For Immediate Release
Chicago, IL – February 23, 2021 – Zacks Equity Research Shares of Qorvo, Inc.
QRVO
as the Bull of the Day, Fastly, Inc.
FSLY
as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Uber Technologies, Inc.
UBER
, Shopify Inc.
SHOP
and Facebook, Inc.
FB
.
Here is a synopsis of all five stocks:
Bull of the Day
:
Qorvo
is a Zacks Rank #1 (Strong Buy) that is a leading provider of core technologies and radio frequency solutions for mobile, infrastructure and aerospace/defense applications.
The stock was a big performer in 2020, but investors are questioning the current stock price as there are valuation questions. However, a recent sell off after a solid earnings report, gives bulls an opportunity to enter for a longer-term play.
About the Company
The company was formed after RF micro devices and TriQuint Semiconductor merged and Qorvo went public in 2015. Qorvo is headquartered in Greensboro, NC and has over 7,900 full time employees.
Qorvo operates in two segments: Mobile Products (MP) and Infrastructure & Defense products (IDP). The MP segment supplies RF and Wi-Fi solutions and was almost 66% of 2020 revenues. The IDP segment is used for high performance defense systems such as radar, electronic warfare and communication systems, Wifi equipment, LTE and 5G base stations, could connectivity, automotive connectivity and smart home solutions.
45% of Qorvo’s revenues came form the United States, while China was 34% of its international sales. Apple is a huge customer, with 33% of 2020 revenues coming from the big tech company.
Earnings and Estimates
Early in February, Qorvo reported an EPS beat of 15% and guided Q4 higher, now seeing $2.42 v the $2.11 expected. The company also sees Q4 revenues higher, seeing a range of $1.03-1.06B v the $967M expected.
The big surprise was the gross margins, which came in at 54.4% vs the 51.7% seen last quarter.
The company has not missed on EPS since 2017, so it wasn’t a surprise to see this trend continue. However, continued adoption for 5G and strong demand for Wi-Fi, defense, power management and IoT are keeping analysts bullish.
For the current quarter, analysts have hiked estimates 17% over the last 30 days, from $2.08 to 2.44. For the current year, estimates have gone 9% higher, from $8.67 to $9.45.
Valuation
The stock has a Zacks Style Score of “B” in Growth, but “D” in value. According to a recent analyst report out by Piper, the stock trades at 17.4x EPS v the peer group trading at 18.2x. This would make the stock undervalued to its peers and as a result, the firm raised its price target to $190.
Analysts Targeting $200 and Beyond
Piper isn’t the only one that sees higher price targets, with many firms raising price targets after earnings:
Benchmark Company reiterated QRVO with Buy and a price target of $200, up from $185.
Morgan Stanley reiterated QRVO with Overweight and a price target of $210, up from $196.
Loop Capital reiterated QRVO with Buy and a price target of $213.
JPMorgan Chase reiterated QRVO with Overweight and a price target of $210, up from $185.
Raymond James reiterated QRVO with Outperform and a price target of $220, up from $200.
Both Raymond James and Oppenheimer have $220 targets, about 25% higher from current levels.
The Technical Take
Since making lows at $67.54 during the March 2020 sell off, the stock has seen a steady trend higher, with the 50-day MA offering support along the way.
After earnings, the stock broke this moving average for a few days, but the bulls eventually stepped in. Additionally, the stocks recent pullback fell into a 61.8% Fibonacci retracement level drawn from December lows to all-time highs.
Last week the stock firmly broke back above the 21-day, changing the short-term momentum to the bulls. If the stock can clear the $180 level on heavy volume the $200 level could come quickly.
If we get a market sell off, patient investors should target the $137 area, which is where the 200-day MA resides.
In Summary
Qorvo has a lot going for it on both the fundamental and technical fronts. The recent sell off gave investors the opportunity to enter at great prices, but those that missed below $170 still have plenty of upside left.
Bear of the Day
:
Fastly
is a Zacks Rank #5 (Strong Sell) that provides infrastructure software. The company offers cloud computing, game optimization, security, edge computer technology and streaming solutions.
2020 was a great year for investors, with the stock running from $20-$136 over the course of five months. However, the stock got ahead of itself and has become very volatile over the last few months on valuation concerns.
Recent earnings added more questions and the stock has fallen over 30% in February. Now the bulls are questioning their next move as the stock falls to the 200-day moving average.
More about Fastly
The company is headquartered in San Francisco, CA and was founded in 2011. Fastly is valued around $9 Billion and has Zacks Style Scores of “A” in Momentum and “B” in Growth, but “D” in Value.
Some popular customers on the company are TikTok, Buzzfeed, Financial Times, Kayak, Wayfair and Shopify.
Q4 Earnings
On February 17
th
Fastly reported Q4 EPS, seeing a 10% EPS beat. Revenues were only a slight beat and the company guided Q1 and FY21 EPS lower. The total customer count, came in at $2.08k v the 2.05k last quarter.
The quarter had many concerned over multiple issues, especially with accelerating losses and slowing organic growth. While the company is gaining market share, some analysts are suggesting that cash burn rates might force a capital raise.
Estimates
Analysts dropped estimates after the earnings report, which likely caused the drop in the Zacks Rank. For the current year, the last 7 days have seen a fall in Estimates dropped from -$0.19 to -$0.22. For next year, it was estimated the company would turn a profit, but that too has been lowered back down to -$0.03. While analysts collectively are dropping numbers, some raised their price target after the quarter.
Volatility to Remain.
There are two different views of this stock and the bulls will have issues until the company proves the gaining of market share turns into growth. The stock has a Beta of 1.27, which means its more volatile than the overall market. I would expect the bulls and bears to continue to fight and volatility to persist in the name.
The Technicals
FSLY has meandered back and forth around the 50-day moving average since September of last year. Now the stock has fallen to the 200-day and the bulls will have to prove themselves and hold this level. The stock hasn’t been below the 200-day since May of 2020 and we could see a rather large stop run from traders that depend on the technicals.
Looking at Fibonacci levels, the stock saw one big retracement since the breakout back in May. The $62 level saw a big bounce, but the $58.50 level is the 61.8% from the March lows to recent highs. The stock may have room lower if current levels fail to hold.
In Summary
Fastly has good long-term prospects. However, short-term concerns on both the fundamental and technical fronts could bring a big shakeout in the weeks to come. Be patient with a stock that trends lower and wait for a good trade location.
Additional content:
UBER Loses Battle in UK: Court Decides Drivers Are Workers
In a major blow to
Uber’s
business model, the U.K. Supreme Court on Friday ruled that the ride-hailing company’s drivers are workers entitled to minimum wage, holiday pay and rest breaks.
Classifying drivers as workers would invariably raise labor costs for Uber, which currently considers its drivers self-employed and does not provide them with minimum wage or other associated benefits. Besides being a threat to Uber’s U.K. business model, this re-classification could have a huge impact on Britain’s gig economy.
Supreme Court judges unanimously dismissed Uber’s appeal against the ruling. According to a
CNBC report
, Uber and a group of former drivers claiming that they are workers and should be given employment rights like a minimum wage and holiday pay, have been embroiled in a five-year-long legal battle. In 2016, an employment tribunal ruled in favor of the group of drivers, who were led by Yaseen Aslam and James Farrar.
Uber defends its stance on the ground that it acts as an agency connecting drivers with passengers through an app. It further contends that drivers prefer to work as independent contractors rather than employees since it gives them flexibility.
Per the CNBC report, Farrar, general secretary of the App Drivers & Couriers Union, stated, “This ruling will fundamentally re-order the gig economy and bring an end to rife exploitation of workers by means of algorithmic and contract trickery.”
Regarding the ruling, Uber said that it applied only to the 25 drivers who brought the case against the company in 2016. It further added that it will consult with all its drivers in the U.K. to “understand the changes they want to see.”
The CNBC report quoted Jamie Heywood, Uber’s regional general manager for Northern and Eastern Europe, saying, “We respect the Court’s decision which focused on a small number of drivers who used the Uber app in 2016.”
“Since then we have made some significant changes to our business, guided by drivers every step of the way. These include giving even more control over how they earn and providing new protections like free insurance in case of sickness or injury.”
In a similar legal battle with Californian regulators last year, Uber was exempted from classifying its drivers as employees in accordance with the state law, after Proposition 22 passed in the state.
Zacks Rank & Key Picks
Uber carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the
Internet – Services
space are
Shopify
and
Facebook
, each sporting a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here
.
While shares of Baidu and Shopify have rallied more than 100% each in a year’s time, Facebook shares have gained more than 30%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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