 months, including a big one-day drop Monday. Despite the recent turbulence, the cloud-based IT security and compliance solutions firm’s stock is up big over the last several years and Qualys looks poised to grow both its top and bottom lines going forward.
Qualys’ pitch to potential customers is simple. The firm boasts that it offers “a single cloud platform for IT, security and compliance across” all of a company’s “global IT assets.” The firm’s cloud-based platform and its integrated cloud apps provide business critical security intelligence continuously, which allows Qualys’ clients the chance to automate “auditing, compliance and protection for IT systems and web applications on premises, on endpoints and elastic clouds.”
The Foster City, California-based company was one of the first security firms to operate a Software-as-a-Service model. This has become widely popular across the tech industry today, from Salesforce to more consumer-facing companies like Netflix and Uber. Qualys has strategic partnerships with some well-known consulting giants and managed service providers like Accenture and IBM and currently has over 12,200 customers around the world.
Cybersecurity concerns are set to expand as the world becomes ever-more digitized and connected. In fact, roughly $600 billion, or nearly 1% of global GDP, is expected to be lost to cybercrime every year, based on a 2018 study by The Center for Strategic and International Studies and global computer security firm McAfee.
Qualys is coming off top and bottom line beats in Q1 fiscal 2019. And as we mentioned at the top, shares of QLYS have outperformed over the last serval years. Qualys is up 154% in the last three years and 93% over the past 24 months, which blows away the Security Market’s 31% average climb and the S&P 500’s 12% jump.
Outlook & Earnings Trends
Looking ahead, our current Zacks Consensus Estimate calls for the company’s second-quarter revenue to pop roughly 15.2% from the prior-year quarter to reach $78.5 million. This would mark a slight slowdown from Q1’s 16% top-line expansion. With that said, the company’s full-year fiscal 2019 revenue is projected to jump 15.4% to hit $321.9 million. Peeking further ahead, Qualys is expected to see its full-year 2020 revenue surge 16% above our current-year estimate, in a sign of solid and stable sales growth.
At the bottom end of the income statement, the security provider is expected to see its adjusted second-quarter earnings soar 20.5% from the year-ago period to touch $0.47 per share. Last quarter, QLYS crushed our earnings estimate by 16.7% to post adjusted earnings of $0.49, which marked a 36% climb. Meanwhile, the company’s adjusted full-year EPS figure is projected to pop 10.3%. Plus, Qualys’ 2020 earnings are projected to come in 14.6% higher than our current-year estimate.
Qualys has topped our quarterly earnings estimate for several years now. This includes a 21.1% average beat over the trailing four periods. Investors will also notice that Qualys’ earnings estimate revision picture has trended heavily upward recently, especially for fiscal 2019 and 2020. The firm’s positive earnings estimate revision activity has helped lift its overall consensus estimates for both the current and following fiscal year, which means at least some analysts are more optimistic about Qualys’ earnings growth.
Bear of the Day:
Nordstrom, Inc. stock has tumbled 30% in 2019. This stands in stark contrast to the S&P 500’s roughly 10% comeback, but is part of an increasingly worrisome trend among department store chains that struggle for relevance in the quickly changing retail landscape.
Overview & Recent Performance
Nordstrom, Macy’s, Kohl’s, JC Penney and other more traditional department store-style retailers have found it harder to adapt to the e-commerce and delivery age. JWN and others have revamped their businesses to accommodate shoppers that have come to expect quick delivery and smooth, easy to use e-commerce platforms in the Amazon age.
Wall Street and investors have, however, noticed that companies like Nike and Ralph Lauren have focused on direct-to-consumer expansion and big-box retailers such as Target have successfully attracted shoppers who might have been Nordstrom and Macy’s customers in years gone by. Nordstrom has purchased Stitch Fix competitor Trunk Club and member-only shopping website HauteLook and focused on its off-priced Nordstrom Rack stores in order to better compete.
Nordstrom’s first quarter fiscal 2019 revenue slipped 3.3% from the prior-year quarter and missed our Zacks Consensus Estimate. More specifically, the top line was hurt by the company’s loyalty program, digital marketing, and merchandise, which led to downturns across JWN’s full-price and off-price businesses. Worse yet, the firm’s adjusted Q1 earnings plummeted roughly 55% to fall well short of estimates.
Shares of JWN have fallen roughly 14% since the company reported its Q1 2019 financial results on May 21. This recent downturn has pushed Nordstrom stock down 31% this year. Investors will notice that the company’s recent performance is part of a much larger five-year downturn.
Outlook & Earnings Trends
Management lowered JWN’s guidance for fiscal 2019 following Nordstrom’s brutal Q1 showing. Looking ahead, the company’s current-quarter revenue is projected to dip 3% to $3.94 billion, based on our current Zacks Consensus Estimate. Nordstrom’s full-year revenue is expected to sink 1.75% to $15.58 billion. Peeking further down the road, the company’s 2020 revenue is projected to jump 1.3% above our fiscal 2019 estimate. But this would still see revenue come in below 2018’s total.
At the bottom end of the income statement, the firm’s adjusted Q2 2019 earnings are projected to fall nearly 16% to touch $0.80 per share. On top of that, the company’s current full-year EPS figure is expected to slip 5.6%. Plus, Nordstrom has experienced a ton of downward earnings estimate revisions recently, especially for fiscal 2019 and 2020.
Google, Amazon & Facebook Fall as Antitrust Allegations Revisit Silicon Valley
Alphabet Inc. and Amazon.com Inc. stocks opened Monday down big, with Amazon down 3% and Google down over 6%. Both companies are facing speculation of an antitrust investigation. The U.S. Department of Justice is reportedly going after Google, while the Federal Trade Commission is trying to tackle Amazon and Facebook. Amazon closed the day down around 5% while Alphabet closed around -6.5%.
Meanwhile, Facebook is just now nearing the end of the Cambridge Analytica scandal and will be paying $3-5 billion for its privacy violations based on reports. Facebook opened Monday down 3% amid the concerns around other tech giants and closed the day down around 7% as the FTC will reportedly be including Facebook in their antitrust investigation.
Alphabet’s subsidiary Google is under pressure as the DOJ looks to open an investigation into "Google’s business practices related to its search and other businesses," as first reported by the Wall Street Journal. With Alphabet being the tech power that it is, it’s hard to know exactly what the DOJ is set to look into.
Many of the worries seem to be focused on Google’s collection of search data and control of the digital advertising market. Google’s search engine currently claims about 75% of the worldwide search engine market share for desktops and that number is even higher for mobile and tablet devices. Google also made up 38% of the digital advertising market in 2018, 17% more than its closest competitor, Facebook.
Google has faced many investigations in the past, paying out billions to the European Commission over the past few years. The FTC has also previously investigated Google, which ended with Google agreeing to pay a $22.5 million fine after denying any guilt.
The Federal Trade Commission has started the first steps of an investigation into Amazon. There is no clear sign of what the FTC will be specifically looking into, but Amazon’s control in the online retail sector has always been an area of concern for politicians. This, coupled with its growing influence in multiple markets, make it a prime target.
Amazon is also currently under investigation by the European Union who believe Amazon may be stifling competition due to its size. As seen with the previous Google investigation, the European Union is not afraid to fine these big tech companies in the name of consumer protection. The EU also tends to be significantly stricter than the US when it comes to regulation of these large companies.
Facebook was added to the investigation after initial reports were focused on just Amazon and Google. The investigation into Facebook will focus on whether or not it stifles competition and has acted in an unlawful and monopolistic nature. This comes on the back of an FTC investigation regarding privacy issues and Facebook’s user data collection.
These investigations come after the companies and tech giants as a whole have come under bipartisan pressure from government officials. President Trump, backed by other Republicans, has accused Google of having biased search results and has had something of a personal feud with Amazon CEO Jeff Bezos.
Meanwhile, Democrats have concentrated on whether or not these tech-giants cut off competition. Antitrust regulation has become a main focus of Democratic Sen. Elizabeth Warren’s 2020 presidential campaign and her thoughts have been echoed by Sen. Amy Klobuchar and Sen. Bernie Sanders. With this much support behind the investigations, it could prove troublesome for the companies.
This investigation is just in the very early days and although the government pressure is large, all these companies have large legal teams and resources at their disposal so it is nothing to be overly worried about at the moment, but should be watched as it continues to progress.
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