For Immediate Release
Chicago, IL – December 21, 2020 – Zacks Equity Research Shares of Sterling Construction Company, Inc. STRL as the Bull of the Day, CDK Global, Inc. CDK as the Bear of the Day. In addition, Zacks Equity Research provides analysis on PayPal Holdings, Inc. PYPL, Square, Inc. SQ and NVIDIA Corporation NVDA.
Here is a synopsis of all five stocks:
Sterling Construction is a Zacks Rank #1 (Strong Buy) that sports a B for Value and a B for Growth. This is a construction name that I believe will have strong 2021. Let’s take a deeper look at why this is a Zacks Rank #1 (Strong Buy) in this Bull of the Day article.
Sterling Construction Company, Inc., a construction company, engages in the heavy civil construction, specialty services, and residential construction activities primarily in the southern United States, The company was formerly known as Oakhurst Company, Inc. and changed its name to Sterling Construction Company, Inc. in November 2001. Sterling Construction Company, Inc. was founded in 1955 and is headquartered in The Woodlands, Texas.
I see two beats and two misses in the last four quarters. The good thing about that is the last two quarters were the beats… and they were bigger than the misses. There is a 17% average positive earnings surprise over the last year.
The current quarter has slipped from 27 cent to 23 cents, but at the same time the full year number has moved from $1.50 to $1.55.
Next year is looking at $1.88 and I see an 8 cent increase over the last 60 days.
The Zacks Rank is most heavily impacted by the increase or decrease of the annual earnings estimates.
I see a 12x forward PE and that comes after the company recently posted topline growth of 31%. I see expectations for the topline next year at about 22%, but that will probably increase over time. A 2x price to book is very low and I like to see that. Price to sales at 0.38x is not where I like to see it, but there is room for growth.
Operating margins are steadily improving for STRL, but they are somewhat thin. If we see margin expansion this stock should run… and run fast.
CDK Global has slipped to a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day today. Let’s take a look at why this stock fell to the lowest Zacks Rank in this Bear of the Day article.
CDK Global, Inc. provides software and technology solutions for automotive retailers in the United States, Europe, Canada, and internationally. The company offers Dealer Management System (DMS), a portfolio of layered software applications and services for automotive retailers, original equipment manufacturers (OEMs), consumers, and It serves approximately 30,000 retail locations and OEMs. CDK Global, Inc. has a partnership with Integrated Rental. The company was founded in 2014 and is headquartered in Hoffman Estates, Illinois.
I see a solid earnings history here with 3 beats in the last 4 quarters. The lone standout was an earnings meet.
Over that time horizon the average positive earnings surprise computes to 16%.
Those are good stats, so why is it a Zacks Rank #5 (Strong Sell)?
The Zacks Rank does take into account the earnings history, but more than that it looks at earnings estimate revisions.
I see a decrease in earnings estimates for this quarter, next quarter, this full year and next year as well. That is not what investors want to see.
This quarter has seen the Zacks Consensus Estimates fall from $0.79 to $0.65 over the last 30 days. Over that same time horizon the estimate for next quarter slipped to $0.70 from $0.89.
The full year 2020 estimate fell dramatically from $3.23 to $2.60. Most investors are looking forward to 2021 and that number has fallen as well. The 2022 fiscal year has seen estimates fall from $3.41 to $2.78.
Those big negative revisions have all come over the last 30 days and that is what has caused the Zacks Rank to fall.
The valuation is a little high given the numbers I see. The 19x forward estimate is right about the historical multiple for the market, but that comes after the company posted a contraction on the topline. I see margins moving in the wrong direction… as operating margins have slipped from 19.5% to 18.8% over the last three quarters.
Cryptocurrency Bounces Back: Focus on These 3 Stocks
In this data-driven world, blockchain-backed cryptocurrency space has gained solid traction on the heels of an increasing bitcoin adoption, the most popular and widely used digital currency.
Although the cryptocurrency market has been on a roller coaster ride in the past two years, it is now scaling new highs with the resurgence in bitcoin trading. Notably, bitcoin has hit a new all-time high by surpassing the $20,000 mark on Dec 16.
Moreover, 2020 has turned out to be favorable for bitcoin and other cryptocurrencies like ethereum, litecoin, ripple, monero and zcash. The coronavirus outbreak taking the shape of a pandemic early this year has been benefiting this particular market, with its resulting push toward digital and contactless trading and payments.
This strong bounce-back remains a major positive for online payment companies like PayPal and Square, which are highly getting involved in cryptocurrency by processing bitcoin transactions.
Further, cryptocurrency resurgence is expected to benefit chipmakers like NVIDIA which is riding on the strengthening momentum of its graphic processing units (GPUs) among crypto-miners.
Positive Growth Trends
Cryptocurrencies, which hold the potential to revolutionize the process of peer-to-peer and remittance transactions, are gaining strongly from the decentralized system, low fees, transparency of distributed ledger technology, protection from consumer chargebacks,and quick international transfers.
Additionally, the growing demand for alternative currency as a result of the ongoing pandemic remains a tailwind.
All these factors are driving growth in digital currency (especially bitcoin) transactions throughout the world. Per a report from Statista, the number of daily bitcoin transactions at end of third-quarter 2020 exceeded the mark of 351 million, jumping significantly from around 200 million in first-quarter 2016.
Further, a report from Fortune Business Insights shows that the global cryptocurrency market is expected to hit $1.8 billion in 2027 from $754 million in 2019 by witnessing a CAGR of 11.2%.
Here we focus on PayPal, Square and NVIDIA, which have strong fundamentals that poise them well to capitalize on the cryptocurrency boom in the near term.
PayPal’s Solid Stance
PayPal is one of the well-known bitcoin-related stocks that should be focused on. Notably, the leader in digital payment processes helps merchants to accept crypto payments via partnerships with three major bitcoin payment processors — BitPay, GoCoin and Coinbase.
Further, the company’s recent launch of a service that allows its customers to buy, hold and sell cryptocurrency directly from their PayPal account. Further, this Zacks Rank #3 (Hold) company announced its intentions to enable cryptocurrency as a funding source across its 26 million merchants worldwide.
Moreover, PayPal’s hiring push in early 2020 to boost its new Blockchain Research Group remains noteworthy.
Square announced its plan to enter the market of cryptocurrency at the end of 2017 and forayed into it in 2018 by facilitating the buying and selling of bitcoins via its Cash App. Since then, bitcoin trading has been driving growth in the company’s user base. Moreover, bitcoin revenues have turned out to be the key catalyst behind the company’s top-line growth.
In third-quarter 2020, Square generated revenues of $1.63 billion from the bitcoin category (53.8% of total revenues), rising from $148.3 million in the year-ago quarter.
The Zacks Rank #3 company is continuously gaining from the increasing uptake of Cash App, and strong customer demand and growth in bitcoin activities.
The company’s latest investment of $50 million to purchase 4,709 bitcoins remains a major positive in regard to its strengthening efforts to bolster its presence in the promising cryptocurrency market.
We note that the investment, which increased the company’s bitcoin reserve, will enhance its cryptocurrency offerings.
This, in turn, is expected to accelerate Square’s bitcoin revenue generation in the near term. Additionally, the strengthening bitcoin offering is likely to deliver an enhanced experience to customers of Cash App through which the company facilitates bitcoin trading.
NVIDIA’s Growing Momentum
The growing momentum of NVIDIA’s GPUs in the cryptocurrency space provides the company with a strong competitive edge against other chipmakers.
In third-quarter fiscal 2021, this Zacks Rank #2 (Buy) company experienced solid traction among the ethereum, monero and zcash miners. Reportedly, NVIDIA’s GPU sales to crypto-miners were around $175 million.
Further, the new Ampere GPU chips of the company are well-designed to meet the requirement of the upcoming advanced cryptocurrencies.
We believe that the expanding presence of NVIDIA in the booming cryptocurrency market is likely to contribute well to the stock’s performance in the near term.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?
These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.
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