For Immediate Release
Chicago, IL – October 28, 2021 – Zacks Equity Research shares Salesforce CRM as the Bull of the Day, and Autohome Inc. ATHM as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ford Motor Co. F, eBay EBAY, and Teladoc Health TDOC.
Here is a synopsis of all five stocks:
Bull of the Day:
Salesforce was part of the vanguard of modern business software. The company’s various subscription-based offerings are now essential to thousands of customers in the digital-driven world. And CRM has expanded through some rather large acquisitions in the last several years to help it diversify as it competes for dominance in the ever-growing cloud software market.
Salesforce helped start the software-as-a-service industry that nearly every business, government, and countless other entities rely on to help them do just about everything. Its various divisions help support sales, marketing, commerce, customer and client engagement, analytics, app development, and more.
The company has grown its top-line at an impressive clip since its 2004 IPO. CRM posted between 25% and 30% sales growth in the trailing five years. Its steady double-digit expansion highlights the strength of its business model and the constant need for companies of all shapes and sizes to adapt to the quickly changing tech-fueled landscape.
The pandemic-driven remote work environment solidified its business. Salesforce posted record sales last year, with revenue up 24% to crack $20 billion for the first time. CRM also raised its guidance and it’s poised to thrive in the hybrid work environment.
Salesforce made a splash late last year when it announced its $28 billion deal to buy Slack. The company completed that purchase in July and it is expected to help CRM compete against Microsoft and Zoom in the evolving work communication space. The deal comes roughly two years after Salesforce paid $15 billion for data-analytics platform Tableau.
Top & Bottom Line Outlook
Salesforce beefed up its offerings to help it continue to stand out in a crowded cloud-software space. Its growth outlook showcases the stability of its subscription model as well. Zacks estimates call for CRM’s FY22 (its current year) revenue to climb 24% to $26.3 billion, with FY23 projected to jump another 21% higher to come in at nearly $32 billion.
The tech firm’s adjusted FY22 earnings are projected to slip 10% from last year to $4.40 a share, with FY23 then set to bounce 4% above our current-year estimate.
Wall Street has looked beyond the YoY decline projections to Salesforce’s improving earnings estimates, which help it land a Zacks Rank #1 (Strong Buy) at the moment. The stock has also crushed our adjusted EPS estimates by an average of 68% in the trailing four quarters.
Salesforce shares have roughly matched the Zacks Computer Software industry over the past five years, up around 300%. CRM has jumped 90% in the last two years to lag just behind its industry. Salesforce shares have surged 25% in the trailing six months to outclimb its peers and it hit brand new highs Wednesday.
The stock has jumped to records amid the broader big-tech resurgence that’s sent the Nasdaq to new highs once again. Investors will, however, have to wait until early December for CRM to release its quarterly results, even as many tech titans report their financials during the last week of October.
Salesforce still trades at sky-high valuations in terms of forward earnings and it does not yet pay a dividend as it focuses on growth. But investors have been willing to pay up for CRM for years and largely ignored its P/E ratio. Despite sitting at records, CRM trades at a nearly 10% discount to its own year-long highs at 9.5X forward 12-month sales and 20% below its high-water mark when it comes to forward earnings.
The recent climb pushed Salesforce slightly above overbought RSI levels (70 or higher), with it currently hovering at 72. This could mean the stock is due for a near-term pullback, along with other tech names—the Nasdaq 100-tracking QQQ ETF is approaching overdone levels at 65, after hitting oversold territory in early October.
Still, investors with long-term horizons shouldn’t be nervous about buying stocks at their highs since timing the market is extremely difficult. And Wall Street is bullish on Salesforce, with 22 of the 26 brokerage recommendations Zacks has currently coming in at “Strong Buys.” None of the other recommendations are below a “Hold” and its overall rating has improved in the last several months.
Let’s also remember Salesforce’s offerings aren’t going out of style anytime soon and its customers become largely dependent on its constantly expanding portfolio of business software.
Bear of the Day:
Autohome Inc. is a leading online automobile shopping hub in China. But its shares have been hammered since February and its earnings outlook continues to trend in the wrong direction.
Autohome is the leading online search platform for consumers in China. The firm offers original content, a comprehensive auto library, and a variety of auto listing information. The company works with both dealers and automakers and it covers the entire car purchase and ownership cycle.
ATHM’s services also include data analysis, marketing, sales leads, and more. Overall, its Autohome “Mall” is a full-service digital platform that aims to help facilitate transactions for automakers and dealers.
Autohome has consistently grown its sales amid a booming Chinese auto market. However, its stock price performance hasn’t always matched its rather consistent top-line expansion.
Autohome’s revenue and adjusted earnings are projected to slip 4% and 17%, respectively this year, based on our Zacks consensus estimates. On top of that, analysts have continued to lower their longer-term EPS outlooks and its recent revisions activity helps it land a Zacks Rank #5 (Strong Sell). The stock also earns an “F” grade for Growth in our Style Scores system.
The recent selling has pushed the stock into oversold RSI (30 or under) territory. This could mean it’s due for a bit of a comeback as the broader market breaks new ground.
That said, Wall Street has started to shy away from many Chinese stocks in 2021, including giants like Alibaba. Therefore, ATHM might be considered more of a trader’s stock for the time being.
Investors Book Profits Late Wednesday; Q3 Reports for Ford, eBay, Teladoc
If you were under the impression that the stock market rally of the past week or so was getting a little long in the tooth, you were not alone: late-day selling in the regular session Wednesday brought indexes to their lows for the day. The Dow slid -265 points, -0.74%, while the S&P 500 fell -0.51%. The Nasdaq managed to eke out the slightest of margins to the upside: +0.12 points, or +0.001%. And the small-cap Russell 2000 hit the skids among major indexes, -1.9%.
Ford Motor Co. posted mixed results in its Q3 earnings report after the bell yesterday: 51 cents per share beat the 29 cents analysts were looking for, but were down from the year-ago 65 cents per share. Revenues came in below expectations, to $32.2 billion from an anticipated $34.23 billion. Margins for the quarter reached 8.4%.
However, Ford not only raised guidance going forward but also is reinstating its dividend policy, giving out 10 cents per share as of Q4. These have helped the company — which has the F-150 Lightning EV in its future — bolster +4.3% gains on the news in late trading. It’s the sixth straight earnings beat, with a trailing 4-quarter average surprise of +364%.
eBay beat on both top and bottom lines in its Q3 earnings report Wednesday afternoon, with earnings of 90 cents per share on $2.5 billion in revenues outpacing the 89 cents and $2.45 billion in sales expected. Active buyers missed estimates to 154 million in the quarter, and Gross Merchandise Value (GMV), while outpacing expectations to $19.5 billion, still represents a -10% drop year over year. Guidance was also lowered. The stock was down -5% after the bell.
Telemedicine major Teladoc Health were down even further, -5.6% in the late session, even as the company posted a narrower-than-expected loss of -53 cents on a better-than-expected $522 million in revenues in its Q3. Gross Margins dipped slightly quarter over quarter, as subscriber access fees in its International market were falling a bit behind expectations. Teladoc was already -31% year to date.
The first take on Q3 GDP greets us Thursday morning, along with another heavy stream of earnings reports and Weekly Jobless Claims. We feel the market took a breather yesterday, perhaps booked a profit or two. A continued successful Q3 earnings season and economic print habitat ought to be good for growth going forward.
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Ford Motor Company (F): Free Stock Analysis Report
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Autohome Inc. (ATHM): Free Stock Analysis Report
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