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Fastly is a $4.5 billion provider of infrastructure software and services including cloud computing, image optimization, security, edge computer technology and streaming solutions.
The company is classified as a Content Delivery Network (CDN) like Akamai and they both serve the fast growing social media platform TikTok, which helped its privately-controlled owner ByteDance generate $17 billion in revenue last year.
According to a CNBC article by Sam Shead on May 27, TikTok owner ByteDance reportedly made a profit of $3 billion on $17 billion of revenue in 2019, which was a 130% jump over 2018's revenue of $7.4 billion. "The Beijing-headquartered firm released TikTok in 2016 and the app has already been downloaded over 2 billion times," Shead noted.
Serving this monster growth, since its IPO in May 2019, Fastly is on its way to a 43% revenue advance this year with a topline consensus projection of $286 million.
After delivering a beat-and-raise quarter on May 6, FSLY shares have doubled from $23 to $46, exceeding the highest analyst price targets.
The company even pulled off a 6 million share secondary offering at $41.50 in late May and the stock barely peeked below $40!
What has investors so excited?
The Beat
Fastly reported Q1 EPS of (6c) vs consensus of (12c) and Q1 revenue of $63M vs consensus of $59.38M.
Total enterprise customer count grew to 297, up from 288 in Q4 2019. Average enterprise customer spend of approximately $642,000 was up 5.45% sequentially from $607,000 in Q4 2019.
Enterprise customers generated 88% of Fastly's trailing twelve-month total revenue, up from 87% in Q4 2019.
The Raise
Fastly raised their FY20 EPS view to (16c)-(8c) from (43c)-(32c) vs. the consensus of (40c). And they raised their FY20 revenue outlook to $280M-$290M from $255M-$265M, vs. consensus of $259.6M.
Management noted "As we mentioned earlier, we saw continued customer expansion on our platform which was bolstered by increased internet traffic from social distancing measures in Q1. We expect this trend to continue into Q2 and future periods. Despite the current global economic uncertainty, we remain optimistic about the demand for our mission-critical services and the underlying growth of our business. Accordingly, we raised guidance for the full-year 2020. Gross margin will continue to be affected by the timing of personnel and infrastructure investments, along with the seasonal fluctuations of platform usage by our customers. Despite the uncertain economic environment, we remain confident in our ability to deliver incremental annual gross margin expansion as we continue to scale and deliver innovative security and edge computing solutions. Additionally, as we continue to invest in the business in 2020 through global network expansion, we continue to expect annual capital expenditures as a percentage of revenue to be approximately 13% to 14% of revenue - similar to full-year 2018. Longterm, we expect capital expenditures to approach 10% of revenue on a calendar year basis."
The Analyst Estimates, Price Targets and Conjectures
Immediately after the May 6 report, several i-bank analysts raised their estimates with the Zacks EPS consensus rising from a loss of 42c to (22c). And price targets were boosted from the high $20s to the low-to-mid $30s. Here were some typical reactions...
Piper Sandler analyst James Fish raised the firm's price target on Fastly to $31 from $27 and reiterated an Overweight rating on the shares. The earnings call had a lot to like within it, but the biggest "mic-drop" was Fastly winning one of the largest e-commerce vendors, says Fish, who believes it to be Amazon. Additionally, Fastly's exposure to struggling verticals is less than 10% and live sporting events are also relatively immaterial, adds the analyst. Fish continues to see 2020 as the "Year of the CDN", with Fastly as one of the biggest beneficiaries.
Oppenheimer analyst Timothy Horan raised the firm's price target on Fastly to $32 from $27 and kept an Outperform rating on the shares. He noted the company reported a "strong" Q1 and increased revenue guidance by 10% with "strong confidence" in sustainable high-profit growth.
And Craig-Hallum analyst Jeff Van Rhee raised the firm's price target on Fastly to $36 from $29 following a "wow" quarter and guide.
But on June 3, and after the Fastly $250M raise, DA Davidson analyst Rishi Jaluria raised the firm's price target on Fastly to $55 from $33 following his virtual investor meetings with management. The analyst shared that the discussion revolved around an "unusual bump in traffic" through the end of Q2 as well as the company's confidence in being well-positioned amid a digital acceleration.
Jaluria added that he is positive on Fastly's edge computing in terms of its improved speed, scalability, and security. Edge computing is a distributed computing paradigm that brings computation and data storage closer to the location where it is needed, to improve response times and save bandwidth.
Bottom line on FSLY: The platform is on fire because of the pandemic-induced "remote economy" and the flaming success of TikTok. I would buy the dips under $40.
Baidu, the $40 billion web search and marketing portal that used to be considered "the Google of China," especially as they forayed into AI technologies and self-driving cars, rallied over 16% since their strong Q1 earnings report on May 18.
But guidance was cloudy enough to cause analysts to lower estimates and drive the stock into the cellar of the Zacks Rank.
Baidu sees Q2 revenue of $3.5 billion to $3.9 billion, vs. the consensus of $3.62B.
Since the report, the 2020 Zacks EPS Consensus among Wall Street analysts dropped over 14% from $7.59 to $6.50.
Management also elaborated "For the second quarter of 2020, Baidu expects revenues to be between RMB 25.0B ($3.5B) and RMB 27.3B ($3.9B), representing a growth rate of -5% to 4% year over year, which assumes that Baidu Core revenue will grow between -8% to 2% year over year. The COVID-19 situation in China is evolving, and business visibility is very limited. The above forecast reflects Baidu's current and preliminary view, which is subject to substantial uncertainty."
As if this somber outlook were not enough of a headwind for investors, the company revealed a few days later that it was considering delisting from Nasdaq amid U.S.-China tensions. According to Reuters, Baidu is mulling delisting from Nasdaq and moving to an exchange closer to China in an effort to raise its valuation amid escalating tension between the United States and China regarding investments.
Julie Zhu and Zhang Yan of Reuters cited three sources with knowledge of the matter and explained that Baidu has contacted advisers looking at issues associated with funding and regulatory reaction. While the company reportedly believes it is undervalued on Nasdaq, the discussions are at an early stage and are subject to change.
Analyst Reaction to the Quarter
Baidu beat core operating profit estimates in Q1 by over 60% on strong cost controls and provided "encouraging signs" of a near-term revenue recovery, Mizuho analyst James Lee tells investors in a post-earnings research note. Lee remained "constructive" on the company's consistent revenue improvement in April and so far in May and he continues to expect a full recovery by Q4 of 2020. He maintained a Buy rating on BIDU shares with a $175 price target.
Meanwhile, HSBC analyst Binnie Wong raised the firm's price target on Baidu to $132 from $120 and kept a Buy rating on the shares. While FY20 continues to be a transition year to Wong, she is seeing some positive signs for long-term recovery.
And KeyBanc analyst Hans Chung raised the firm's price target on Baidu to $145 from $136 with an Overweight rating. Though ad demand for offline related business has not fully recovered from the COVID-19 pandemic, the recovery is tracking ahead of expectations he said. Chung notes that higher base of user engagement could support monetization upside after demand normalizes. Further, margin expansion, AI ramps, and growth reacceleration in core online marketing could remain key catalysts for the second half of 2020 and 2021.
Another feather in BIDU's cap is the valuation vs other tech giant peers. While this year's topline may only grow 2% to $15.85 billion, that makes the stock trade under 3 times sales.
Bottom line on BIDU: The potential US delisting is a new headwind for the stock as the company remains in a business transition during a potential recession in China. While the longer-term prospects for its footholds in China ecommerce and advanced technologies are strong, it's probably best to wait for the analyst estimates to stop going down and start heading back up. The Zacks Rank will let you know.
Additional content:
3 Blue-Chip Stocks to Buy for Safety on Renewed Coronavirus Worry
All three major U.S. indexes suffered big losses Thursday after reports of upticks in coronavirus cases, as the U.S. economy slowly reemerges from its pandemic lockdown. The Dow fell nearly 7% for its worst day since March last Thursday, while the S&P 500 and the Nasdaq slipped 5.9% and 5.3%, respectively.
Wall Street has for months been looking beyond the coronavirus downturn to the eventual recovery. In fact, last Friday’s better-than-expected May jobs data helped justify investor optimism. But things might have overheated a bit too quickly after the tech-heavy Nasdaq surged to new highs and the S&P 500 broke into positivity territory for the year.
Thursday’s selloff could have been just a good opportunity for investors to take home some profits, with giants like Amazon hitting new highs earlier in the week. And the S&P 500 is still up roughly 35% from the market’s March 23 lows and hovered above 3,000 Friday morning.
That said, the Fed noted that the economic recovery could take years, which added to the recent worries. At the same time, the central bank indicated that interest rates could remain near zero through 2022. This means investors will have to find returns somewhere. Plus, economists said in a new Wall Street Journal survey that the U.S. economy will likely be in recovery by the third quarter.
Uncertainty is clearly poised to remain and the rally was never going to continue uninterrupted. So investors might want to consider taking refuge in blue-chip stocks that pay a dividend and provide strong longer-term potential…
Microsoft
Microsoft has been a must-own stock for the last several years, outpacing all of the so-called FAANG stocks in the past two years and only barely lagging Netflix over a three-year stretch. MSFT is up 20% in 2020 to crush the tech sector’s 4% climb and it currently rests about 5% off its recent highs. The tech giant’s run, which has it approaching a $1.5 trillion market cap, has been driven by cloud computing expansion. MSFT is now a leader within the booming growth industry, with its quarterly Intelligent Cloud revenue up 27% for the second period in a row.
Microsoft’s cloud division pulled in the most of its three units in Q3 FY20, but its Office-heavy Productivity and Business Processes divisions continue to grow as well. The firm’s Office 365 suite remains vital to businesses, governments, schools, and consumers, and its Teams business is tailor-made for the current stay-at-home environment, as it fends off smaller rivals Slack and Zoom. And let’s not forget its consumer electronics and video gaming businesses.
Microsoft is positioned to weather nearly any economic storm, as it held over $137 billion in cash and equivalents at the end of last quarter. It has also bought back a ton of stock and it continues to raise its dividend payout, with its current 1% yield well above the 10-year U.S. Treasury note. Our Zacks estimates call for MSFT’s revenue to jump 12.5% this year and another 10% next year. Meanwhile, its adjusted EPS figures are projected to surge 20% and 9.4%, respectively. Microsoft is currently a Zacks Rank #3 (Hold) that sports “B” grades for both Growth and Momentum in our Style Scores system.
Home Depot
Home Depot has shined during the coronavirus lockdown period as shoppers continue to spend at the home improvement powerhouse deemed an essential business. HD’s first quarter revenue, reported on May 19, jumped 7.1%, with comps up 6.4%. This growth came on top of the year-ago period’s nearly 6% top-line expansion. HD also showcased its growing e-commerce business, with digital platforms sales up by roughly 80%, driven by buy online and pick up in store. HD noted on its earnings call that “sales of both our DIY and Pro customers grew during the quarter with DIY sales growing faster than Pro sales.”
Home Depot’s costs did rise during the quarter as it boosted pay and benefits for workers, which could help it retain the best employees now and in the future. HD’s second quarter revenue is projected to climb 5.8%, with its FY20 sales projected to jump 3.7% to $114.32 billion. The firm’s adjusted quarterly earnings are projected to pop 1.3% in the second quarter. Meanwhile, its full-year EPS figure is expected to sink just 3.80%, with FY21 projected to surge over 11% higher.
Home Depot has experienced mixed earnings revisions recently to help it hold a Zacks Rank #3 (Hold). HD is also part of a highly-ranked Zacks industry and grabs a “B” grade for Growth and an “A” for Momentum. On top of that, HD shares are up 11% in 2020 and nearly 60% in the last three years to crush the S&P 500’s 24% climb. Plus, its 2.48% dividend yield tops rival Lowe’s 1.73% and the S&P 500’s 1.90%. Home Depot appears to be a solid retail stock to own during the coronavirus uncertainty and beyond.
Apple
Apple is another seemingly all too easy of a pick that’s working its way back to something close to normal in China and slowly reopening its stores in the U.S. and elsewhere. The Wall Street Journal and other outlets did report that Apple is pushing back the production ramp up of its next iPhone. And the firm clearly faces the potential for more possible setbacks and reduced demand for its high-priced iPhone.
That said, Apple’s Q2 revenue topped our estimates and popped 0.50%, once again driven by its non-iPhone businesses. This includes its services and wearables division, which surged 17% and 23%, respectively. Meanwhile, AAPL’s adjusted earnings jumped 3.7%. Perhaps more importantly during these uncertain times, Apple closed the quarter with $83 billion in net cash. The tech titan also raised its dividend by 6%, with its yield resting at 0.98%, and it authorized a $50 billion increase to its stock buyback program.
Apple’s fiscal 2020 revenue it projected to climb nearly 1%, with its adjusted earnings set to jump 3.5%. Peeking further ahead, Apple’s FY21 earnings consensus has climbed recently, with its adjusted FY21 EPS figure projected to jump 24% above our FY20 estimate on 14.5% higher sales. AAPL shares are up 15% in 2020 and it recently hit new all-time highs. Apple is currently a Zacks Rank #3 (Hold) and it remains one of the safer plays on Wall Street.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
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/performancefor information about the performance numbers displayed in this press release.
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Fastly, Baidu, Microsoft, Home Depot and Apple highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – June 15, 2020 – Zacks Equity Research Shares of Fastly (FSLY - Free Report) as the Bull of the Day, Baidu (BIDU - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Microsoft (MSFT - Free Report) , Home Depot (HD - Free Report) and Apple (AAPL - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Fastly is a $4.5 billion provider of infrastructure software and services including cloud computing, image optimization, security, edge computer technology and streaming solutions.
The company is classified as a Content Delivery Network (CDN) like Akamai and they both serve the fast growing social media platform TikTok, which helped its privately-controlled owner ByteDance generate $17 billion in revenue last year.
According to a CNBC article by Sam Shead on May 27, TikTok owner ByteDance reportedly made a profit of $3 billion on $17 billion of revenue in 2019, which was a 130% jump over 2018's revenue of $7.4 billion. "The Beijing-headquartered firm released TikTok in 2016 and the app has already been downloaded over 2 billion times," Shead noted.
Serving this monster growth, since its IPO in May 2019, Fastly is on its way to a 43% revenue advance this year with a topline consensus projection of $286 million.
After delivering a beat-and-raise quarter on May 6, FSLY shares have doubled from $23 to $46, exceeding the highest analyst price targets.
The company even pulled off a 6 million share secondary offering at $41.50 in late May and the stock barely peeked below $40!
What has investors so excited?
The Beat
Fastly reported Q1 EPS of (6c) vs consensus of (12c) and Q1 revenue of $63M vs consensus of $59.38M.
Total enterprise customer count grew to 297, up from 288 in Q4 2019. Average enterprise customer spend of approximately $642,000 was up 5.45% sequentially from $607,000 in Q4 2019.
Enterprise customers generated 88% of Fastly's trailing twelve-month total revenue, up from 87% in Q4 2019.
The Raise
Fastly raised their FY20 EPS view to (16c)-(8c) from (43c)-(32c) vs. the consensus of (40c). And they raised their FY20 revenue outlook to $280M-$290M from $255M-$265M, vs. consensus of $259.6M.
Management noted "As we mentioned earlier, we saw continued customer expansion on our platform which was bolstered by increased internet traffic from social distancing measures in Q1. We expect this trend to continue into Q2 and future periods. Despite the current global economic uncertainty, we remain optimistic about the demand for our mission-critical services and the underlying growth of our business. Accordingly, we raised guidance for the full-year 2020. Gross margin will continue to be affected by the timing of personnel and infrastructure investments, along with the seasonal fluctuations of platform usage by our customers. Despite the uncertain economic environment, we remain confident in our ability to deliver incremental annual gross margin expansion as we continue to scale and deliver innovative security and edge computing solutions. Additionally, as we continue to invest in the business in 2020 through global network expansion, we continue to expect annual capital expenditures as a percentage of revenue to be approximately 13% to 14% of revenue - similar to full-year 2018. Longterm, we expect capital expenditures to approach 10% of revenue on a calendar year basis."
The Analyst Estimates, Price Targets and Conjectures
Immediately after the May 6 report, several i-bank analysts raised their estimates with the Zacks EPS consensus rising from a loss of 42c to (22c). And price targets were boosted from the high $20s to the low-to-mid $30s. Here were some typical reactions...
Piper Sandler analyst James Fish raised the firm's price target on Fastly to $31 from $27 and reiterated an Overweight rating on the shares. The earnings call had a lot to like within it, but the biggest "mic-drop" was Fastly winning one of the largest e-commerce vendors, says Fish, who believes it to be Amazon. Additionally, Fastly's exposure to struggling verticals is less than 10% and live sporting events are also relatively immaterial, adds the analyst. Fish continues to see 2020 as the "Year of the CDN", with Fastly as one of the biggest beneficiaries.
Oppenheimer analyst Timothy Horan raised the firm's price target on Fastly to $32 from $27 and kept an Outperform rating on the shares. He noted the company reported a "strong" Q1 and increased revenue guidance by 10% with "strong confidence" in sustainable high-profit growth.
And Craig-Hallum analyst Jeff Van Rhee raised the firm's price target on Fastly to $36 from $29 following a "wow" quarter and guide.
But on June 3, and after the Fastly $250M raise, DA Davidson analyst Rishi Jaluria raised the firm's price target on Fastly to $55 from $33 following his virtual investor meetings with management. The analyst shared that the discussion revolved around an "unusual bump in traffic" through the end of Q2 as well as the company's confidence in being well-positioned amid a digital acceleration.
Jaluria added that he is positive on Fastly's edge computing in terms of its improved speed, scalability, and security. Edge computing is a distributed computing paradigm that brings computation and data storage closer to the location where it is needed, to improve response times and save bandwidth.
Bottom line on FSLY: The platform is on fire because of the pandemic-induced "remote economy" and the flaming success of TikTok. I would buy the dips under $40.
Bear of the Day:
Baidu, the $40 billion web search and marketing portal that used to be considered "the Google of China," especially as they forayed into AI technologies and self-driving cars, rallied over 16% since their strong Q1 earnings report on May 18.
But guidance was cloudy enough to cause analysts to lower estimates and drive the stock into the cellar of the Zacks Rank.
Baidu sees Q2 revenue of $3.5 billion to $3.9 billion, vs. the consensus of $3.62B.
Since the report, the 2020 Zacks EPS Consensus among Wall Street analysts dropped over 14% from $7.59 to $6.50.
Management also elaborated "For the second quarter of 2020, Baidu expects revenues to be between RMB 25.0B ($3.5B) and RMB 27.3B ($3.9B), representing a growth rate of -5% to 4% year over year, which assumes that Baidu Core revenue will grow between -8% to 2% year over year. The COVID-19 situation in China is evolving, and business visibility is very limited. The above forecast reflects Baidu's current and preliminary view, which is subject to substantial uncertainty."
As if this somber outlook were not enough of a headwind for investors, the company revealed a few days later that it was considering delisting from Nasdaq amid U.S.-China tensions. According to Reuters, Baidu is mulling delisting from Nasdaq and moving to an exchange closer to China in an effort to raise its valuation amid escalating tension between the United States and China regarding investments.
Julie Zhu and Zhang Yan of Reuters cited three sources with knowledge of the matter and explained that Baidu has contacted advisers looking at issues associated with funding and regulatory reaction. While the company reportedly believes it is undervalued on Nasdaq, the discussions are at an early stage and are subject to change.
Analyst Reaction to the Quarter
Baidu beat core operating profit estimates in Q1 by over 60% on strong cost controls and provided "encouraging signs" of a near-term revenue recovery, Mizuho analyst James Lee tells investors in a post-earnings research note. Lee remained "constructive" on the company's consistent revenue improvement in April and so far in May and he continues to expect a full recovery by Q4 of 2020. He maintained a Buy rating on BIDU shares with a $175 price target.
Meanwhile, HSBC analyst Binnie Wong raised the firm's price target on Baidu to $132 from $120 and kept a Buy rating on the shares. While FY20 continues to be a transition year to Wong, she is seeing some positive signs for long-term recovery.
And KeyBanc analyst Hans Chung raised the firm's price target on Baidu to $145 from $136 with an Overweight rating. Though ad demand for offline related business has not fully recovered from the COVID-19 pandemic, the recovery is tracking ahead of expectations he said. Chung notes that higher base of user engagement could support monetization upside after demand normalizes. Further, margin expansion, AI ramps, and growth reacceleration in core online marketing could remain key catalysts for the second half of 2020 and 2021.
Another feather in BIDU's cap is the valuation vs other tech giant peers. While this year's topline may only grow 2% to $15.85 billion, that makes the stock trade under 3 times sales.
Bottom line on BIDU: The potential US delisting is a new headwind for the stock as the company remains in a business transition during a potential recession in China. While the longer-term prospects for its footholds in China ecommerce and advanced technologies are strong, it's probably best to wait for the analyst estimates to stop going down and start heading back up. The Zacks Rank will let you know.
Additional content:
3 Blue-Chip Stocks to Buy for Safety on Renewed Coronavirus Worry
All three major U.S. indexes suffered big losses Thursday after reports of upticks in coronavirus cases, as the U.S. economy slowly reemerges from its pandemic lockdown. The Dow fell nearly 7% for its worst day since March last Thursday, while the S&P 500 and the Nasdaq slipped 5.9% and 5.3%, respectively.
Wall Street has for months been looking beyond the coronavirus downturn to the eventual recovery. In fact, last Friday’s better-than-expected May jobs data helped justify investor optimism. But things might have overheated a bit too quickly after the tech-heavy Nasdaq surged to new highs and the S&P 500 broke into positivity territory for the year.
Thursday’s selloff could have been just a good opportunity for investors to take home some profits, with giants like Amazon hitting new highs earlier in the week. And the S&P 500 is still up roughly 35% from the market’s March 23 lows and hovered above 3,000 Friday morning.
That said, the Fed noted that the economic recovery could take years, which added to the recent worries. At the same time, the central bank indicated that interest rates could remain near zero through 2022. This means investors will have to find returns somewhere. Plus, economists said in a new Wall Street Journal survey that the U.S. economy will likely be in recovery by the third quarter.
Uncertainty is clearly poised to remain and the rally was never going to continue uninterrupted. So investors might want to consider taking refuge in blue-chip stocks that pay a dividend and provide strong longer-term potential…
Microsoft
Microsoft has been a must-own stock for the last several years, outpacing all of the so-called FAANG stocks in the past two years and only barely lagging Netflix over a three-year stretch. MSFT is up 20% in 2020 to crush the tech sector’s 4% climb and it currently rests about 5% off its recent highs. The tech giant’s run, which has it approaching a $1.5 trillion market cap, has been driven by cloud computing expansion. MSFT is now a leader within the booming growth industry, with its quarterly Intelligent Cloud revenue up 27% for the second period in a row.
Microsoft’s cloud division pulled in the most of its three units in Q3 FY20, but its Office-heavy Productivity and Business Processes divisions continue to grow as well. The firm’s Office 365 suite remains vital to businesses, governments, schools, and consumers, and its Teams business is tailor-made for the current stay-at-home environment, as it fends off smaller rivals Slack and Zoom. And let’s not forget its consumer electronics and video gaming businesses.
Microsoft is positioned to weather nearly any economic storm, as it held over $137 billion in cash and equivalents at the end of last quarter. It has also bought back a ton of stock and it continues to raise its dividend payout, with its current 1% yield well above the 10-year U.S. Treasury note. Our Zacks estimates call for MSFT’s revenue to jump 12.5% this year and another 10% next year. Meanwhile, its adjusted EPS figures are projected to surge 20% and 9.4%, respectively. Microsoft is currently a Zacks Rank #3 (Hold) that sports “B” grades for both Growth and Momentum in our Style Scores system.
Home Depot
Home Depot has shined during the coronavirus lockdown period as shoppers continue to spend at the home improvement powerhouse deemed an essential business. HD’s first quarter revenue, reported on May 19, jumped 7.1%, with comps up 6.4%. This growth came on top of the year-ago period’s nearly 6% top-line expansion. HD also showcased its growing e-commerce business, with digital platforms sales up by roughly 80%, driven by buy online and pick up in store. HD noted on its earnings call that “sales of both our DIY and Pro customers grew during the quarter with DIY sales growing faster than Pro sales.”
Home Depot’s costs did rise during the quarter as it boosted pay and benefits for workers, which could help it retain the best employees now and in the future. HD’s second quarter revenue is projected to climb 5.8%, with its FY20 sales projected to jump 3.7% to $114.32 billion. The firm’s adjusted quarterly earnings are projected to pop 1.3% in the second quarter. Meanwhile, its full-year EPS figure is expected to sink just 3.80%, with FY21 projected to surge over 11% higher.
Home Depot has experienced mixed earnings revisions recently to help it hold a Zacks Rank #3 (Hold). HD is also part of a highly-ranked Zacks industry and grabs a “B” grade for Growth and an “A” for Momentum. On top of that, HD shares are up 11% in 2020 and nearly 60% in the last three years to crush the S&P 500’s 24% climb. Plus, its 2.48% dividend yield tops rival Lowe’s 1.73% and the S&P 500’s 1.90%. Home Depot appears to be a solid retail stock to own during the coronavirus uncertainty and beyond.
Apple
Apple is another seemingly all too easy of a pick that’s working its way back to something close to normal in China and slowly reopening its stores in the U.S. and elsewhere. The Wall Street Journal and other outlets did report that Apple is pushing back the production ramp up of its next iPhone. And the firm clearly faces the potential for more possible setbacks and reduced demand for its high-priced iPhone.
That said, Apple’s Q2 revenue topped our estimates and popped 0.50%, once again driven by its non-iPhone businesses. This includes its services and wearables division, which surged 17% and 23%, respectively. Meanwhile, AAPL’s adjusted earnings jumped 3.7%. Perhaps more importantly during these uncertain times, Apple closed the quarter with $83 billion in net cash. The tech titan also raised its dividend by 6%, with its yield resting at 0.98%, and it authorized a $50 billion increase to its stock buyback program.
Apple’s fiscal 2020 revenue it projected to climb nearly 1%, with its adjusted earnings set to jump 3.5%. Peeking further ahead, Apple’s FY21 earnings consensus has climbed recently, with its adjusted FY21 EPS figure projected to jump 24% above our FY20 estimate on 14.5% higher sales. AAPL shares are up 15% in 2020 and it recently hit new all-time highs. Apple is currently a Zacks Rank #3 (Hold) and it remains one of the safer plays on Wall Street.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>
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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/performancefor information about the performance numbers displayed in this press release.