Veeva, Party City, Mellanox, Cree and Intel highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – December 18, 2018 – Zacks Equity Research Veeva Systems Inc. VEEV as the Bull of the Day, Party City PRTY asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Mellanox Technologies MLNX , Cree, Inc. CREE and Intel Corporation INTC .
Based in Pleasanton, CA, Veeva Systems Inc. is a provider of industry-specific, cloud-based software solutions for the life sciences industry. It offers enterprise applications, a multichannel platform, customer relationship management, and content management solutions. Additionally, Veeva offers its solutions to pharmaceutical, animal health, and biotechnology companies.
Better-Than-Expected Q3 Earnings
During the third quarter, earnings of 45 cents per share easily beat the Zacks Consensus Estimate of 38 cents and soared 80% year-over-year.
Revenues of $225 million also surpassed our consensus estimate and jumped 27% from the prior year period. And, operating expenses, which include research & development, sales and marketing, and administrative, grew much slower than revenues at 19%. This helped non-GAAP profit margins expand 900 basis points to 31.3%.
Additionally, free cash flow hit $37 million during Q3, up 19% year-over-year.
As a result, Veeva raised its guidance for the upcoming fourth quarter, and now expects revenues at a midpoint of $226.5 million and non-GAAP earnings of 40 cents per share. This represents growth of 22% and 74%, respectively.
CEO Peter Gassner said in the earnings release that “We executed well across all areas of the business, expanding our leadership with Veeva Commercial Cloud and Veeva Vault. Our focus on innovation and customer success coupled with our consistent execution sets us up for a great finish to the year and establishes a strong foundation for next year and beyond.”
Party City is a party goods giant, supplying paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery. Its locations are primarily located in the U.S. and Canada, and the company is based in Elmsford, New York.
Shares of Party City have slumped about 35.5% since January, and lower-than-expected results in its third-quarter earnings report didn’t much help the stock.
Overall, Q3 was challenging for PRTY.
Analysts had been expecting the company to report revenues of $592 million on pro forma earnings of 17 cents per share. Party City instead came out with revenues of just $553 million and pro forma earnings of 8 cents per share; GAAP earnings were just 3 cents.
Sales dipped 1.3% year-over-year, while brand comparable sales decreased 1.0%. Net third-party wholesale revenues fell 9.4% as well.
In the company’s earnings release, management blamed “temporary operational disruptions, increased inflationary pressures associated with distribution costs and helium shortages and slightly lower sales than expected” for the earnings miss.
Party City revised its guidance for the year as a result of its weak performance during Q3.
It now expects fiscal 2018 revenues between $2.43 billion and $2.46 billon, with comps flat to slightly down. GAAP earnings should fall somewhere between$1.22 to $1.27 per share.
Buy Semis on the Dip? 3 Stocks to Consider Now
Semiconductor stocks have been battered by recent market-wide volatility and concerns that the industry’s strong cycle is nearing its end. The business is historically cyclical, so these concerns make sense, but buying opportunities are still present as valuations become more attractive and secular growth trends remain.
We certainly hear a lot about how consumer-facing companies like Tesla, Apple and Microsoft plan to revolutionize their industries by harnessing the Internet of Things and artificial intelligence, but we should also remember that semiconductor manufacturers also have the opportunity to grow as they provide the chips which power these technologies.
The aforementioned emerging tech trends have created new consumer demand, and the semiconductor makers are delivering.
Luckily, the proven Zacks stock picking methods are effective across all industries. Check out these Zacks buy-ranked semiconductor stocks right now:
1. Mellanox Technologies
Mellanox Technologies is a leading supplier of semiconductor-based computer networking products to world-class server, storage, and infrastructure OEMs. The company’s VPI enables standard communication protocols to operate over any converged network with the same software solution. MLNX has a Zacks Rank #2 (Buy) right now.
MLNX is a pick for exposure to new tech trends, especially in the server space, without buying just a chipmaker. This could shield from cyclical volatility. The stock is also an explosive growth pick, with earnings and revenue growth expected to finish at 114% and 25%, respectively, this year. Plus, considering the company’s P/E of 18.7 and PEG of 0.9, the valuation looks pretty decent here.
2. Cree, Inc.
Cree is a manufacturer of LEDs and semiconductors that enhance the value of solid-state lighting, power and communications products. The company’s “SmartCast” platform enables Power over Ethernet technology and is geared toward IoT products and Smart Building platforms. CREE sports a Zacks Rank #1 (Strong Buy) and has booked gains of 17% in what has been a difficult year for specialty chipmakers.
Cree is another pick that investors might like for its growth metrics. For its current fiscal year ending next June, analysts have the company booking earnings growth of 284%. That growth is expected to continue to the tune of another 74% in the next year. Current estimates have revenue growth in these years reaching 11% and 12%, respectively.
This implies Cree might not see the pullback some expect other semiconductors to witness in the near future. One can assume this is because of Cree’s exposure to LEDs, and the fact that smart home and building manufacturing has a lot of potential in the next several years.
3. Intel Corporation
As the world’s largest semiconductor manufacturer, Intel has its hands in nearly every corner of the modern tech world. And as cloud computing and the Internet of Things continue to grow, Intel should continue to benefit. Plus, its broad product portfolio and diverse operations might protect investors in comparison to niche chip makers during trade war uncertainty.
Intel has a Zacks Rank #1 (Strong Buy) and “B” grades for Value and Growth in our Style Scores system. The chip behemoth has fared better than many of its peers this year, and part of that is because it has fought hard to win back market share from key competitors. Investors might also find refuge in its relative stability and 2.5% dividend yield. Moreover, the stock looks attractively priced at just 10.6x earnings.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it’s predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce “the world’s first trillionaires,” but that should still leave plenty of money for regular investors who make the right trades early.
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