Fitbit Inc (FIT), Home Depot Inc (HD), salesforce.com, inc. (CRM), Target Corporation (TGT), Palo Alto Networks Inc (PANW) – Stocks To Watch
Monday, February 22
Tuesday, February 23
Joel Greenblatt Owned Hedge Fund On Why Value Investing Isn’t Working Now
Acacia Capital was up 12.27% for the second quarter, although it remains in the red for the year because of how difficult the first quarter was. The fund is down 14.25% for the first half of the year. Q2 2020 hedge fund letters, conferences and more Top five holdings Acacia's top five holdings accounted for Read More
Wednesday, February 24
Thursday, February 25
Fitbit Inc (FIT)
Fitbit Inc Information Technology – Electronic Equipment | Reports February 22, after the close.
The Estimize consensus calls for Fitbit Inc EPS of $0.28, three cents above Wall Street and a nickel above company guidance. In the wake of a promising Q3 report, fourth quarter estimates climbed to $0.36 from $0.22, but since the beginning of the year, with the stock plummeting and so have estimates, down to their current level. Revenue expectations are also more bullish at $656.24M vs the sell-side’s $644.99M and guidance of $635M. This puts growth expectations at 33% for EPS and 77% for sales. This is a company that has beaten both the Estimize and Wall Street consensus both quarter’s since IPOing in June.
What to Watch: Shares of Fitbit Inc have almost been cut in half since the beginning of the year as competition from other wearables makers, specifically Apple, heats up. The issue for Fitbit Inc is that it is solely a fitness tracker, and falls into the very niche health and wellness sporting goods category. Even when Fitbit does sell one of their devices, active use is not guaranteed. Attrition rates are very high, of the 12M trackers sold, only 6.5M are in active use. Fourth quarter results shouldn’t be hurt however, as holiday sales are are expected to have come in strong, with Fitbit reporting sold out inventory of their Fitbit Charge HR at many stores during the period. First quarter sales haven’t been as strong, however, with many analysts speculating that consumers are waiting for Fitbit’s new Blaze smartwatch scheduled to ship March 1. After tomorrow’s closing bell investor’s will also be looking for updates on standing, specifically the patent suit from competitor Jawbone.
Home Depot (HD)
Consumer Discretionary – Specialty Retail | Reports February 23, before the open.
The Estimize consensus is calling for EPS of $1.11, just a penny higher than the Street. Revenues of $20.375B also slightly surpass the sell-side estimate of $20.350B. Since the last quarter EPS estimates have climbed by 3 cents, but revenues have been all over the place. Sales expectations peaked at $20.436B just after the Q3 report, but fell to $20.315B just the next day despite a beat on on EPS and revenues. Home Depot has consistently put up double-digit growth on the bottom-line, and mid-single digit growth on top-line for the last 6 quarters.
What to Watch: This week we get a further read on the health of the US consumer and their willingness to make large ticket purchases for their homes. The housing sector performed relatively well throughout the fourth quarter, with New Home Sales recording consistent month-over-month gains, and Existing Home Sales increasing 15% in December. Homebuilders such as Lennar and PulteGroup released better than expected results this quarter, also boding well for the home improvement retailers. While consumers have more money in their pockets due to an improving jobs situation and lower oil prices, they have been very choosy with how they allocate their discretionary income. Home price appreciation was solid in October and November (December results released Tuesday), and as prices appreciate consumers typically invest in their properties. Same store sales remained above 4% for the first 3 quarters of the year, bolstered by increased customer traffic and average guest spend. The world’s largest home improvement retailer recently announced it was hiring more than 80,000 associates to ensure all locations are fully staffed for the busy spring season.
Consumer Discretionary – Multiline Retail | Reports February 24, before the open.
The Estimize community is looking for EPS of $1.54 and revenue of $21.896 billion, in-line with Wall Street on the bottom-line, and around $35 million greater on the top-line. Target is projecting relatively flat earnings growth compared to the same period last year. The company perennially beats Wall Street on the bottom line 71% of the time while only besting Estimize EPS estimates 44% of the time.
What to Watch: After three consecutive quarters of positive earnings surprises, Target’s winning streak came to an end in Q3, with the Estimize community expecting another miss for Q4. Target has undertaken several strategic initiatives to boost performance in the near term. With consumers shifting rapidly to online shopping, Target has deployed significant resources to develop its online platform and sturdy its omni-channel facilities. Last quarter, digital channel sales surged 20% while also adding to comp store sales growth. Moreover, Target recently sold its pharmacy business to CVS in a deal worth $1.9 billion. In the next 6 to 8 months all 1672 Target pharmacies will be rebranded to read CVS, operating through a store within a store format. This partnership is expected to serve as a compliment to the customer experience which will help drive higher traffic. Target is also focusing on the development of smaller format stores to penetrate urban and metropolitan areas. Aggressive cost cutting measures, such as the company’s recent decision to discontinue their struggling Canadian business, is expected to help finance its new initiatives and bolster free cash flow. Furthermore, Target has eliminated over 3000 stores and corporate employees in the U.S., estimated to save the company $2 billion.
Information Technology – Software | Reports February 24, after the close.
The Estimize community is looking for EPS of $0.20, just ahead of the Wall Street estimate and company guidance of $0.19. Estimize is also looking for slightly higher revenues of $1.793B vs. the Street’s $1.791B and guidance of $1.787B. This is a company that beats the Estimize EPS consensus 65% of the time, and the revenue consensus an even greater 88% of the time. For the last 6 quarters CRM has put up 44%+ growth on the bottom-line and 23%+ growth on the top-line, very impressive in this environment of falling revenues.
What to watch: Despite the strong fundamentals that Salesforce has put up for the last several quarters, like PANW, shares of CRM have plummeted this year along with others in the cloud space. After gaining 32% in 2015, the stock is down over 20% thus far in 2016. Up until recently, companies like Salesforce had enjoyed very high multiples as compared to traditional providers. Heavy investing in new data centers and digital marketing efforts and covering costs related to international expansion and headwinds from currency fluctuations are beginning to impact gross margins and the bottom-line. The fourth quarter is expected to benefit from the success of popular products such as Salesforce ExactTarget Marketing Cloud platform and the recently launched Salesforce 1 Customer Platform. Salesforce is also making a play for social, launching a new set of tools to help marketers engage with customers on Instagram by using their suite of Marketing Cloud products. The most important number to watch for is Salesforce’s is their backlog of booked business which increased 28% YoY in the latest quarter.
Palo Alto Networks (PANW)
Information Technology – Communications Equipment | Reports February 25, after the close.
The Estimize consensus calls for EPS of $0.40, only a penny higher than the Wall Street consensus and company issued guidance. On the sales front, the Estimize Select Consensus (more heavily weights historically accurate analysts and recent estimates) is looking for $318.36M, well above the Estimize mean of $317.49M, Wall Street’s consensus of $317.54 and company guidance of $316M.
What to watch: Even in a crowded cybersecurity space, Palo Alto has been holding it’s own and steadily beating earnings expectations for the last five quarters, and revenue expectations for the last nine. Despite increased demand for security services over the last year, not all in the space are winners which has allowed PANW to swoop in and steal a bit of market share. The company’s closest competitors are FireEye and Fortinet, both of which disappointed on EPS and revenues for the fourth quarter. By the end of their 2015 fiscal year, Palo Alto boasted more than 26,000 customers, with new customer acquisition trends remaining healthy into the new year. Year-over-year billings grew nearly 61% in the latest quarter, continuing a long trend of high double-digit growth in that area. The company also recently announced the launch of it’s latest product, Aperture, an SaaS offering used to increase security for cloud service providers (CSPs) such as Dropbox and Google Drive. This is certainly a space with significant growth opportunities as the number of cloud-based applications have been forecasted to grow 20 – 30% in the next three years. In spite of all of the good news around this name, it was not protected from the recent sell-off of tech names, with share of PANW down 28% this year alone.
Be sure to get your estimates in for this week’s releases!