For Immediate Release
Chicago, IL – May 22, 2020 – Zacks Equity Research Shares of Chegg Inc. (CHGG - Free Report) as the Bull of the Day, Brinker International (EAT - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Microsoft (MSFT - Free Report) , SAP (SAP - Free Report) and Appian (APPN - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Chegg Inc. is an education technology company that provides supplementary material for primarily college students. The company rents and sells textbooks, provides eTextbooks, homework help, textbook buybacks, courses, and college admissions and scholarship services.
Q1 Earnings Way Past Expectations
Chegg reported strong first-quarter results earlier this month, and the top and bottom line easily beat the consensus estimates.
Adjusted earnings grew 40% year-over-year to 22 cents per share, while revenue jumped 35% to $132 million.
Chegg Services subscribers hit 2.9 million, also up 35% from the prior-year period, and there were 253 million total Chegg Study content views during the quarter.
Chegg’s CFO Andy Brown said the company was comfortable giving guidance for the second quarter, and is forecasting total revenues in the range of $135 million and $137 million.
But because of the general uncertainty about the pandemic, and colleges reopening campuses in the fall, Chegg is not updating their outlook for the second half of 2020.
Year-to-date, shares of CHGG have surged about 64% compared to the S&P 500’s 8.7% decline. Earnings estimates have been rising, and Chegg is a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, six analysts have revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 14 cents to $1.21 per share; earnings are expected to increase 33% compared to the prior year period. 2021 looks strong as well, with earnings expected to continue double-digit year-over-year growth.
Because the pandemic has forced all education levels to be online, Chegg is poised to benefit. Its Services segment provides tools that help both traditional students and those wanting to learn valuable work skills; it also offers online tutoring in subjects like writing and math, all of which will likely be in high demand if classes remain online any longer
If you’re an investor searching for a tech stock to add to your portfolio, make sure to keep CHGG on your shortlist.
Bear of the Day:
Based in Dallas, TX, Brinker International is a restaurant holding company that owns and operates casual dining establishments like Chili’s Grill & Bar and Maggiano’s Little Italy.
How the Coronavirus Crisis is Impacting EAT
Like many restaurant stocks, Brinker plunged hard and fast during the initial coronavirus sell-off, and shares are down more than 44% year-to-date.
However, its recent third-quarter report shows that things are gradually moving in the right direction. Earnings and revenue managed to beat the Zacks Consensus Estimate, but comparable store sales were pretty dismal, especially for April.
During the month, total comps fell 64.6%, 59.7%, 53.1% and 46.8%, respectively, on a weekly basis, though each week improved upon the previous.
For the quarter, Chili’s comps ended down 5.3% and Maggiano’s sales fell 9.9%.
Additionally, Moody’s announced the completion of a periodic review of Brinker’s business earlier this month. Its credit rating has now slipped to junk status, something investors will want to keep an eye on.
The ratings agency said that the company’s negative free cash flow during the pandemic resulted in a weak liquidity rating, and the pandemic has the potential to have a sustained impact on Brinker; consumers may still be reluctant to spend their money despite restaurants and other non-essential businesses opening back up.
EAT is now a Zacks Rank #5 (Strong Sell). Eight analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen from $4.22 to $1.09 a share; earnings are expected to fall over 72% for the fiscal year.
For nearly all economic sectors, the real damage from the coronavirus is still uncertain.
Brinker’s future revenue, earnings, and cash flow are still up-in-the-air, and even though states are beginning to reopen, these key metrics can’t be determined until the length of the outbreak is figured out. It’s probably best to avoid restaurant stocks like EAT for the time being.
Microsoft (MSFT - Free Report) Acquires Softomotive to Strengthen RPA
Microsoft announced the acquisition of robotic process automation (RPA) software provider Softomotive, during Build 2020 conference.
However, the financial terms of the deal have been kept under wraps. Per Crunchbase data, Softomotive raised around $25 million in funding as a private entity.
Per the terms, Softomotive’s WinAutomation will become a part of Microsoft’s automation platform Power Automate. Notably, WinAutomation platform enables customers to create their own bot that aids them in automating manual business processes.
The combined offering will provide customers with additional options to automate Windows based tasks. It will also facilitate RPA connectivity to new software applications from companies including SAP and Citrix.
Moreover, customers will be able to run multiple workflows and automations at the same time and on the same system, which will boost efficiency of their bots and reduce latency. WinAutomation was made available for free to all customers with an RPA attended license in Power Automate on May, 19.
Markedly, Softomotive currently has a global customer base of about 9000, which is a positive. This is likely to bolster Microsoft’s top line in the upcoming quarters and boost investors’ optimism in its stock.
Notably, shares of Microsoft have returned 17.7% year to date compared with the industry’s rise of 9.8%.
Strengthening RPA Capabilities Holds Promise
Growing use of business process automation (BPA) backed by AI and software robots is likely to boost demand for RPA solutions, as it enables enterprises to boost productivity and performs repetitive tasks without human intervention. The Softomotive buyout is a part of Microsoft’s focus on developing robust RPA capabilities and expanding its footprint in the RPA space.
Notably, the company launched UI Flows in April which added RPA capabilities to the Power Automate platform. This allowed enterprises to automate their legacy apps and manual processes through UI-based automation for both attended and unattended scenarios.
Moreover, solid demand for RPA services in the market driven by the digital transformation taking place across all industries, bodes well for Microsoft’s growing RPA strength over the long haul.
In fact, Power Automate is already used by more than 350,000 organizations every month owing to enhanced features like AI-based data understanding through AI Builder and UI-based application automation through UI flows. Thus, the integration of Softomotive’s capabilities is anticipated to aid Microsoft acquire more customers in the days ahead.
Furthermore, Microsoft’s flexible and low-cost business model for RPA is expected to boost adoption among smaller enterprises. Markedly, the service is available in two tiers – $40 per user/month for attended RPA bots and $150 per month for each unattended RPA bot.
These factors are expected to aid Microsoft in expanding its presence in the RPA market, which per Grand View Research data, is expected to witness a CAGR of 33.6% between 2020 and 2027.
Nevertheless, other tech players like Appian and UiPath, aren’t far behind in the RPA game, given its alluring growth prospects.
Notably, Appian acquired RPA provider Jidoka in January to strengthen its platform and make it a one stop shop for Automation, with some of the best solutions for workflow, AI, and RPA.
In the same month, IBM expanded its partnership with RPA provider Automation Anywhere to roll out a new RPA offering which aids business enterprises in driving automation projects with improved stability and at lower ownership and maintenance costs. The offering comes with enhanced features like Control Room and Bot Insight, which gives users better control over bots.
Further, RPA startup UiPath acquired ProcessGold and StepShot in October, 2019. The acquisitions were aimed at bolstering UiPath’s existing RPA strength with added capabilities. Notably, UiPath Explorer Expert will leverage Stepshot to identify and improve well defined business processes, while UiPath Explorer Enterprise will use ProcessGold tech to identify variations in less well-defined processes and recommend optimal courses of action.
Nevertheless, Microsoft’s deep focus toward strengthening RPA offerings is likely to strengthen its market position in the space and enable it to offer advanced services to enterprises that boost business productivity.
Microsoft currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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