Volvo and MicroStrategy have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 15, 2023 – Zacks Equity Research shares Volvo VLVLY as the Bull of the Day and MicroStrategy MSTR as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Meta Platforms META, Salesforce CRM and Analog Devices ADI.
Here is a synopsis of all five stocks:
Bull of the Day:
Among automakers, Volvo stock is standing out at the moment with a Zacks Rank #1 (Strong Buy) and an overall "A" VGM Style Scores grade for the combination of Value, Growth, and Momentum.
As the parent company of Volvo Group, Sweden-based AB Volvo recently hit 52-week highs earlier in the month and looks poised to continue growing its products and services.
The Volvo Group manufactures cars, trucks, buses, construction equipment, and diesel engines along with marine and industrial engines. In addition to this, its offering includes insurance, rental services, spare parts, and preventive maintenance among other services.
Volvo had a record year for revenue in 2022 driven by its progression into the EV space. In fact, Volvo is making the push to be fully electric by 2030 with EVs accounting for 11% of its total sales last year compared to 4% in 2021.
Even better, this strong performance is spilling over into 2023 with Volvo most recently reporting sales of 51,286 cars in February, up 22% year over year. February's growth was attributed to its Recharge hybrid vehicles which made up 40% of global car sales while its fully electric car sales increased an impressive 187% YoY and accounted for 19% of total sales.
Volvo's earnings are expected to be up 6% this year and rise another 1% in FY24 at $1.72 per share. Earnings estimate revisions have remained higher over the last 60 days.
After its record year, Volvo's sales are forecasted to dip -1% in FY23 and be virtually flat in FY24 at $46.24 billion. However, Fiscal 2024 would still be above pre-pandemic levels with 2019 sales at $45.70 billion.
Performance & Valuation
Volvo stock is up +9% year to date to outperform the S&P 500's virtually flat performance and the Auto -Truck-Origional Equipment Markets +1%. Over the last three years, Volvo's +80% has also topped the benchmark and absolutely crushed its Zack Subindustry's -28% performance.
Volvo's strong performance in recent years while other automakers struggled has been very impressive and this could continue based on the company's valuation.
Shares of VLVLY trade at $19 and 11.1X forward earnings which is nicely below its industry average of 13.1X and the S&P 500's 17.7X. Volvo stock also trades 65% below its five-year high of 31.7X and slightly below the median of 11.4X.
The EV growth of Volvo is very intriguing and the strong February numbers are starting to reaffirm that 2023 could be another stellar year for the company. While there are many companies competing in the EV space Volvo is one that investors will not want to overlook as the company has a strong track record of automotive engineering that dates back to 1927.
Bear of the Day:
MicroStrategy currently lands a Zacks Rank #5 (Strong Sell) and there could be more short-term weakness ahead for the business intelligence company despite the Computer – Software Industry being in the top 28% of over 250 Zacks Industries.
Furthermore, some longer-term risks will also need to be monitored as MicroStrategy has struggled with profitability over the last few years and has burned through a considerable amount of cash from reinvesting in its enterprise analytics software and services business.
Amid high inflation and broader economic concerns, investors may want to stay away from companies with weaker balance sheets. Unfortunately, MicroStrategy appears very risky in this regard with only $51 million in cash on hand compared to $567 million in 2019.
While newer or startup tech companies get the benefit of the doubt in terms of cash flow and shoring up the balance sheet, MicroStrategy was founded in 1989 and has been public since 1998 making its cash crunch an indication that its business is ailing.
EPS & Poor Performance
MicroStrategy's earnings are expected to be back in the black this year at $2.10 per share compared to an astonishing adjusted loss of -$124.61 a share in 2022. However, fiscal 2023 earnings estimate revisions have dropped 35% throughout the quarter and FY24 estimates have declined 27%.
Adding fuel to the fire is MicroStrategy's poor performance over the last few years. Despite being up +62% year to date, MicroStrategy stock is still down -70% over the last two years to largely underperform the S&P 500's -4% and the Nasdaq's -15%.
With earnings estimates revisions declining and a limited amount of cash remaining the rally in MicroStrategy stock this year appears overdone. Investors will want to be cautious of MicroStrategy stock which currently trades over $200 per share and question the premium they are paying for the company.
Investors Can't Get Enough of These 3 Tech Stocks
This morning, investors were finally served the main course of the week, February's Consumer Price Index (CPI) data.
As we've all become aware, CPI releases have become pivotal for markets, especially following a historical year-long tightening campaign aimed at cooling an overheated economy.
Core CPI (which doesn't include food and energy prices) Y/Y came in at 5.5%, meeting expectations and reflecting the smallest 12-month increase since December 2021.
Further, the headline CPI came in at 6% Y/Y, again meeting expectations and representing the smallest Y/Y climb since September 2021.
All in all, good news for the Fed, with stocks finding buyers early in the trading session following the release.
However, several large-cap tech stocks have had no issue finding buyers all year long, outperforming the broader market by notable margins. This is illustrated in the chart below.
For those interested in riding momentum, let's take a closer look at each one.
The tech titan META presently sports a Zacks Rank #2 (Buy), with earnings estimates increasing across all timeframes.
The market liked META's latest quarterly report in early February, with the tech giant announcing a sizable $40 billion share buyback program.
The company exceeded the Zacks Consensus EPS Estimate by more than 40% and posted sales 3% ahead of expectations, sending shares flying. The green arrow in the chart below illustrates this.
However, what the market really appreciated was news of cost-cutting measures; the company expects full-year 2023 total expenses in a range of $89 billion – $95 billion, down from prior views of $94 billion – $100 billion.
Salesforce is the leading provider of on-demand Customer Relationship Management software, enabling organizations to better manage critical operations. CRM presently sports the highly-coveted Zacks Rank #1 (Strong Buy).
Like META, Salesforce posted notably strong results in its latest quarterly release, beating bottom line expectations by more than 25% and reporting revenue 5% above expectations. Below is a chart illustrating the company's revenue on a quarterly basis.
Investors cheered on the results, with CRM shares finding plenty of buyers post-earnings.
Analog Devices is an original equipment manufacturer of semiconductor devices, specifically analog, mixed-signal, and digital signal-processing integrated circuits. Analysts have taken a bullish stance on the company's earnings outlook.
ADI shares trade at a nice discount relative to historic levels, with the current 17.2X forward earnings multiple sitting well beneath the 21.1X five-year median and highs of 23.5X in 2022.
In addition, ADI shares provide exposure to technology paired with an income stream; ADI's annual dividend presently yields 1.9%, nicely above the Zacks Computer and Technology sector average.
While buyers step up following the release of CPI data, all three stocks above – Meta Platforms, Salesforce and Analog Devices – have found many buyers all year long, widely outperforming the general market.
For those interested in targeting stocks displaying relative strength paired with rising earnings estimate revisions, all three deserve consideration.
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Analog Devices, Inc. (ADI) : Free Stock Analysis Report
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AB Volvo (VLVLY) : Free Stock Analysis Report
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