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Altair Engineering, Netgear, Fitbit, Microsoft and DexCom highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – June 17, 2019 – Zacks Equity Research Shares of Altair Engineering (ALTR - Free Report) as the Bull of the Day, Netgear (NTGR - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Fitbit, Inc. (FIT - Free Report) , Microsoft (MSFT - Free Report) and DexCom, Inc. (DXCM - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Altair Engineering is a Zacks Rank #1 (Strong Buy) and its sports that growth and value divergence that I really like to see.  The stock has an A for its Growth Style Score and an F for the Value Style Score.  This tells me right away that this is a growth name as growth investors and value investors are inherently looking for different things.

Description

Altair Engineering Inc. is focused on the development and broad application of simulation technology to synthesize and optimize designs, processes and decisions for business performance. The company serves broad industry segments. Altair Engineering Inc. is headquartered in Michigan, USA.

Earning History

The earnings history for this stock is pretty good.  I see three of the last four quarters were beats of the Zacks Consensus Estimate. 

The most recent beat was good for a 23.8% positive earnings surprise with the company posting $0.26 in EPS when $0.21 was expected.

Estimate Revisions

The main driver of the Zacks Rank are earnings estimate revisions, and ALTR has some positive movement that we love to see.  The current quarter has ticked higher to $0.08 from $0.07, which is always good to see, but the Rank tends to focus more on the move for the full year as opposed to a single quarter.

The 2019 Zacks Consensus Estimate has moved from $0.54 to $0.63 over the last 60 days and that is the biggest factor that pushed this stock to a Zacks Rank #1 (Strong Buy).

The 2020 Zacks Consensus Estimate has held constant at $0.80 and that may be due to a lack of visibility on the part of the covering analysts.

Valuation

So the valuation style score is F, and that comes with the territory when you are looking at a growth stock.  The forward PE multiple of 56x is high, as is the 8.4x price to book multiple.  Of course this stock comes with 39% annual topline growth and price to sales multiple of 6x. 

Operating margins have improved of late moving the low 4% area to 6.8% in the most recent quarter.  If margins continue to expand then this stock could see an even higher valuation.

Bear of the Day:

Netgear is a Zacks Rank #5 (Strong Sell) even after posting a solid beat.  The problem is that guidance came in below Wall Street expectations, and when that happens, earnings estimates have a way dropping and when that happens, the stock tends to follow. NTGR is now the Bear of the Day and we will take a look at where estimates have slipped to.

Description

Netgear. designs, develops, and markets networking and Internet connected products for consumers, businesses, and service providers. It operates in two segments, Connected Home, and Small and Medium Business. The company offers smart home/connected home/broadband access products, such as broadband modems, WiFi gateways, WiFi hotspots, WiFi routers and home WiFi systems, WiFi range extenders, Powerline adapters and bridges, WiFi network adapters, and digital canvasses; and value added service offerings, including technical support, parental controls, and cybersecurity protection. NETGEAR, Inc. was founded in 1996 and is headquartered in San Jose, California.

Recent Earnings

In late April, NTGR reported EPS of $0.60 and that was $0.11 ahead of the consensus estimate at the time.    Revenues came in at $249M when $244M was expected. That is a solid beat, but that was the extend of the good news. 

The company then guided next quarter for revenue and it wasn't what we like to see.  The company expects sales of $215M - $220M but at the time, the expectation was calling for $256M.

Estimate Revisions

The Zacks Rank tends to focus on the full year numbers more than the quarterly estimates, but in this case, it is worth mentioning the level of decline.

The current quarter was calling for $0.53 in EPS, but followin the soft guide, analysts slashed estimates down to $0.25.  That is a big move down. 

The following quarter wasn't hit as hard, dropping only 3 cents to $0.62.  

The full year number, however, dropped from $2.49 to $2.24.  Next year saw a move lower from $2.87 to $2.75.

Valuation

With the topline contracting, investors are seeing multiples shrink.  The forward PE for NTGR is 11x while the price to sales multiple is below 1 at 0.6x.  I like to see that price to sales multiple of at least one as it tells me the market values the sales.  Value investors will look at this stock as see a 1.2x price to book, which is very low, so if NTGR can turn it around, this could be a great time to get long.  Problem is, we have to wait and see how the next quarter goes first.

Additional content:

3 “Internet of Things” Stocks to Buy Right Now

The “Internet of Things” essentially connects industrial and medical devices, vehicles, and an array of consumer and household products to allow for advanced monitoring, analytics, and more. Everyday products and machines can now be embedded with sensor technology to process data or interact with other electronic devices.

Consumer-level IoT products include things like Amazon’s Echo “smart speakers,” wearable motion and activity tracking products from the likes of Apple, and advanced in-car technology. On the commercial side of the IoT market, industrial manufacturers have started to implement sensors into machines to track performance and efficiency

One of the more obvious plays here for investors is semiconductor stocks, as chipmakers should be able to benefit from the growth of connected devices. But chip stocks are often cyclical. With that said, IoT is set to become nearly ubiquitous, which means investors can try to profit from its growth in countless industries and firms.  

Today we’ve highlighted three stocks with a Zacks Rank #2 (Buy) or better that could be poised for further IoT growth soon.

1. Fitbit, Inc.

Fitbit stock has been on a roller-coaster ride over the last two years, and is down big since going public in 2015. FIT stock is now trading for under $5 a share, which makes it inherently more supplicative. Therefore, Fitbit stock should be treated as more of a home run-style, swing for the fences and possibly strike out stock. With that said, Fitbit has been flagged by our Zacks Rank because of its positive earnings estimate revision activity, especially for fiscal 2019. This positivity helps FIT earn a Zacks Rank #2 (Buy) at the moment. Fitbit is also coming off a first quarter that saw its revenue jump 10%, driven by its traditional fitness tracker devices and smartwatch growth.

The San Francisco, California-based firm has expanded its offerings and partnerships in recent years in order to better compete. Fitbit has partnered with the likes of Google to help Fitbit become a more valuable health monitor. Today, Fitbit is able to track a user’s activity, calories burned, heart rate, sleep patterns, and more. Yet, going forward, it is not too hard to imagine the company monitoring much more and playing a vital role in a more preventive medicine-minded future. Looking ahead, our current Zacks Consensus Estimates call for the company’s adjusted fiscal 2019 earnings to jump 30% on 3.2% revenue growth. The company’s 2020 earnings are then projected to climb 47% above our current year estimate to help the company inch closer to break-even EPS.

2. Microsoft

Microsoft hit a new 52-week high on Tuesday, June 11 as shares of MSFT continue to climb in 2019. The historic tech giant has seen its stock price surge 30% so far this year to help it crush its industry’s 19% average. The firm’s impressive first half of the year has helped Microsoft once again become the world’s most valuable public company with a market cap of over $1 trillion. Microsoft’s legacy businesses have remained strong and grown, but its cloud business has helped really drive expansion. This division, highlighted by Azure, also includes a diversified and growing IoT unit that is used by the likes of Adobe, Kohler,  3M and many more.

Our Zacks Consensus Estimates call for the company's adjusted Q4 earnings to pop 7.1% on the back of 8.8% revenue growth. Microsoft’s full-year EPS figure is projected to climb 18% on 13.1% revenue growth that would see it reach $124.86 billion. Peeking further ahead, Microsoft’s full-year fiscal 2020 revenue is projected to jump 10.6% above our 2019 estimate, with earnings expected to climb 11.2% higher. MSFT has also seen its earnings estimate revision picture trend heavily upward recently, especially for fiscal 2019 and 2020. Microsoft is currently a Zacks Rank #2 (Buy) that also pays a dividend.

3. DexCom, Inc.

DexCom is a medical device firm that offers those with diabetes the chance to place a small sensor just beneath their skin to help them continuously monitor their glucose levels through a companion device, or via an application on compatible smartphones or smartwatches. Shares of DXCM are up 46% in the last 12 months, which includes some volatility. With that said, DexCom stock is up 93% over the last two years and currently sits around 6% below its 52-week high at $146.01 per share.

DexCom posted better-than-expected Q1 2019 results, which helped management feel confident enough to raise the its full-year outlook. The company’s adjusted full-year earnings are projected to soar 167% to reach $0.80 per share, on the back of roughly 25% revenue growth that would see it hit $1.29 billion. DexCom’s 2020 revenue is then projected to jump 19% higher than our current year estimate. Meanwhile, its 2020 EPS figure is expected to soar 52% above our current-year projection. DexCom has also seen its longer-term earnings estimate revision activity trendy heavily in the right direction recently to help DXCM earn a Zacks Rank #2 (Buy).

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