Chicago, IL –October 29, 2024 – Zacks Equity Research shares CyberArk Software CYBR, as the Bull of the Day and Ulta Beauty ULTA, as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Meta Platforms Inc. META, NVIDIA Corp.’s NVDA and Thomson Reuters Corp. TRI.
Analysts have taken a bullish stance on the company’s earnings outlook, landing it into the highly-coveted Zacks Rank #1 (Strong Buy).
In addition to favorable earnings estimate revisions, the stock resides in the Zacks Computers – IT Services industry, currently ranked in the top 20% of all Zacks industries. Let’s take a closer look at how the company currently stacks up.
The outlook for its current fiscal year has remained very bullish, with the $2.29 Zacks Consensus EPS estimate up more than 60% over the last year and suggesting a sizable 105% growth rate year-over-year. Sales growth is also forecasted to be strong, with the $940 million expected 25% higher than FY23.
Shares saw a nice pop following its latest set of quarterly results, now trading at all-time highs. Stocks making new highs tend to make even higher highs, particularly when positive earnings estimate revisions are present.
Concerning the above-mentioned print, CyberArk delivered record revenue and saw a profitability uptick, also outperforming its previous guidance across all metrics. The company is enjoying a snowball of demand, with Subscription revenue of $158.4 million nearly 50% higher than the year-ago figure.
The company raised its full-year guidance across the board following the print, explaining the positive share reaction post-earnings. The company’s growth trajectory is expected to continue nicely, as shown below.
The valuation picture here is quite rich, but that’s a reflection of investors’ big growth expectations. Shares currently trade at an 11.4X forward 12-month price-to-sales ratio, well above the 9.1X five-year median but still beneath five-year highs of 14.2X.
The stock sports a Style Score of ‘F’ for Value. While the valuation picture may steer some away, the company’s robust growth is undeniable.
Investors can implement a stellar strategy to find expected winners by taking advantage of the Zacks Rank – one of the most powerful market tools that provides a massive edge.
The top 5% of all stocks receive the highly coveted Zacks Rank #1 (Strong Buy). These stocks should outperform the market more than any other rank.
CyberArk Software would be an excellent stock for investors to consider, as displayed by its Zack Rank #1 (Strong Buy).
Ulta Beauty is a leading beauty retailer in the United States. The company offers a wide range of products, including cosmetics, fragrances, skincare, hair care, bath and body products, and salon styling tools in stores.
Analysts have taken a bearish stance on the stock’s outlook, lowering their earnings expectations across the board and landing it into an unfavorable Zacks Rank #5 (Strong Sell).
In addition, the company is in the Zacks Retail – Miscellaneous industry, which is currently ranked in the bottom 42% of all Zacks industries. Let’s take a closer look at the company.
ULTA shares have been hit hard in 2024, down 23% and widely underperforming relative to the S&P 500. Quarterly results that have largely disappointed have been a driver behind the share plunge, with the stock not seeing a sustained post-earnings move higher following several periods.
While the company’s sales growth has been notably strong over recent years, regularly impressing the market, the growth rates have cooled significantly, as shown below. Please note that the chart below tracks the % YoY change in sales, not actual sales numbers.
The stock traded at high multiples for years thanks to its explosive growth, with the current 16.1X forward 12-month earnings multiple a bargain relative to five-year highs of 80.8X. Still, while the stock is historically cheap, waiting for positive earnings estimate revisions to hit the tape would be a better approach.
Slowing growth paints a challenging picture for the company’s shares in the near term.
Ulta Beauty is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company’s earnings outlook.
For those seeking strong stocks, a great idea would be to focus on stocks carrying a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy) – these stocks sport a notably stronger earnings outlook paired with the potential to deliver explosive gains in the near term.
Meta Platforms Inc. is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video sharing app Instagram and WhatsApp messaging app owing to acquisitions. Along with in-house developed Messenger, these apps now form Meta’s family of products.
The tech giant is set to release its third-quarter 2024 earnings results on Oct. 30, after the closing bell. The stock currently carries a Zacks Rank #2 (Buy) and has a positive Earnings ESP of 2.83%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better (Rank #1 or 2) and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings release. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Meta Platforms is investing heavily in generative artificial intelligence (AI). A section of financial experts raised questions about the timing of the monetization of these massive investments.
A possible earnings and revenue beat will ensure META’s ability to a great extent about AI spending monetization. This along with a favorable Zacks Rank should drive its stock price significantly in the near future.
Meta Platforms is benefiting from steady user growth across all regions, particularly Asia Pacific. META has been leveraging AI to improve the potency of its platform offerings. These services currently reach more than 3.3 billion people daily. User growth remained solid in the United States, with WhatsApp reaching more than 100 million monthly users and Thread approaching the 200 million user milestone.
META is riding on strong advertising revenue growth prospects. In the second quarter of 2024, advertising revenues increased 21.7% year over year to $38.33 billion, accounting for 97.9% of revenues. Meta Platforms’ advertising revenues are expected to benefit from strong spending from advertisers as they leverage its growing AI prowess.
META has been leveraging AI and machine learning to boost the potency of its social-media offerings, including WhatsApp, Instagram, Facebook and Threads. META’s significant investment in AI is expected to help it gain market share in the digital advertising space.
Key metrics like Family daily active people, ad impressions and average price per advertisement are likely to remain solid on a year-over-year basis in the third quarter, reflecting the dominant position of the company in the digital advertising market.
However, the Meta Platforms Reality Labs division (which includes virtual reality, augmented reality and metaverse initiatives) has been a significant drag on profits. It remains to be seen how the company is approaching profitability for this segment and if massive investment in AI has aided this initiative.
For third-quarter 2024, the Zacks Consensus Estimate currently shows revenues of $40.16 billion, suggesting an improvement of 17.6% year over year and earnings per share (EPS) of $5.17, indicating an appreciation of 17.8% year over year. The company delivered positive earnings surprises in the last four reported quarters with the average beat being 12.6%.
Moreover, META has witnessed positive earnings estimate revisions for 2024 and 2025 in the last seven days. At present, the Zacks Consensus Estimate indicates a year-over-year increase of 20% and 44.2%, respectively, for revenues and EPS in 2024.
The current Zacks Consensus Estimate for 2025 revenues and EPS reflects an upside of 14% and 13.3%, respectively. In addition, META has a long-term (3-5 years) EPS growth rate of 19.1%, significantly higher-than the S&P 500 index’s growth rate of 13.1%.
Meta Platforms is set to receive initial shipments of NVIDIA Corp.’s new flagship AI chip later this year. NVIDIA’s next-generation AI chip, called Blackwell, is the upcoming driver. META is set to get B200 Blackwell chips.
META’s AI-driven platform is enhancing ad delivery efficiency and increasing return on ad spend for advertisers. Solid performance in spaces like e-commerce, gaming, entertainment, and media is benefiting Meta Platforms.
Management said that the company will invest $37-$40 billion as capital expenditure in AI initiatives in 2024. Moreover, capital spending is likely to reach more than $50 billion in 2025.
On July 24, META unveiled its Llama 3 AI model. Using NVIDIA’s latest HDX H200 chip that supports Meta Platforms’ Llama 3 AI model, an investment of $1 by an API provider can generate $7 in revenues over the next four years. This mostly free Llama 3 model and its advanced version to be released next year aim to compete with incumbent like Open AI.
On Oct. 24, Meta Platforms entered into a multi-year deal with Thomson Reuters Corp. to allow its AI chatbot access to news content for responses to current events and news questions. This constitutes a significant AI partnership between a tech behemoth and a news publishing giant.
Year to date, the stock price of Meta Platforms soared nearly 62%, well above the Zacks defined Internet Software Industry’s gain of 23.1%. Despite this, META is currently trading at an attractive valuation compared to its peers. The stock has a forward price/earnings (P/E) of 26.5X, below the industry’s P/E of 32.9X. META has a robust return on equity of 34.2%.
The average short-term price target of brokerage firms represents an increase of 9.1% from the last closing price of $573.25. The brokerage target price is currently in the range of $425-$811. This indicates a maximum upside of 41.5% and a maximum downside of 25.9%.
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