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Zumiez, Yext, Adobe and Salesforce highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – December 11, 2019 – Zacks Equity Research Zumiez ZUMZ as the Bull of the Day, Yext YEXT as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Adobe ADBE and Salesforce CRM.

Here is a synopsis of all four stocks:

Bull of the Day:

With the market just under all-time highs, it may feel like any stock you pick is a good idea. While that may be the case in the short run, over the long run, stocks with strong earnings will outperform. Stock prices tend to move with earnings so this makes perfect sense. But how can you uncover stocks with strong earnings trends? One of the easiest ways is to use the Zacks Rank. Stocks with strong earnings trends tend to have very good Zacks Ranks. Today’s Bull of the Day is one of these highly rated stocks.

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Today’s Bull of the Day is Zacks Rank #1 (Strong Buy) Zumiez. Zumiez Inc., together with its subsidiaries, operates as a specialty retailer of apparel, footwear, accessories, and hardgoods for young men and women. Its hardgoods include skateboards, snowboards, bindings, components, and other equipment. As of August 31, 2019, the company operated 711 stores, including 607 stores in the United States, 51 stores in Canada, 43 stores in Europe, and 10 stores in Australia under the names of Zumiez, Blue Tomato, and Fast Times. It also operates zumiez.com, blue-tomato.com, and fasttimes.com.au e-commerce Websites.

Zumiez is a Zacks Rank #1 (Strong Buy) in the Retail – Apparel and Shoes industry which ranks in the Top 15% of our Zacks Industry Rank. The reason for the favorable rank lies in the series of earnings revisions coming in to the upside recently. Over the last seven days, six analysts have increased their earnings estimates for the current year while five have upped their estimates for next year. The bullish sentiment has pushed up the Zacks Consensus Estimate for the current year from $2.15 to $2.44 while next year’s number has gone up from $2.24 to $2.49.

The positive revisions have been helping the stock rally. After bottoming out under $19 in early June, the stock has rallied dramatically. Shares popped up over $35 following its most recent earnings report. For the last two days, the stock has been giving up ground, coming down to look for support.

Bear of the Day:

Sometimes, all it takes is one earnings report to take a stock from being a potential high-flyer to a tough situation. That’s the case here with today’s Bear of the Day which was just in one of our portfolios at Zacks. After the report, analysts have been slashing earnings estimates. Stocks which have seen negative earnings estimate revisions tend to have worse Zacks Ranks than others. An easy way to uncover stronger earnings trends is by looking for stocks that are Zacks Rank #1 (Strong Buy) stocks. Those with weaker ranks like today’s Bear of the Day have much weaker earnings trends.

Today’s Bear of the Day is Zacks Rank #5 (Strong Sell) Yext. Yext, Inc. provides a knowledge engine platform that lets businesses manage their digital knowledge in the cloud and synchronize it to its knowledge network in North America and internationally. The company offers Yext Knowledge Engine, a cloud-based global platform that enables businesses to control and manage their digital knowledge and make it available through its knowledge Network of approximately 150 third-party maps, apps, search engines, intelligent GPS systems, digital assistants, vertical directories, and social networks.

Over the last week, earnings estimates for the current year and next year have come down. The negative revisions have dropped our Zacks Consensus Estimates for the current year from a 43-cent loss to a 46-cent loss. Next year’s number has come down from a 38-cent loss to a 40-cent loss. That’s not the sort of EPS movement that investors reward.

Will Q4 Earnings Send Adobe (ADBE) to New Highs?

Adobe will report its fourth quarter fiscal 2019 financial performance after the closing bell on Thursday, December 12. The tech giant has seen its shares climb over 36% in 2019 and has outperformed the broader software market’s 24.3% run.

ADBE stock currently trades about 1.6% below its 52-week high of $313.11 per share and a robust quarterly report can potentially help ADBE stock break out to new highs.

The company has found its software as a service model to be popular with businesses especially as more enterprises move over to cloud computing. Let’s take a closer look at what has pushed ADBE stock to where it is today and how the company might report its third quarter performance.

Adobe Acquisitions

In recent years, the company has been expanding into new areas and creating an enterprise marketing software suite, mostly through acquisitions. Since the start of 2017, Adobe has spent nearly $7 billion on just three cornerstone acquisitions in this enterprise software push.

In 2017, Adobe acquired the video advertising platform, TubeMogul, for $560 million. TubeMogul allows brands and marketers to buy advertisements across desktop, mobile, streaming, and linear TV. The TubeMogul acquisition strengthened Adobe’s marketing cloud and brought in new customers who were using TubeMogul but weren't as familiar with Adobe's other capabilities.

In 2018, Adobe purchased Magento, which is an e-commerce hosting platform, for $1.64 billion. Magento helps businesses sell goods and services to consumers and other businesses through order management, payment solutions, and analytics.

Adobe went on to purchase Marketo, which provides business-to-business marketing software. Marketo’s services enable marketers to capture, store, and leverage client data for email marketing, digital advertising, personalized advertising, and customer analytics.

These three acquisitions effectively extend Adobe’s reach into more markets and also further diversified its services portfolio. The purchases also gave Adobe the option to cross sell its new products to existing customers and bundle its services to enhance the value of its marketing software.

Outlook

Adobe has identified a large opportunity in the marketing space that can be addressed with a bundle of products sold as a single subscription. Adobe CEO, Shantanu Narayen recently spoke on the firm’s confidence in this opportunity on an earnings call where he said “we do think there will be unique capabilities that we'll provide all the way from the moment you see your first ad through where you're transacting and purchasing a product."

Adobe is trying to become a one-stop shop for marketing software, which can help the company establish itself in the market. Enterprise customers will likely favor doing business with Adobe rather than dealing with many outsourced vendors. Adobe’s ability to bundle these services helps the company offer the services at lower prices.

Adobe’s string of acquisitions pits it against Salesforce. Many companies around the world already store their customer data in Salesforce's software, which makes Salesforce a prominent competitor in marketing software.

Despite Salesforce’s lead in CRM, Adobe produced $2.4 billion in marketing revenue in fiscal 2018 revenue, which outpaced Salesforce's $1.9 billion of marketing revenue.

Adobe stock has also outperformed Salesforce over the past five years.

Our Q4 consensus estimates forecast earnings to climb 23.5% to $2.26 per share and for revenue to increase 20.5% to $2.97 billion. Marketing cloud revenue is estimated to grow 23.8% to $854.1 million and digital imaging and video revenue is projected to rally 20.1% to $2.05 billion.

Fiscal 2019 sales are predicted to climb 23.5% to $11.15 billion and earnings are anticipated to come in at $7.84 per share, for a 16% increase.

Takeaway

Adobe looks poised to continue on its solid growth trajectory thanks in part to its ability to establish itself in the growing marketing software industry. The company will need to keep its focus on its marketing software efforts, especially as companies like Salesforce make their own moves to cash in on the lucrative space.

Investors should note that the company’s success has driven its valuation to a pricey forward multiple. ADBE stock currently trades at about 31X its forward earnings, but its forward multiple is right on par with the software market’s average. Adobe sits at a Zacks Rank #3 (Hold).

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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/performance for information about the performance numbers displayed in this press release.


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Adobe Systems Incorporated (ADBE) : Free Stock Analysis Report
 
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