Zoom Stock – Zoom, Dycom Industries, YETI Holdings, Pool Corp and Camping World highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – June 29, 2021 – Zacks Equity Research Shares of Zoom Video Communications, Inc. ZM as the Bull of the Day, Dycom Industries, Inc. DY as the Bear of the Day. In addition, Zacks Equity Research provides analysis on YETI Holdings, Inc. YETI, Pool Corporation POOL and Camping World Holdings, Inc. CWH.
Here is a synopsis of all five stocks:
Bull of the Day:
The remote work world brought on overnight by the pandemic thrust Zoom Video Communications into the lives of everyday users, businesses, and Wall Street. The unprecedented circumstances helped ZM’s revenue soar 326% last year.
The standout growth stock then began to tumble in late October as investors dumped Zoom in anticipation of the economic reopening. But the cloud-based video communication platform has diversified its offerings and is poised to thrive in the hybrid work environment. And Wall Street seems to agree Zoom has legs beyond the pandemic, with the stock up around 35% since May 10.
New Work World
The family Zoom calls might be gone for good for many and schools appear ready to restart in person this fall, amid the largely successful vaccine rollout in the U.S. Yet the end of consumer-level Zooming doesn’t really matter since Zoom makes money from its paying business clients that have proliferated during the past 15 months.
For instance, Zoom closed its fiscal 2021 (period ended on Jan. 31) with around 467K customers that had more than 10 employees, up 470%. Plus, its customers contributing more than $100K in TTM revenue surged 156% to 1,644.
Clearly that is the past and Zoom naysayers are focused on the return to a more normal working world as big companies throughout the country slowly call their employees back to the office. Despite the eventual return to the office, hybrid environments where people come in two to three days a week could possibly become the new normal. Many people in professional services jobs, with more leverage and the ability to more easily change jobs, found remote work life beneficial.
The massive climb in corporate earnings, especially in the tech world, and the current U.S. GPD growth have helped showcase that the work-from-anywhere-world can be accompanied by economic expansion. Zoom also enables businesses to cut back on travel, which was a pitch it was making well before it went public. And the pandemic might have changed the corporate travel environment for good, with the help of Zoom and others.
Countless jobs are done nearly all on computers, driven by business software, SaaS, cloud computing, and more. Companies of all shapes and sizes from every sector now rely heavily on various technologies and there is no going back.
Zoom has expanded its portfolio from a videoconferencing app to a more complete communication platform that includes Zoom Phone. Cloud-based phone solutions are quickly becoming popular as businesses look for modern telecom solutions. The goal is to have a unified place for calls, video, meetings, chat, and more. Meanwhile, Zoom Rooms are its updated take on the conference room designed for the hybrid world.
The firm also announced on May 19 its new Zoom Events platform that “combines the reliability and scalability of Zoom Meetings, Chat, and Video Webinars in one comprehensive solution for event organizers, with the ability to produce ticketed, live events for internal or external audiences of any size.” The changing environment is a big reason why Salesforce plans to buy work-focused communication platform Slack for roughly $28 billion, which is the second-largest deal in software history.
Recent Results & Growth Outlook
Zoom topped our first quarter FY22 (period ended on April 30) estimates on June 1, with revenue up 191% to $956.2 million and its adjusted earnings up from $0.20 to $1.32 a share to crush our EPS estimate by 36%. Meanwhile, its customers contributing more than $100K in TTM revenue jumped 160% from the year-ago period and 22% from Q4 to 1,999.
ZM closed the quarter with 497K customers with more than 10 employees, up nearly 90% from the prior-year quarter. Management also said on its earnings call that its cloud-computing-based phone service reached 1.5 million seats, up from the 1 million the company reported in January.
Zoom raised its full-year guidance last quarter and Zacks estimates now call for its fiscal 2022 revenue to jump another 50% from $2.65 billion to $3.99 billion. Clearly, this marks a slowdown from the impossible to recreate year of 326% expansion. Nonetheless, the ability to grow by another 50% or $1.34 billion is highly impressive and shows the stability of its subscription model and the continued demand from business clients.
The firm’s FY23 sales are then projected to climb another 21% higher to reach $4.80 billion—it pulled in $623 million in all of FY20. At the bottom end, its adjusted FY22 earnings are projected to surge another 40% to $4.66 a share after it skyrocketed by around 850% last year.
The nearby chart also showcases that its FY22 and FY23 consensus EPS estimates popped 27% and 17%, respectively following its earnings release. The recent climb is part of a continued upward revisions trend during the past year.
Zoom went public in April 2019 and it has climbed 350% in the last two years. That said, the stock has fallen back to Earth since its huge early pandemic run, up 55% in the trailing 12 months vs. the Zacks Tech sector’s 52%. Luckily, the stock has mounted a comeback since it fell near oversold RSI (30) levels in early May and has benefitted from the resurgence of tech stocks that has pushed the Nasdaq to new records.
ZM has climbed 35% since May 10 and it popped another 4% on Monday to close regular hours $388.86 a share. The recent run has pushed it right near overbought (70) RSI levels. This means there could be a near-term pullback.
Despite the climb, Zoom trades 30% below its October records and at a 60% discount to its own year-long highs at 25.4X forward 12-month sales—with it trading not too far above its all-time lows in terms of forward sales. On top of that, Zoom just broke above its 200-day moving average, which could create more momentum.
Zoom’s positive earnings revisions help it land a Zacks Rank #1 (Strong Buy) right now, alongside its “A” grades for Growth and Momentum in our Style Scores system. And seven of the 18 brokerage recommendations Zacks has for the stock are “Strong Buys,” with none below a “Hold.”
Furthermore, ZM boasts a solid balance and it bolstered its cash position through a secondary stock offering in January. Zoom wanted to maintain what its CFO called “optimal flexibility for our balance sheet.” ZM ended the first quarter with $4.69 billion in cash and equivalents and no debt. This should help the company continue to diversify its business and pursue new strategic growth areas down the road.
It is worth pointing out that some have suggested the pop to start the week is due to concerns about the Delta variant of the coronavirus.
Bear of the Day:
Dycom Industries provides specialty contracting services to telecom service providers throughout the U.S. The company fell well short of our first quarter EPS estimates in late May and its consensus earnings estimates have slipped recently.
The Short Story
Dycom is a “leading provider of specialty contracting services,” for telecommunications providers. These offerings include everything from construction and engineering to underground facility locating, program management, and more. DY’s revenue slipped last year and it fell 11% during its first quarter of fiscal 2022, which ended on May 1.
Worst still, Dycom slipped from adjusted earnings of +$0.36 a share in the year-ago quarter to a loss of -$0.04 per share in Q1. This also came in well below the Zacks consensus estimate that called for +$0.13 a share. The first quarter marked its second-straight big miss and second adjusted loss in as many quarters.
Looking ahead, Zacks estimates call for Dycom’s fiscal 2022 earnings to fall 22% on roughly flat sales. The nearby chart also shows how far DY’s FY22 and FY23 consensus EPS estimates have dipped since its report, down 28% and 11%, respectively.
Dycom’s recent earnings revisions activity helps it grab a Zacks Rank #5 (Strong Sell) right now. DY shares slipped around 2% during regular hours on Monday. More broadly, it has underperformed its industry in 2021, having moved roughly sideways, including some big swings, compared to its industry’s 22% climb.
The recent lagging performance is part of a much longer downward trend, with DY stock down 15% in the last five years. Therefore, investors might want to stay away from DY shares for now.
3 Stocks to Buy for Your Portfolio This Summer and Beyond
The summer of 2021 is officially here and prospects look sunnier than last year, which were dampened by the clouds of coronavirus.
Subsiding pandemic fears, greater savings at disposal, opening of borders and travel forgone last year are making Americans enthusiastic about vacation trips this summer.
Travelers are gung-ho about their holiday destinations and are already crowding the leisure-travel space in droves.
A recent report stated that despite concerns about COVID-19, above 77% of Americans plan to travel for leisure in the next three months. According to the U.S. Travel Association’s Monthly Travel Recovery Data Report, around nine of 10 American tourists plan to travel in the next six months.
This pick-up in travel demand is likely to drive the stocks of companies in the travel, tourism and recreation space. Most of these stocks were hit hard last year as demand dried up. Things are but looking up now.
Stocks for This Summer and Beyond
If the fourth wave of corona doesn’t befall humanity, people will continue pursuing their travel and leisure activities.
Here we look out for some stocks that will gain not only this summer but afterwards, given their strong fundamentals and business innovation that was carried during the pandemic, which made such companies’ business more resilient
These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Outdoor Activity Favors This Stock
If you are planning an outdoor activity, YETI Holdings products will make your trips successful and comfortable. Selling products like coolers, drinkware, backpacks and bags are Yeti products that are sure to catch travelers’ eyes if they wish to hit wilderness or visit a beach or camp anywhere.
Even in 2020, the company managed to register sales growth of 19% and margins expanded 560 basis points as travelers took Yeti’s tumblers and coolers in the wild.
While demand for the company’s coolers and equipment continues to sustain, it recently debuted a new line of backpacks which should contribute to sales as travellers pack bags and go for vacation.
The company is resorting to social-media marketing initiatives to lure young customers. The company is also prioritizing investments in digital, which should drive its online sales. Also, it is shifting its business mix to generate a greater portion of sales through the direct-to-customer sale approach. Earlier, the bent was on wholesale sales.
Additionally, the company is expanding its business outside its national boundaries. Thus, its strategies on diversifying revenues, both geographically and product wise, bode well for the long haul. Another impressive move is that the company is using part of its cash flows to pay down debt, thus strengthening the company’s financial position.
After a strong start in the current fiscal year, management raised the company’s top-line outlook to 20-22% for the period. Strong sales are expected during the fiscal second-fourth quarter, reflecting stable demand for the brand.
The stock currently has a Zacks Rank #2 and a Growth Style Score of A or B. In a year’s time the stock has gained 115.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Pool Fun to Be in Demand
Even if some people abort travel plans, they will look out for activities, such as weekend sports and backyard gatherings, thereby buoying demand for the products of Pool Corp., the world’s largest wholesale distributor of swimming pool supplies, equipment and related products, which performed well even during pandemic. In 2020, sales were up 23%, led by solid demand for residential pool products on the back of stay-at-home trends.
The momentum continued in the first quarter of 2021 with sales improving 57%. Further, a robust housing market will also result in more pool construction, boosting demand for the company’s product line. More good news is that sales in the Commercial pool category turned positive for the first time in the last reported quarter since the onset of the pandemic. With people beginning to travel by and large, this market will continue to progress.
The continuation of the de-urbanization trends, strengthening of the southern migration and more active participation of the millennial population in the housing market should pave the way for the company’s long-term growth.
For 2021, the company expects new pool construction to exceed 110,000 units, up from 96,000 units in 2020. For the full year, it expects earnings per share in the range of $11.85-$12.6, up from the previous guidance of $9.12-$9.62.
The Zacks Consensus Estimate for 2021 and 2022 earnings has been revised 8.8% and 9% upward, respectively, over the past 60 days.
In a year’s time, the stock has gained 71.5% and holds a Zacks Rank of 2 at present.
Recreational Vehicles: Most Sought After
Like the other two stocks mentioned above, Camping World gained momentum through the pandemic as people took to recreational vehicles (RV) for their day out. The trend still continues as people who are still wary of travelling aboard and staying in congested hotels are opting for RVs to go for outings.
Spurred by steady demand for RV in the fiscal first quarter, the company’s revenues jumped 52% and seeing favorable demand, the company upped its past guidance. Its adjusted EBITDA for 2021 is expected in the range of $770-$810 million or 19% higher at the midpoint from its previous projection.
The company has at its disposal, a bulging RV market, which primarily attracts the younger lot. Thus, the customer profile comprising a young cohort, mainly, should provide an opportunity to reap revenues for years to come.
The company is also developing into different verticals by making strategic acquisitions. New store development and facility upgrades should expand its reach. It recently announced plans to launch the Thomasville Recreation Furniture brand of RV and camping furniture. This brand unveiling along with the buyout of furniture manufacturer Allure during the fall of 2020 accelerates its vertical integration within the space and solidifies its sales surge and margin expansion.
Shares of this presently Zacks Rank #1 (Strong Buy) company have soared 42.1% in the past six months. In the past 30 days, earnings estimates for 2021 have been revised 4.9% upward to $5.54.
In a year’s time, the stock has gained 46.7%.
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