The Nasdaq touched record highs again on Wednesday, as investors continue to pile into tech, despite the success coronavirus-impacted spaces and harder-hit cyclicals have enjoyed since the start of November. That said, the gains have been a bit muted since the passage of the new $900 billion relief package that was mostly priced in already.
Investors are also still trying to digest what the new coronavirus-based travel bans from the U.K. might mean as the U.S. and much of the global economy prepare for a harsh winter amid fresh restrictions. Yet, rising coronavirus cases haven’t dampened overall optimism, especially as the vaccine is being rolled out.
Along with the possibility of roughly 100 million Americans being vaccinated by February or March, the S&P 500 earnings outlook for next year is strong. And it can’t be stressed enough how helpful the low interest rate environment will likely continue to be for stocks.
This means that bullish investors are likely looking for stocks to buy for 2021. And the broader tech sector might still be the best place to find winners despite its run because it has the growth outlook and the impact on every aspect of the economy to help justify soaring stock prices…
Digital Turbine, Inc.
APPS
Digital Turbine stock went on an absolute tear in 2020 for its ability to succeed within a vital space that’s focused on the ever-growing world of smartphones and apps. Digital Turbine works to connect OEMs, mobile operators, and publishers with advertisers and developers for “frictionless app and content discovery, user acquisition and engagement, operational efficiency and monetization opportunities.” The Austin, Texas-headquartered firm boasts that it has delivered more than “three billion app preloads for tens of thousands advertising campaigns.”
APPS has made Deloitte’s Technology Fast 500 list multiple times and it completed its acquisition of Mobile Posse in March. The deal helps create a more robust offering for clients, by adding Mobile Posse’s “suite of highly-engaging content discovery products.” APPS fiscal 2020 revenue jumped 34%, which came on top of FY19’s 39% and was mostly organic since it only included a month of Mobile Posse operations.
The company topped our Q2 FY21 estimates at the end of October, and Zacks estimates call for its FY21 revenue to soar 105%, with FY22 projected to come in another 29% higher to reach $364 million. Meanwhile, its adjusted earnings are expected to climb by 215% and 37%, respectively over this stretch.
As we touched on earlier, APPS has skyrocketed over 700% in 2020 from $7 per share to around $60. Digital Turbine has outpaced fellow pandemic high-flyers such as Tesla
TSLA
, Zoom Video
ZM
, and Shopify
SHOP
and it hit new records on Tuesday.
Digital Turbine’s earnings outlook has also surged since its last report to help it land a Zacks Rank #2 (Buy) at the moment. APPS also grabs an “A” grade for Growth in our Style Scores system and three of the five brokerage recommendations Zacks has for Digital Turbine come in at a “Strong Buy.”
Zendesk, Inc.
ZEN
Zendesk is a cloud-focused CRM firm with a software portfolio geared toward sales, support, and customer engagement. The company boasts over 160,000 customers from startups to large businesses.
ZEN topped our Q3 estimates at the end of October and it’s poised to grow as more companies, from a range of industries are forced to ramp up their digital transformations. “Traditional brick-and-mortar businesses are embracing new models of engagement across stores, e-commerce, and emerging channels like social and messaging…” the company wrote in a letter to shareholders last quarter.
ZEN has climbed 85% in the last year to double its industry’s average. This is part of a more impressive run that seen it soar 325% over the past three years. More recently, Zendesk has surged 45% in the trailing three months and it hit a new high of roughly $144 a share on Wednesday.
Zacks estimates call for ZEN’s revenue to jump over 25% in 2020 to reach over $1 billion for the time, with FY21 projected to come in another 23.5% higher. And its adjusted EPS is projected to soar 81% to hit $0.56 this year and then climb 37% next year.
Zendesk has also destroyed our bottom-line estimates over the trailing three periods and its positive earnings revisions help it earn a Zacks Rank #2 (Buy) at the movement. And Wall Street remains high on the stock amid its run, with nine of the 14 brokerage recommendations Zacks has at a “Strong Buy,” with two more at a “Buy,” and none below a hold.
CrowdStrike
CRWD
CrowdStrike is a cloud-focused cybersecurity firm that utilizes machine learning and AI to protect endpoints and cloud workloads. This is crucial in the cloud age that’s full of rapidly expanding endpoints, which include laptops, desktops, smartphones, IoT devices, and more. Remote work and schooling helped push this area of the ever-growing cybersecurity space to the forefront. And the stock has surged to new highs in the wake of the SolarWinds hack.
CRWD crushed our Q3 estimates at the start of December, with sales up 86% and it added nearly 1,200 net new subscription customers. More importantly, company executives raised their outlook. With this in mind, Zacks estimates call for the company to swing from an adjusted loss of -$0.02 a share in the year-ago period to +$0.08 in the fourth quarter on 64% stronger revenue.
CrowdStrike is also projected to swing all the from a full-year loss of -$0.42 a share to +$0.22 in FY21, with FY22 expected to climb nearly 50% higher to $0.32. CrowdStrike’s revenue is projected to jump 78% this year to hit $859 million and then pop 40% higher to reach $1.21 billion in FY22. These estimates would come on top of FY20’s 93% sales expansion for the firm that went public in June 2019.
Shares of CrowdStrike have surged 50% in the last month and they hit brand new records of around $227 on Wednesday. More broadly, the cybersecurity firm’s stock has skyrocketed 370% in the last year to nearly triple its industry’s average.
CRWD’s improving EPS outlook helps it grab a Zacks Rank #2 (Buy) and it rocks “B” grades for Growth and Momentum. Lastly, 12 of the 17 brokerage ratings Zacks has for CRWD sit at a “Strong Buy” with two more at a “Buy.” Therefore, investors might want to consider CrowdStrike as a growth-focused play and a secular bet on cybersecurity.
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