Best Oversold Stocks to Buy for January 2022

At my research firm, MAPsignals, we track the Big Money looking for trends. We believe Big Money analysis can alert you to market and sector trends. Here’s what daily buys and sells looks like over the last six months. It’s been choppy:

Chart, histogram

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That’s what a rotational market looks like. See the red bars? Those are stocks we believe are getting sold. When red bars run rampant, good names can get crushed. They can become what I call “oversold.”

And that can mean opportunity. Let’s look at five stocks seeing lots of red that appear to be near-term oversold: ROKU, BABA, RH, ZM & ETSY.

Up first is Roku, Inc. (ROKU), the television streaming platform.

Even though great companies’ stocks can be volatile, like ROKU over the past year, they’re worthy of attention, especially on pullbacks. Check out ROKU:

  • 1-month performance (-24.2%)
  • Recent Big Money sell signals

To show you what our Big Money signals looks like on a stock, have a look at all the buys (green bars) and sells (red bars) in ROKU over the past year:

Chart, histogram

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Clearly, that’s a lot of red since September.

Looking more broadly, Roku has been a high-quality stock for years. The blue bars in the chart below show when ROKU was likely being bought by a Big Money player and also a high-ranking stock, according to MAPsignals.

When you see a lot of blue, like ROKU did in 2019 (when it hovered around half of its current price), it can be very bullish:

Source: www.MAPsignals.com

Those blue signals indicate Big Buying and strong fundamentals. As you can see, Roku’s recent numbers have been strong, making it worth of attention at these levels:

  • 1-year EBITDA growth rate (+18.9%)
  • 1-year sales growth rate (+57.5%)

Next up is Alibaba Group Holding Ltd. (BABA), which is a Chinese technology giant – it’s like China’s Amazon.

Check out these technicals for BABA:

  • 1-month performance (7.5%)
  • Recent Big Money signals

It’s been getting hammered for more than a year:

Chart, histogram

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But now let’s look long-term. These are the top buy signals Alibaba has made since 2016. The Big Money has been all over it for a while:

Source: www.MAPsignals.com

Let’s look under the hood. As you can see, Alibaba has had rock-solid, double-digit growth in earnings and revenue:

  • 1-year EBITDA growth rate = (+17.4%)
  • 1-year sales growth rate = (+44.6%)

Another growth name is Restoration Hardware (RH), which is a luxury home furnishings retailer.

Strong candidates for growth usually have Big Money buying the shares. RH has historically had that. But recently, it’s full of red which could be an opportunity:

  • 1 month performance (-19.6%)
  • Historical Big Money signals

Chart, histogram

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Below are the blue Big Money signals RH has made since 2015. That’s the JUICE!

Source: www.MAPsignals.com

Now let’s dig deeper. RH’s growth in earnings is impressive, as is its sales growth. I expect more of the same in the coming years:

  • 1-year EBITDA growth rate = (+10.7%)
  • 1-year sales growth rate = (+7.6%)

Number four on the list is Zoom Video Communications, Inc. (ZM), which is a video conferencing platform and popular “stay-at-home” stock.

Here are the technicals important to me:

  • 1 month performance (-12.2%)
  • Historical Big Money signals

Recently, it’s been a choppy downward slide, with more Big Money selling than buying:

Chart, histogram

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But not long ago, Zoom was a Big Money darling. Below are the Big Money buy signals for ZM since it’s 2019 trading debut:

Source: www.MAPsignals.com

Let’s look under the hood. Despite its price slide, Zoom has been growing earnings nicely and generated huge sales growth:

  • 1-year EBITDA growth rate = (+6.4%)
  • 1-year sales growth rate = (+325.8%)

Our last growth candidate is Etsy, Inc. (ETSY), which is an online marketplace and commerce platform. A strong final quarter in 2021 of Big Money buying has given way to steep declines:

Chart, histogram

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Check out these technicals:

  • 1-month performance (-24.1%)
  • Historical Big Money signals

Etsy is a high-quality stock since it’s made my Top 20 report. As you can see below, it’s been a Big Money favorite since 2016. Right now, it’s on a pullback and could be an opportunity.

Source: www.MAPsignals.com

Now let’s look below the surface a bit. Earnings have been growing quite well, and there’s been enormous sales growth:

  • 1-year EBITDA growth rate = (+16.2%)
  • 1-year sales growth rate = (+110.9%)

The Bottom Line

ROKU, BABA, RH, ZM & ETSY represent the top oversold stocks for January 2022. They’ve been sold a lot lately…perhaps too much. Strong, fundamentally-sound stocks seeing near-term sell signals are worthy of extra attention because of their long-term potential.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions in ROKU, BABA, ZM & ETSY in managed accounts.

Investment Research Disclaimer

https://mapsignals.com/contact/

 

Why DocuSign Stock Is Down By 40% Today

DocuSign Stock Plunges As Company’s Growth Slows Down

Shares of DocuSign found themselves under huge pressure after the company released its quarterly report. DocuSign reported revenue of $545 million and adjusted earnings of $0.58 per share, beating analyst estimates on both earnings and revenue.

However, its fourth-quarter revenue forecast disappointed. The company expects to report revenue of $557 million – $563 million, which means that growth is slowing down.

The company’s CEO Dan Springer stated: “After six quarters of accelerated growth, we saw customers return to more normalized buying patterns, resulting in 28% year-over-year billings growth”.

These are not the words that investors would like to hear from a high-growth company. Not surprisingly, analysts rushed to cut their price targets for DocuSign stock, putting additional pressure on the company’s shares.

What’s Next For DocuSign Stock?

Currently, analysts expect that DocuSign will report earnings of $1.7 per share this year and $2.19 per share in the next year, so the stock is trading at 64 forward P/E despite the massive sell-off.

The company’s rich valuation is the main reason for the current weakness of its stock. At such valuation levels, traders expect fast growth. When growth begins to slow down, the stock is punished. Similar pandemic-era examples include Zoom, which is down by about 70% from highs that were reached back in October 2020, and Peloton, which is down by more than 70% year-to-date.

Investors and traders have already seen what happens to high-flying stocks when companies’ growth slows down, so they rush to exits at first signs of weaker growth. In DocuSign’s case, potential for multiple compression remains significant even after the strong sell-off.

In this light, it remains to be seen whether speculative traders will rush to buy DocuSign shares. Examples like Zoom and Peloton show that it is difficult to find a bottom in such situations, so traders may stay away from DocuSign stock in the upcoming trading sessions.

For a look at all of today’s economic events, check out our economic calendar.

Best Stocks, Crypto, and ETFs to Watch – Visa, Shiba Inu and SPDR S&P Retail ETF (XRT) in Focus

Fears of a March 2020 reprise will impact market sentiment and price action in the new trading week, as evidenced by big moves in COVID beneficiaries and casualties during Friday’s holiday-shortened U.S. session. A contrary strategy makes more sense at this point than chasing the fearful crowd, looking for fresh sell signals on pandemic cast-offs that include Peloton Inc. (PTON) and Zoom Video Communications Inc. (ZM) while waiting for tradable lows in travel and digital transaction plays, like United Airlines Holdings Inc. (UAL) and Visa Inc. (V).

Dow component Salesforce Inc. (CRM) is the third strongest performer in the venerable index, gaining nearly 28% year-to-date. The stock broke out earlier this month above the rally peak posted after the company joined the index in August 2020 and pulled back to test new support during Friday’s rout. Tuesday’s post-market earning report should decide whether or not the breakout is sustainable, with the company expected to post a profit of $0.92 per-share on $6.80 billion in revenue.

Crypto assets are under pressure along with growth stocks after the Omicron news, illustrated by Bitcoin 10%+ decline to a 7-week low on Friday. However, lowly Shiba Inu held above Wednesday’s low during that session and has continued to trade above short-term support near $0.00003800 over the weekend. This bullish divergence could come into play because that price level also marks support at the .618 Fibonacci retracement of the powerful uptrend between October 2020 and October 2021.

Brick and mortar retailers got sold aggressively ahead of Black Friday, with popular chains that include Nordstrom Inc. (JWN) and Gap Inc. (GPS) reporting weak margins and issuing cautious outlooks. Taken together with the COVID threat, SPDR S&P Retail ETF (XRT) could offer a low risk short sale opportunity with 10% to 20% short-term downside. Better yet, the fund just failed a breakout above the January peak near 100, potentially signaling a long-term top and significant change in trend.

The Natural Gas futures contract rose 8.48% on Friday while the Crude Oil contract fell more than 13%. This bullish divergence highlights growing shortages across Europe and Asia and the potential for the long-suffering commodity to break out above the 7-year high posted in October. Cheniere Energy Inc. (LNG) looks like an excellent way to play this long-term opportunity, with the stock trading at an all-time high after breaking out above 2014 resistance in the mid-80s in September.

For a look at this week’s economic events, check out our earnings calendar.

Disclosure: the author held Visa in a family account at the time of publication. 

Zoom Shares Rally on the Emergence of New Covid Variant

The Coronavirus has affected the global economy for nearly two years now. Despite vaccines now available, the emergence of new variants is threatening life going back to normal, and this is affecting the global economy.

The financial markets have been affected by the emergence of the new variants, but some stocks have been rallying on the back of the latest development.

A Mutated Covid Variant Appears in South Africa

Health authorities have revealed that there is a new mutated variant of the Coronavirus. The mutated Covid-19 appeared in South Africa, and the World Health Organization is set to discuss it soon.

The emergence of the new variant has led the global financial markets to be negatively affected. The stock, crypto and commodities markets have been trading in the red zone over the past few hours.

Despite that, some stocks have been rallying following the news of the mutated Covid variant. The shares of Zoom, the video communications company, is up by more than 5% since the US market opened a few hours ago. Zoom was one of the biggest beneficiaries during the lockdown as companies moved their operations abroad and they used its services to carry out video meetings.

Zoom Could Rally Higher if Lockdowns are Reinstated in Several Countries

The emergence of the Covid variants has forced some countries to reintroduce lockdowns. Zoom and similar stocks could perform excellently over the coming weeks if more countries across the world put in place lockdown measures again.

ZM Stock chart. Source: FXEMPIRE

Zoom’s RSI of 34 is an improvement of the oversold region it was a few days ago, and it could rally towards 50 over the coming days. The MACD line is still below the neutral zone, thanks to Zoom’s poor performance in recent weeks.

However, the stock price could rally higher over the coming weeks and months if the current global condition persists. Year-to-date, Zoom’s stock price has dipped by more than 33%. However, the company could recover its losses if more countries reintroduce lockdowns and companies are forced to work from home again.

Why Zoom Stock Is Down By 17% Today

Zoom Stock Falls On Growth Concerns

Shares of Zoom found themselves under strong pressure after the company released its third-quarter results.

Zoom reported revenue of $1.05 billion and adjusted earnings of $1.11 per share, beating analyst estimates on both earnings and revenue.

The company has also provided guidance for Q4 fiscal year 2022 and full fiscal year 2022. In Q4, Zoom expects to report revenue of $1.051 billion – $1.053 billion and adjusted earnings of $1.06 – $1.07 per share. In the full fiscal year 2022, total revenue is expected at $4.079 billion – $4.081 billion, while adjusted earnings are expected at $4.84 – $4.85 per share.

Analysts have rushed to decrease their price targets for Zoom stock due to growth concerns, and analyst downgrades have clearly served as additional bearish catalysts for the company’s shares.

What’s Next For Zoom Stock?

Shares of Zoom are down by roughly 65% from highs that were reached back in October 2020, but it remains to be seen whether traders will rush to buy the stock after another pullback.

Analysts expect that Zoom will report earnings of $4.77 per share in the next fiscal year, so the stock is trading at roughly 43 forward P/E. This means that Zoom stock remains expensive even after the massive pullback from historic highs.

Current analyst consensus implies no growth on the earnings side, which is bearish for a growth stock which is trading at a rich valuation. While the company tries to position itself for a hybrid work model in the post-pandemic work, it is not clear whether the market will be patient in case the company does not show material growth in the upcoming quarters.

At this point, it looks that the risks of additional multiple compression remain elevated. In the near term, the stock may find some buyers as its RSI is close to the extremely overbought territory. In the longer-term, the company needs to come up with positive catalysts or its stock will remain under pressure.

For a look at all of today’s economic events, check out our economic calendar.

Zoom Could Bottom Out This Week

Zoom Interactive Communications Inc. (ZM) reports Q3 2021 results after Monday’s closing bell, with analysts forecasting a profit of $1.10 per-share on $1.02 billion in revenue. If met, earnings-per-share (EPS) will mark an 11% improvement compared to the same quarter in 2020 when infections ticked higher ahead of the winter wave. The stock crashed 16.7% in August after beating Q3 expectations and has dropped another 13% into mid-November.

Shedding Points at a Rapid Pace

The remote meeting provider has been shedding points since topping out in October 2020 but still posted a phenomenal 495% return last year, suggesting the steep decline marks a natural proportional retracement, following the old market wisdom that ‘big winners in one year become the next year’s big losers’.  It’s now relinquished more than 60% of the gains posted since 2019, suggesting reward-to-risk for new entries is moving rapidly in the buyer’s favor.

JP Morgan analyst Sterling Auty offered an upbeat view on Zoom’s outlook recently, noting “We believe growth will bottom in the fourth quarter but think the market has priced that into the current stock price such that the risk/reward looks more attractive. The entire UCaaS space has been rerated lower on these concerns and worries about Microsoft’s ability to capture share through Teams. We expect Zoom to be the other big winner in the enterprise UCaaS (video, phone, etc.) market and RingCentral in the mid-market”.

Wall Street and Technical Outlook

Wall Street consensus now stands at an ‘Overweight’ rating based upon 14 ‘Buy’, 1 ‘Overweight’, 13 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $145 to a Street-high $571 while the stock is set to open Monday’s session nearly $100 below the median $350 target. This humble placement should offer a perfect opportunity for solid quarterly results to force short covering and a rapid advance to the $300 level.

Zoom hit an all-time low at 60.97 in October 2019 and exploded higher when the pandemic struck in the first quarter of 2020. It gained 965% off the low, topping out at 588.84 in October, just two weeks before Pfizer Inc. (PFE) introduced the first COVID vaccine. Price action has carved a series of lower highs and lower lows since that time, settling below the .618 Fibonacci retracement of the historic uptrend. Long-term relative strength has now crashed to the most oversold reading since the stock came public in 2019, suggesting it’s nearing a long-term bottom.

For a look at today’s economic events, check out our earnings calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Best Stocks, Crypto, and ETFs to Watch – Deere and Co., Zoom and Bitcoin in Focus

Stocks

Deere and Co. (DE) heads a light holiday week calendar, with Wednesday’s pre-market report expected to show a profit of $3.87 per-share on $10.57 billion in revenue. The farm and construction machinery giant soared between March 2020’s pandemic low and May 2021’s all-time high at 400, underpinned by rapidly escalating agricultural prices and the transition into AI farming equipment, which will feature driverless combines, pickers, strippers, scrapers, seeders, and harvesters.

Zoom Interactive Communications Inc. (ZM) was the hottest stock in 2020’s momentum market, exploding to higher ground as workers were forced to lock down and conduct business remotely. Heightened competition and the end of those restrictions haven’t been kind to the company, which has dropped 57% since October 2020. Even so, it’s posted an impressive 369% return since the start of 2020. The company reports earnings after Monday’s closing bell.

Black Friday marks the start of the 2021 holiday season in the United States, with retailers offering deep discounts to attract floor traffic and eyeballs. Best Buy Co. (BBY) earnings on Tuesday will offer preview of sales expectations, which have been complicated by widespread supply disruptions. However, we learned during third quarter earnings that good companies are powering through these headwinds while bad companies are using them as excuses for poor performance.

Crypto

Bitcoin took a beating last week, dropping nearly 12% to a 5-week low. More importantly, the decline triggered a failed breakout above April’s high at 65,895, stoking fears the crypto king is forming a bearish double top pattern. However, many double tops yield more bullish patterns so let’s pull up a chair and see if the instrument finds support above the September swing  high  at 53,000, potentially heralding the last leg of a cup and handle breakout.

ETFs

iShares Russell-2000 Index Fund ETF (IWM) broke out above 7-month symmetrical triangle resistance at the start of November, lifting to an all-time high at 244.46 just 8-days later. It’s been pulling back since that time and is now approaching breakout support between 230 and 232. In turn, this predicts the decline will offer a low risk buying opportunity, ahead of higher prices into 2022.  The timing couldn’t be better, with positive small cap seasonality in force until the end of March.

For a look at today’s economic events, check out our earnings calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Earnings to Watch in Holiday-Shortened Week: Zoom, Medtronic, Best Buy, Dollar Tree and Deere in Focus

Earnings Calendar For The Week Of November 22

Monday (November 22)

IN THE SPOTLIGHT: ZOOM

The San Jose, California-based communications technology company Zoom is expected to report its fiscal third-quarter earnings of $1.09 per share, which represents year-over-year growth of over 10% from $0.99 per share seen in the same period a year ago.

The company, which provides video telephony and online chat services through a cloud-based peer-to-peer software platform, would post revenue growth of over 30% to $1.02 billion. Zoom will report 3Q FY22 earnings after market close on Monday, November 22.

“Investors lean cautious heading into FQ3 print given ongoing concerns around SMB churn, particularly as other WFH names have underperformed. View FQ4 print as having more favourable risk/reward, but given cautious positioning, could see outperformance if SMB churn is better than expected,” noted Meta Marshall, equity analyst at Morgan Stanley.

Zoom has established its position as the leader in video conferencing, now a growth market. The company has a meaningful competitive moat built on more than just architecture. Position within customers makes an attractive opportunity to expand into the broader UC market. Early wins are encouraging. Opportunities to expand the platform remain. Manageable churn post-COVID as a move to hybrid work setups.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 22

Ticker Company EPS Forecast
JKS JinkoSolar Holding Co. Ltd. ADR -$0.07
GRFS Grifolsbarcelona $0.29
JOBS 51job $4.45
GGAL Grupo Financiero Galicia $0.68
ZM Zoom Video Communications $1.09
A Agilent $1.18
KEYS Keysight Technologies $1.64
URBN Urban Outfitters $0.83
BMA Banco Macro $1.22
TLK Telekomunikasi Indns Tbk Prshn Pp Pt $0.46

Tuesday (November 23)

IN THE SPOTLIGHT: MEDTRONIC, BEST BUY, DOLLAR TREE

MEDTRONIC: The medical device company is expected to report its fiscal second-quarter earnings of $1.29 per share, which represents year-over-year growth of over 26% from $1.02 per share seen in the same period a year ago.

The company has beaten earnings per share (EPS) estimates all times in the last four quarters with a surprise of over 13%. The Fridley, Minnesota-based medical company would post revenue growth of nearly 4% to $7.9 billion.

Medtronic (MDT) commentary and guide should act as a barometer for MedTech recovery through the balance of ’21 and into ’22. More muted recovery through October could incrementally pressure 2FQ, with the path to 9% y/y FY22 growth looking increasingly challenging in the face of recent sector headwinds,” noted Cecilia Furlong, equity analyst at Morgan Stanley.

BEST BUY: The Richfield, Minnesota consumer electronics retailer is expected to report its fiscal third-quarter earnings of $1.93 per share, which represents a year-over-year decline of over 6% from $2.06 per share seen in the same period a year ago.

The consumer electronics retailer’s revenue would decline 2.5% to $11.56 billion down from $11.85 billion a year earlier. It is worth noting that in the last two years the company has delivered an earnings share price (EPS) at all times.

“Market looking for a 4-5% comp in Q3 vs cons at -1.5%. We see upside to 2H’21 numbers and expect a raised full-year guide as demand remains strong. That said, momentum is slowing and the category could shrink in ’22/’23. The stock is +15% in the last month, and a Q3 beat and raise seems priced in,” noted Simeon Gutman, equity analyst at Morgan Stanley.

DOLLAR TREE: The Chesapeake, Virginia-based company is expected to report earnings of $0.96 per share in the third quarter, down over 30% from $1.39 per share seen in the same period a year ago. But the discount variety stores that sells items for $1 or less would post revenue growth of nearly 4% to $6.4 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 23

Ticker Company EPS Forecast
CPG Compass Group £17.93
BYG Big Yellow £19.26
MDT Medtronic $1.29
BBY Best Buy $1.93
DLTR Dollar Tree $0.96
J Jacobs Engineering Group Inc $1.57
BURL Burlington Stores $1.24
SJM J.M. Smucker $2.04
DKS Dick’s Sporting Goods $2.03
PLAN Progressive Planet -$0.11
AEO American Eagle Outfitters $0.60
ANF Abercrombie & Fitch $0.65
DY Dycom Industries $0.75
JWN Nordstrom $0.56
NOAH Noah $2.95
VMW VMware $1.54
HPQ HP $0.88
GME GameStop -$0.51
CPB Campbell Soup $0.81
GPS Gap $0.50
SVT Severn Trent £49.79

Wednesday (November 24)

IN THE SPOTLIGHT: DEERE

Deere & Company, the world’s largest maker of farm equipment, is expected to report its fiscal fourth-quarter earnings of $3.92 per share, which represents year-over-year growth of over 64% from $2.39 per share seen in the same period a year ago.

The agricultural, construction and forestry equipment manufacturer would post revenue growth of more than 20% to $10.5 billion. It is worth noting that in the last two years the company has delivered an earnings share price (EPS) at all times.

“Despite positive secular demand fundamentals within both the Ag and Construction businesses we are lowering near-term estimates for Deere (DE) (F4Q21/F1Q22) to better reflect the impact from lost production in the US stemming from supplier bottlenecks and the labour strike,” noted Stephen Volkmann, equity analyst at Jefferies.

“We assume any lost production elongates the cycle, and we maintain our above Consensus estimates for 2023 noting additional upside from the infrastructure bill has yet to be factored into outlooks.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 24

Ticker Company EPS Forecast
UU United Utilities £25.21
JMAT Johnson Matthey £44.57
BVIC Britvic £31.37
DE Deere & Company $3.92
TCOM Trip.com Group Ltd $0.11
KC Kutcho Copper -$1.53

Thursday (November 25)

No major earnings are scheduled for release. The U.S. stock market will be closed for the Thanksgiving holiday.

Friday (November 26)

No major earnings are scheduled for release. The U.S. stock market will be closed for the Thanksgiving holiday.

Preview: What to Expect From Zoom’s Earnings on Monday

The San Jose, California-based communications technology company Zoom is expected to report its fiscal third-quarter earnings of $1.09 per share, which represents year-over-year growth of over 10% from $0.99 per share seen in the same period a year ago.

The company, which provides video telephony and online chat services through a cloud-based peer-to-peer software platform, would post revenue growth of over 30% to $1.02 billion. Zoom will report 3Q FY22 earnings after market close on Monday, November 22.

According to ZACKS Research, Zoom expects revenues between $1.015 billion and $1.020 billion for the third quarter of fiscal 2022. The non-GAAP income from operations is expected to be between $340 million and $345 million.

Additionally, non-GAAP earnings are expected to be in the range of $1.07-$1.08 per share. Zoom expects its fiscal 2022 revenues to range between $4.005 billion and $4.015 billion. The company expects non-GAAP income from operations to range between $1.5 billion and $1.51 billion. In addition, non-GAAP earnings are expected to range between $4.75 and $4.79 per share, noted analysts at ZACKS.

“Reasons To Buy: Zoom Video is benefiting coronavirus-induced remote working trend. Its efforts to eradicate security and privacy flaws are expected to aid it to expand its userbase,” noted analysts at ZACKS Research.

“Reasons To Sell: Stiff competition with the entry of Facebook and Verizon in the video communication space and massive repercussion from customers due to security and privacy lapses are concerns.”

Zoom Stock Price Forecast

Twenty-one analysts who offered stock ratings for Zoom in the last three months forecast the average price in 12 months of $343.69 with a high forecast of $460.00 and a low forecast of $255.00.

The average price target represents a 34.39% change from the last price of $255.75. From those 21 analysts, 12 rated “Buy”, nine rated “Hold” while none rated “Sell”, according to Tipranks.

Technical analysis suggests it is good to sell as 100-day Moving Average, and 100-200-day MACD Oscillator signals a strong selling opportunity.

Morgan Stanley gave the base target price of $365 with a high of $500 under a bull scenario and $180 under the worst-case scenario. The firm gave an “Overweight” rating on the communications software company’s stock.

Several other analysts have also updated their stock outlook. Stifel cut the price target to $300 from $350. Baird lowered the target price to $335 from $380. Citigroup slashed the price target to $304 from $380.

Analyst Comments

“Investors lean cautious heading into FQ3 print given ongoing concerns around SMB churn, particularly as other WFH names have underperformed. View FQ4 print as having more favourable risk/reward, but given cautious positioning, could see outperformance if SMB churn is better than expected,” noted Meta Marshall, equity analyst at Morgan Stanley.

Zoom has established its position as the leader in video conferencing, now a growth market. The company has a meaningful competitive moat built on more than just architecture. Position within customers makes an attractive opportunity to expand into the broader UC market. Early wins are encouraging. Opportunities to expand the platform remain. Manageable churn post-COVID as a move to hybrid work setups.”

Check out FX Empire’s earnings calendar

Best Stocks To Buy Now November 2021

And this month we look at my best stocks to buy now for November 2021. Keep in mind, I like to use a lot of data in my process, and this isn’t personalized advice.

For MAPsignals, we focus on Big Money buying the best stocks. We find that oftentimes how a stock trades can alert you to the forward fundamental picture more than just looking at a company’s financials. I like the odds in my favor when looking for the highest quality stocks.

Up first is Garmin Ltd. (GRMN), which makes navigation and communication equipment for customers around the world.

Great companies on pullbacks are worthy of attention. Check out GRMN:

  • 1 month performance (-7.1%)
  • Historical big money signals

Just to show you what our Big Money signal looks like, have a look at the top buy signals Garmin has made the past few years.

Blue bars are showing that GRMN was likely being bought by a Big Money player according to MAPsignals.

When you see a lot of them, I call it the stairway to heaven:

Chart, histogramDescription automatically generated
Source: www.MAPsignals.com

But, what about fundamentals? As you can see, Garmin’s revenue numbers have been strong:

  • 3-year sales growth rate (+10.7%)
  • 3-year earnings growth rate (+13.1%)

Next up is Chipotle Mexican Grill, Inc. (CMG), which is a leading Mexican fast-food chain.

Check out these technicals for CMG:

  • 1 month performance (-9.7%)
  • Historical big money signals

Let’s look long-term. These are the top buy signals Chipotle has produced since 2015. Clearly, the Big Money has been consistent for years:

Chart, histogramDescription automatically generated
Source: www.MAPsignals.com

Let’s look under the hood. As you can see, Chipotle has had big growth. I see that continuing in the years to come:

  • 3-year sales growth rate = 10.2%
  • 3-year earnings growth rate = 34.1%

Another growth name is NVIDIA Corporation (NVDA), which is a leading computer graphics card and specialty semiconductor maker.

Strong candidates for growth usually have big money buying the shares. NVIDIA has that. Also, the stock has been on a tear recently:

  • 1 month performance (11.9%)
  • Historical Big Money signals

Below are the big money signals NVIDIA has made since 2015. That’s juice!

Chart, histogramDescription automatically generated
Source: www.MAPsignals.com

Now let’s look under the hood. NVIDIA’s sales growth is impressive. I expect more growth in the coming years:

  • 3-year sales growth rate = +22.2%
  • 3-year earnings growth rate = +18.0%

Number four on the list is PayPal Holdings Inc. (PYPL), which is a leading digital payments company.

Here are the technicals important to me:

  • 1-month performance (-12.6%)
  • Historical big money signals

Below are the big money signals for PYPL since 2015:

Chart, histogramDescription automatically generated
Source: www.MAPsignals.com

Let’s look under the hood. PayPal has been growing nicely:

  • 3-year sales growth rate = +18.0%
  • 3-year earnings growth rate = +36.1%

Our last growth candidate is Zoom Video Communications, Inc. Class A (ZM), which is a hugely popular video communication platform.

Check out these technicals:

  • YTD performance (-17.4%)
  • Historical big money signals

Zoom is a high-quality stock since it’s made my Top 20 report:

Chart, histogramDescription automatically generated
Source: www.MAPsignals.com

Now look under the hood. Earnings and sales growth have skyrocketed:

  • 3-year sales growth rate = +177.5%
  • 3-year earnings growth rate = +2,441.0%

The Bottom Line

GRMN, CMG, NVDA, PYPL, & ZM represent top stocks for November 2021. Strong fundamentals and big money buy signals make these stocks worthy of extra attention.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions in GRMN, CMG, PYPL, and ZM in personal accounts and managed accounts.

Investment Research Disclaimer

S&P 500 Looks Ready To Move Higher As Traders Stay Bullish

Traders Ignore Valuation Concerns And Continue To Buy Stocks

S&P 500 finished the previous week near all-time high levels as traders remained optimistic despite worries about the potential reduction of Fed’s asset purchase program.

The stock market remains driven by available liquidity, as well as FOMO (fear of missing out) and TINA (there is no alternative). Meanwhile, the yield of 10-year Treasuries remains stuck near 1.30% which is bullish for stocks. The U.S. Dollar Index has pulled back from recent highs which is also bullish for the stock market, but it should be noted that fluctuations of the American currency had little impact on U.S. stock market in 2021.

Some analysts speculated that S&P 500 will find itself under pressure after the end of the earnings season as stocks would lack catalysts to move higher. In addition, September has been (on average) the worst month for S&P 500 in the last thirty years. However, the stock market started the month with a test of new highs which indicated that traders remained bullish despite problems like the spread of the Delta variant of coronavirus or the potential reduction of Fed’s asset purchase program.

As is often the case in the stock market, there is no pullback when too many people are waiting for such a pullback. The last chance to “buy stocks at a discount” was in mid-August, and this pullback was quickly bought. The two other pullbacks which happened during this summer were very quickly bought as well. This indicates that there are many traders on sidelines who use any pullback to buy stocks. When many traders want to buy and few traders want to sell, a correction cannot occur.

Obviously, many stocks are generously valued by the market. Tesla is trading at more then 105 forward P/E , and it remains well below yearly highs! Netflix is valued at more than 45 forward P/E after the recent rally.

The risks for high-flying growth stocks have been recently highlighted by Zoom which issued disappointing guidance for the third quarter and lost about 17% of market capitalization in just one trading session. However, even Zoom shares have found some support in recent trading sessions as traders rushed to buy the stock after the major pullback despite the fact that it is valued at more than 60 forward P/E while analyst estimates have started to move lower.

In this liquidity-driven market, the Fed is one of the main players. So far, the Fed was successful in managing market’s expectations. Fed Chair Jerome Powell remained very dovish and calmed markets on rare ocassions of small panic.

Powell has a more challenging task in front of him as the Fed will have to cut its asset purchase program in the upcoming months. Even if the Fed decides that it’s too early to announce tapering at its meeting on September 22, it will still have to reduce support to markets at the beginning of the next year to avoid pushing inflation above reasonable levels.

It should be noted that traders may stay bullish and bet on dovish comments from Powell up until the time he finally says that it is time to reduce the asset purchase program. In this light, the market may experience several months of calm, bullish trading in case the Fed keeps the current support intact at its next meeting.

The current bullish trend is strong, and traders have been “trained” to buy pullbacks. A change of trend demands strong catalysts, and there are no such catalysts at this point. The situation may change in case inflation gets out of control, Fed has to reduce its asset purchase program at a very fast pace while Delta variant forces new lockdowns, but this negative scenario is not the base case for the market right now.

Technical Analysis

sp 500 september 6 2021

Let’s take a look at the weekly chart. S&P 500 is moving higher in a rather tight upside channel, and any attempt to settle below the low end of this channel is quickly bought.

RSI is in the overbought territory and the risks of a pullback are increasing. However, RSI has been in the overbought territory for several weeks and nothing serious happened as pullbacks have been quickly bought.

sp 500 september 6 2021 daily

On the daily chart RSI remains in the moderate territory which is good for the continuation of the current upside trend. Pullbacks are more visible on the daily chart, but it is obvious that they were not big at all as the bullish trend remained strong.

This is the type of the market when being bearish and trying to short tops leads to poor results. At one point, the bears will be right, but they can lose a lot of money trying to find the true top. Put simply, the trend remains bullish until proven otherwise. The Fed may break the trend by reducing support too quickly, but it has been very supportive in previous months and will likely remain very cautious when it finally begins to reduce its asset purchase program.

For a look at all of today’s economic events, check out our economic calendar.

Why Zoom Stock Is Down By 16% Today

Zoom Stock Dives As Q3 Guidance Disappoints

Shares of Zoom found themselves under strong pressure after the company released its second-quarter report.

Zoom reported revenue of $1.02 billion and adjusted earnings of $1.36 per share, beating analyst estimates on both earnings and revenue. While second-quarter results were strong, the company’s guidance was disappointing.

In the third quarter, Zoom expects to report revenue of $1.015 billion – $1.02 billion and adjusted earnings of $1.07 – $1.08 per share.

Zoom explained that it faced headwinds as workers got back to their offices while students moved back to schools. The company also noted that demand from small customers declined, while demand from large firms remained strong.

What’s Next For Zoom Stock?

The company’s third-quarter guidance implies no growth, which is not good for richly-valued stocks like Zoom. Currently, analysts expect that Zoom will report earnings of $4.67 per share in the current year and $4.76 per share in the next year, so the stock is trading at more than 60 forward P/E even after today’s drop.

Such valuation implies fast growth but Zoom is facing headwinds. The company stated that the return to work was its main near-term problem, but the market will also take a look at the possibility of increasing competition from products like Microsoft Teams.

It remains to be seen whether the significant pullback will attract speculative traders as slowing growth is traditionally considered to be a dangerous catalyst for richly-valued stocks like Zoom.

Zoom’s growth story is now under question, and there is potential for additional multiple compression, which will inevitably put pressure on the company’s shares as earnings estimates should not increase in the upcoming weeks.

At the same time, it should be noted that one quarter without growth is not the end of the world for Zoom, and the company may move back to the growth trajectory in 2022.

For a look at all of today’s economic events, check out our economic calendar.

Zoom’s Stock Price Plunges As CFO Discusses Concerns Over Businesses Reopening

Zoom had been one of the best-performing stocks over the past year, thanks to the Coronavirus pandemic forcing people to work from home. However, with businesses and offices now reopening, the company might face growth challenges.

Zoom Could Face Some Challenges

The Chief Financial Officer (CFO) of Zoom Kelly Steckelberg told CNBC’s Squawk Box earlier today that the company could face growth challenges as businesses and offices start to reopen. Zoom’s video interactive software has gained massive over the past 18 months, thanks to the Coronavirus.

The pandemic forced businesses and offices to operate from home, with meetings turning virtual. As a result, corporate entities and freelancers turned to Zoom to carry out their meetings despite the pandemic.

However, with the vaccinated population now increasing and businesses operating again, live events and meetings have started again. This has affected Zoom’s performance, and it could extend for the coming months.

The CFO said, “What we’re seeing… is headwinds in our mass markets, so these are individual consumers and small businesses. And, as you say, they are now moving around the world. People are taking vacations again, they’re going to happy hours in person.”

With the fast rate businesses and offices are reopening, the CFO added that their guidance for the rest of the year is not so positive, and this will reflect in the stock’s performance. In its latest guidance, Zoom expects massive growth from its direct and channel businesses. However, it expects a decrease in its online businesses due to the challenges facing smaller customers and consumers.

Zoom’s stock price is down by 15% so far today, becoming one of the biggest losers in the market. ZM is trading at $292 per share at the time of this report.

ZM stock chart. Source: FXEMPIRE

Zoom Delivers Excellent Q2 Earnings

The CFO’s comments come 24 hours after the company delivered an excellent second-quarter earnings result. In the second half of 2021, Zoom’s earnings per share were $1.36, surpassing the analysts’ estimate of $1.16. The revenue of $1.02 billion also surpassed the $991.0 million as expected by analysts.

The revenue increase was 54% year-over-year for the second quarter. However, Zoom’s growth had reduced during the previous quarter. The first quarter of the year saw Zoom record a 191% growth rate, but it expects it to be 31% in the current quarter.

Marketmind: Who’s Rocking The Boat Now?

But China is rocking the boat.

Its non-manufacturing PMI fell to a contractionary 47.5 in August (53.3 in July) and the composite PMI recorded its first sub-50 reading since February 2020.

The impact of new rules restricting under-18s from playing video games for more than three hours a week is also weighing — Shenzen-listed tech shares are down more than 2%.

And a Reuters report of a regulatory probe into the property investments of Ping An Insurance sent its shares 7% lower at one point.

Still, world shares scaled new record highs, while Wall Street futures are almost half a percent higher. The main focus in Europe is the euro zone “flash” inflation data following Germany’s 3.4% reading on Monday. Economists polled by Reuters predict 2.7% — that would be the highest reading since 2012.

Bond markets however, shrugged off Germany’s outsized reading and are likely to keep their eyes firmly trained on the Fed and Friday’s August U.S. jobs data.

On the corporate front, dealmaking never really took a break over the summer but expect the pace to pick up in coming weeks.

Today’s big news is the $4.7 billion purchase by tech investor Prosus of Indian payments platform BillDesk. And the familiar laments about supply chain disruptions continue – business supplies distributor Bunzl is the latest.

Finally, watch travel stocks after EU removed the United States and five other countries from its safe travel list. The United States, on its part, has issued a “do not travel” advisory for several European nations.

Developments that should provide more direction to markets on Tuesday:

– Japan’s industrial output shrank in July.

– Germany’s centre-left SPD cement hold on first place ahead of Sept 26 elections.

– Zoom Q2 revenues rose 54% to $1.02 billion, beating forecasts of $991 million; BlackRock AUM at record $9.49 trillion in Q2 vs $7.32 trillion a year earlier

– Chinese Evergrande New Energy Vehicle shares down after big H1 loss.

-Chile central bank meeting

-Chicago PMI due out

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sujata Rao; editing by Dhara Ranasinghe)

 

Zoom Shares Slump Over 12% as Revenue Outlook Disappoints

Zoom shares slumped more than 12% in an extended trading hour on Monday after the San Jose, California-based communications technology company warned that video conferencing demand is easing faster than anticipated following a pandemic-driven boom in 2020.

The company, which provides video telephony and online chat services through a cloud-based peer-to-peer software platform, forecasts fiscal third-quarter 2022 total revenue in the range of $1.015 billion and $1.020 billion and non-GAAP diluted EPS is expected to be between $1.07 and $1.08.

This increase is only modest compared with the multifold growth Zoom experienced last year during the COVID-19 crisis.

For the full fiscal year 2022, the company forecasts total revenue in the range of $4.005 billion and $4.015 billion and on-GAAP diluted EPS is expected to be between $4.75 and $4.79.

Following this, Zoom shares plunged over 12% to $305.05 in extended trading hours on Monday, hitting the lowest since May 20. The stock fell about 10% so far this year.

However, the company reported better-than-expected earnings and revenue in the second quarter.

Analyst Comments

Zoom (ZM) beat FQ2 Street expectations by 3% in FQ2, a disappointment relative to investor expectations for a ~5% beat as SMB churn picked up. While a pickup in churn provides headwinds in NT, still believe with ent business growing 2x SMB, that ZM has an ability to outperform growth expectations over NTM,” noted Meta Marshall, equity analyst at Morgan Stanley.

Zoom has established its position as the leader in video conferencing, now a growth market. The company has a meaningful competitive moat built on more than just architecture. Position within customers makes an attractive opportunity to expand into the broader UC market. Early wins are encouraging. Expanding platform with pending FIVN acquisition. Manageable churn post-COVID as a move to hybrid work setups.”

Zoom Stock Price Forecast

Twenty-one analysts who offered stock ratings for Zoom Video Communications in the last three months forecast the average price in 12 months of $424.25 with a high forecast of $495.00 and a low forecast of $345.00.

The average price target represents a 22.09% change from the last price of $347.50. From those 21 analysts, 11 rated “Buy”, 10 rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $360 with a high of $480 under a bull scenario and $240 under the worst-case scenario. The firm gave an “Equal-weight” rating on the communications software company’s stock.

Several other analysts have also updated their stock outlook. BTIG slashed the stock price forecast to $460 from $495. Piper Sandler cut the target price to $369 from $464. JPMorgan lowered the target price to $385 from $456.

“We remain impressed by management’s ability to overdeliver in terms of both growth and margins. Given strong results, we are raising our estimates slightly, driving our fair value estimate to $252 per share from $245 but we still view shares as overvalued,” noted Dan Romanoff, Equity Analyst at Morningstar.

Check out FX Empire’s earnings calendar

Zoom Dead Money So Far in 2021

Zoom Video Communications Inc. (ZM) reports fiscal Q1 2022 earnings after Monday’s closing bell, with analysts looking for a profit of $1.16 per-share on $990.2 million in revenue. If met, earnings-per-share (EPS) will mark a 26% profit increase compared to the same quarter last year. The virtual meeting provider has beaten estimates every quarter since coming public in April 2019, posting a 191.4% year-over-year revenue increase in the quarter ending May 31st.

Growing Competition in a Post-Pandemic World

The company continues to diversify its product catalog after 2020’s historic uptrend, driven by pandemic lockdowns around the world. Meanwhile, multiple competitors are offering alternatives to the Zoom platform at the same time that lockdowns have drawn huge political opposition, despite the rise of the Delta variant. It’s been a race against time for Zoom, seeking to replace lost income to maintain its rich valuation and high stock price.

Morgan Stanley analyst Meta Marshall upgraded Zoom to ‘Overweight’ last week, noting “we think that enterprise momentum, combined with margin headwinds dissipating, creates a positive setup into FQ2. While revenue expectations are not low, we believe they are doable, which combined with upcoming Zoomtopia and FY23 guidance in a couple of quarters, leaves us more optimistic on the stock at current valuation”.

Wall Street and Technical Outlook

Wall Street consensus has improved in the last three months, now standing at an ‘Overweight’ rating based upon 14 ‘Buy’, 1 ‘Overweight’, 11 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $242 to a Street-high $525 while the stock ended Friday’s session more than $75 below the median $416 target. This low placement highlights investor apathy toward pandemic beneficiaries, most recently illustrated by Peloton Interactive Inc.’s (PTON) steep post-earnings slide.

Zoom broke out above the 2009 high at 107.34 in February 2020, entering an historic uptrend that hit an all-time high at 588.84 in October, just weeks before Pfizer Inc. (PFE) and BioNTech SE (BNTX) announced the success of their vaccine. The stock has posted a long series of lower highs and lower lows since that time, crisscrossing the 200-day moving average and 50% rally retracement repeatedly since March.  Accumulation fell to an 8-month low last week, highlighting slow-motion profit-taking that could easily stretch into the fourth quarter.

For a look at all of this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Earnings Week Ahead: Zoom, Nordson, Five Below and MongoDB in Focus

Earnings Calendar For The Week Of August 30

Monday (August 30)

IN THE SPOTLIGHT: ZOOM, NORDSON

ZOOM: The San Jose, California-based communications technology company is expected to report its second-quarter earnings of $1.16 per share, which represents year-over-year growth of over 26% from $0.92 per share seen in the same period a year ago.

The company, which provides video telephony and online chat services through a cloud-based peer-to-peer software platform, would post revenue growth of about 50% to $990.2 million. Zoom will report 2Q FY22 earnings after market close on Monday, August 30th.

Zoom expects to report revenue of $985 million to $990 million and adjusted earnings of $1.14 to $1.15 per share in the second quarter. In its full-year guidance, the company now expects revenue of $3.98 billion – $3.99 billion, and adjusted earnings of $4.56 – $4.61 per share.

“Continuation of WFH and structural increase in usage of video, progress in Phone, and pending FIVN acq supports Zoom Video Communications’ (ZM) longer-term platform opportunities. With Delta variant likely slowing NT churn, FQ2 expectations skew high. Remain EW but positively inclined w/ next legs of growth coming into view,” noted Meta A Marshall, equity analyst at Morgan Stanley.

Zoom has established its position as the newly emerged leader in video conferencing, now a growth market, largely credible to the company itself given an introduction of a solution that employees actually use. The company has a meaningful competitive moat built on more than just architecture, but a rapid uptick in video usage has attracted significant investment efforts from competitors. Position within customers makes an attractive opportunity to expand into the broader UC market. Early wins are encouraging. Expanding platform with pending FIVN acquisition. Environment post-COVID and large-scale WFH, and timing to reach, less certain.”

NORDSON: The Westlake, Ohio-based medical device manufacturer is expected to report its fiscal third-quarter earnings of $2.07 per share, which represents year-over-year growth of over 45% from $1.42 per share seen in the same period a year ago.

The maker of adhesives and industrial coatings would post revenue growth of about 12% to $600 million. Nordson will report 3Q FY21 earnings on Monday, August 30th. It is important to note that the company beat consensus expectations for EPS four times in a row. Monday’s better-than-expected results could help the stock hit new all-time highs.

“We are tactically constructive into Nordson’s (NDSN) 3Q21 earnings release next week, as we see the likelihood for a 3Q21 beat and full-year guidance raise. Additionally, we think NDSN’s favourable exposure to electronic components shortages (more an upside opportunity than downside risk) is differentiated,” noted Connor Lynagh, equity analyst at Morgan Stanley.

“We are making moderate revisions to our prior estimates, largely reflecting our incrementally positive outlook on NDSN’s end-markets. The impact on our long-term estimates is limited, with FY21 EBITDA only ~3% higher. Near-term, we have raised our 3Q consolidated revenue growth by ~400bps, with ATS ~700bps higher. Consequently, 3Q revenue is ~3% above prior, with EBITDA ~5% higher as well.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE AUGUST 30

Ticker Company EPS Forecast
LI Li Auto $0.00
CTLT Catalent $1.10
ZM Zoom Video Communications $1.16
NDSN Nordson $2.07
BACHY Bank China ADR $0.84
CEA China Eastern Airlines -$1.34
ADOOY Adaro Energy ADR $0.12

Tuesday (August 31)

Ticker Company EPS Forecast
NTES NetEase $6.16
ALXN Alexion Pharmaceuticals $3.43
IMAB I Mab -$1.24
EGFEY Eurobank Ergasias S.A. ADR $0.01
CRWD CrowdStrike Holdings Inc. Cl A $0.09
PVH PVH $1.20
AMBA Ambarella $0.25

Wednesday (September 1)

IN THE SPOTLIGHT: FIVE BELOW

The Philadelphia, Pennsylvania-based discount retailer Five Below is expected to report its second-quarter earnings of $1.11 per share, which represents year-over-year growth of over 45% from $0.50 per share seen in the same period a year ago.

The popular discount store retailer that sells products that cost up to $5 would post revenue growth of more than 50% to $656 million. Five Below will report 2Q FY21 earnings after market close on Wednesday, Sept 1. It is important to note that the company beat consensus expectations for EPS four times in a row.

Five Below’s (FIVE) profile among pure B&M retailers is nearly unmatched (20% top/bottom-line growth, no debt). It’s driven by a differentiated, defensible model focused on extreme value merchandise across diverse categories. FIVE is exiting the COVID-19 pandemic as a fundamentally stronger and more relevant business, with best-in-class growth characteristics, various company-specific initiatives in place, and solid liquidity,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“However, valuation is near peak the stock seems fairly valued, in our view, with a balanced risk/reward skew. White space store growth (>50% unit runway remaining) and multi-year track record of ~20% square footage growth with >90% productivity.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 1

Ticker Company EPS Forecast
CPB Campbell Soup $0.47
GEF Greif $1.54
VEEV Veeva Systems $0.87
SMTC Semtech $0.62
FIVE Five Below $1.11

Thursday (September 2)

IN THE SPOTLIGHT: MONGODB

MongoDB Inc, which provides an open-source database platform for automating, monitoring, and deployment backups, is expected to report a loss of $0.39 per share in the second quarter, worse than -$0.22 per share seen in the same quarter a year ago.

However, the New York City-based company would post year-over-year revenue growth of over 30% to $182.4 million.

MongoDB has established itself as one of the most popular databases to support the development of modern net-new apps. Into CY21, we see the business at a crucial inflection point. First, it is poised to garner the majority of revs from its public cloud business – the segment where market growth and share gains are the strongest,” noted Sanjit Singh, equity analyst at Morgan Stanley.

“Second, the acceleration in customer adds suggests that its go-to-market model has matured to scale a modern, cloud-first business.  As a result, an equation for durable 30%+ growth emerges (20%+ customer base growth with near 120% net expansion from the existing base) – a growth story that does not look overly demanding given the strategic nature of this asset.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 2

Ticker Company EPS Forecast
BDEV Barratt Developments £32.00
CIEN Ciena $0.80
SIG Signet Jewelers $1.62
AEO American Eagle Outfitters $0.54
TTC Toro $0.77
HRL Hormel Foods $0.40
SAIC Science Applications International $1.47
GWRE Guidewire Software $0.24
AVGO Avago Technologies $6.88
COO Cooper Companies $3.29
PDCO Patterson Companies $0.37
MDB MongoDB Inc -$0.39
SMAR Smartsheet Inc. -$0.13
CLDR Cloudera Inc. $0.10
PD PagerDuty Inc. -$0.15
GMS GMS Inc. $1.26
DCI Donaldson $0.66
HPE Hewlett Packard $0.42
BRC Brady $0.71

Friday (September 3)

No major earnings are scheduled for release.

Zoom Q2 Earnings to Rise Over 26%, Revenue to Jump Nearly 50%

The San Jose, California-based communications technology company Zoom is expected to report its second-quarter earnings of $1.16 per share, which represents year-over-year growth of over 26% from $0.92 per share seen in the same period a year ago.

The company, which provides video telephony and online chat services through a cloud-based peer-to-peer software platform, would post revenue growth of about 50% to $990.2 million. Zoom will report 2Q FY22 earnings after market close on Monday, August 30th.

Zoom expects to report revenue of $985 million to $990 million and adjusted earnings of $1.14 to $1.15 per share in the second quarter. In its full-year guidance, the company now expects revenue of $3.98 billion – $3.99 billion, and adjusted earnings of $4.56 – $4.61 per share.

Zoom shares have been range-bound so far this year. The stock ended 0.74% lower at $337.74 on Wednesday.

Analyst Comments

“Continuation of WFH and structural increase in usage of video, progress in Phone, and pending FIVN acq supports Zoom Video Communications’ (ZM) longer-term platform opportunities. With Delta variant likely slowing NT churn, FQ2 expectations skew high. Remain EW but positively inclined w/ next legs of growth coming into view,” noted Meta A Marshall, equity analyst at Morgan Stanley.

Zoom has established its position as the newly emerged leader in video conferencing, now a growth market, largely credible to the company itself given an introduction of a solution that employees actually use. The company has a meaningful competitive moat built on more than just architecture, but a rapid uptick in video usage has attracted significant investment efforts from competitors. Position within customers makes an attractive opportunity to expand into the broader UC market. Early wins are encouraging. Expanding platform with pending FIVN acquisition. Environment post-COVID and large-scale WFH, and timing to reach, less certain.”

Zoom Stock Price Forecast

Twenty-one analysts who offered stock ratings for Zoom Video Communications in the last three months forecast the average price in 12 months of $421.75 with a high forecast of $495.00 and a low forecast of $345.00.

The average price target represents a 24.87% change from the last price of $337.74. From those 21 analysts, 10 rated “Buy”, 11 rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $360 with a high of $480 under a bull scenario and $240 under the worst-case scenario. The firm gave an “Equal-weight” rating on the communications software company’s stock.

Several other analysts have also updated their stock outlook. BTIG slashed the stock price forecast to $495 from $550. Deutsche Bank raised the target price to $375 from $360. JPMorgan lowered the target price to $385 from $456.

Check out FX Empire’s earnings calendar

How Options Are Fueling The Markets

First, let’s look at the covid crisis and how it played a role. As a result of the shutdowns, the FED took a really aggressive stance with its quantitative easing measures.  Lots of money printing to pay for massive stimulus payouts.  The worse news we hear historically is that the markets will react sharply to the downside.

In this market, they did the opposite because many in the market viewed the bad news as a sign the FED will keep its foot on the gas with their aggressive quantitative easing.  The markets love this as they see it as huge economic growth with less risk, even when things were shut down.  Many people were at home and had nothing to do but spend their stimulus money.  The markets loved this.  That is why we saw massive growth in AMZN, FB, GOOGL, and MSFT.  Other stocks favored from staying at home were ZM, NFLX, and TTD.

Now how do options fuel the markets?  Well, when an underlying stock has options there is a secondary derivative market that has its own supply and demand outside of the stock.  This can cause market makers to balance those demands.  How do they do this?

They do this by taking the difference of the total contracts bought and sold and adjust accordingly.  So for example let’s look at SPX.  In the below picture you can see Put volume is roughly half the call volume.  In this case, the market maker would engage in an activity called delta hedging where they would buy shares of stock to offset the difference between the Put and Call contract volume.  Since the market maker is only interested in the arbitrage between the bid and ask of these contracts, they want to stay delta neutral or, in other words, not be affected by stock price movement.

When they buy to offset, this can drive the price of an underlying stock up.  This is one reason why so many traders watch unusual options activity.

Every day on  Options Trading Signals we do defined risk trades that protect us from black swan events 24/7.  Many may think that is what stop losses are for.  Well, remember the markets are only open about 1/3 of the hours in a day.  Therefore, a stop loss only protects you for 1/3 of each day.  Stocks can gap up or down.  With options, you are always protected because we do defined risk in a spread.  We cover with multiple legs which are always on once you own.

Enjoy your day!

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Founder & Chief Market Strategist
www.TheTechnicalTraders.com

 

Zoom to Buy Cloud-Based Call Center Operator Five9 in $15 Billion Deal

Zoom has become a household name and investor favorite in the year since the coronavirus pandemic, as businesses and schools adopted its services to hold virtual classes, office meets and socialize.

But with rapid vaccination and life creeping back to normality, analysts and investors are looking to see how Zoom will sustain its hot streak of growth, especially with rivals Microsoft Corp, Cisco Systems Inc and Alphabet Inc’s Google snapping at its heels.

Five9, whose call center software is used by more than 2,000 clients across the globe to interact with their clients, counts firms such as Under Armour, Lululemon Athletica Inc and Olympus Corp as customers.

The deal makes strategic sense, as it helps accelerate Zoom’s product roadmap outside of its core offering, Barclays analyst Raimo Lenschow wrote in a note.

The San Jose, California-based company is now shifting focus to its two-year-old cloud-calling product Zoom Phone and conference-hosting product Zoom Rooms as bigger players amp up their video products.

“The acquisition is expected to help enhance Zoom’s presence with enterprise customers and allow it to accelerate its long-term growth opportunity by adding the $24-billion contact center market,” Zoom said in a statement on Sunday.

Under the terms of the deal, approved by the boards of both companies, Five9 stockholders will receive 0.5533 shares of Zoom stock for each share of Five9.

Based on Zoom’s Friday close, this represents a price of $200.28 for each share of Five9 common stock, or nearly a 13% premium.

Zoom shares, which have surged more than 450% since going public in 2019, were down 1.5% on Monday. Five9 shares were up 6% at $188.5.

Five9 will become an operating unit of Zoom and its chief executive, Rowan Trollope, will become a president of the company, staying on as chief of the unit after the deal, which is expected to close in the first half of 2022, it said.

Global spending on cloud-based conferencing is forecast to reach $5.41 billion this year, up from $5.02 billion in 2020, according to tech consultancy Gartner. It does not track market share, but analysts cite Zoom and Cisco as the leaders.

Goldman Sachs advised Zoom and Qatalyst Partners advised Five9.

(Reporting by Kanishka Singh, Subrat Patnaik and Tiyashi Datta in Bengaluru; Editing by Miyoung Kim, Clarence Fernandez, Gerry Doyle and Anil D’Silva)