TV and oil and cloud call center technology, oh my! (We’re out of breath.)
Every day, Q.ai brings you what’s hot and trending in the land of stocks. Today’s trending list focuses mostly on technology stocks, as AT&T and Dish have big news for the world, with a quick visit to the oil fields as ExxonMobil struggles with its increasingly slippery stock prices.
Meanwhile, Monday saw stocks tumble considerably as one sell-off after another led to the Dow Jones Industrial Average posting its worst day since last October on a nearly 726-point (2.1%) loss. Moreover, the S&P 500 plunged 1.6% with energy and financials leading the way, while the Nasdaq Composite fared best at just 1.1% down.
Q.ai runs daily factor models to get the most up-to-date reading on stocks and ETFs. Our deep-learning algorithms use Artificial Intelligence (AI) technology to provide an in-depth, intelligence-based look at a company – so you don’t have to do the digging yourself.
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Five9, Inc (FIVN)
Five9, Inc closed up 0.6% to $177.60 on Friday, ending the day at 347.7k trades – before soaring over $10 per share by Monday’s close to end the first day of the week at $188.12 per share with nearly 11.3 million trades on the books. This substantive jump saw Five9 trade near 200x forward earnings on the day.
The sudden stock price surge over the weekend – on a day when the rest of the market performed abysmally, no less – came after Zoom announced on Sunday that it’s acquiring Five9 at a purchase price of $14.7 billion in an all-stock sale. This is the first significant leap Zoom has made from its comfortable pandemic-era perch, as Five9 provides an opportunity for the video communications company to expand into the cloud contact center software space.
All Five9 stockholders will receive 0.5533 shares of Zoom Video Communication per share, which values Five9 at a 13% premium of $200.28 per share.
And it’s no wonder why Zoom is interested in Five9, as the last three fiscal years have seen the up-and-coming cloud technology company explode. Revenue is up 85.4% to $434.9 million compared to $257.7 million; operating income jumped from $7 million to $8.5 million; and EPS has risen from zilch to 66 cents on the share. Meanwhile, return on equity shot up from just 0.23% to over 17.7%.
Currently, Five9’s forward 12-month revenue is expected to grow by 3.33%. Our AI rates this cloud tech company B in Technicals and C in Growth, Low Volatility Momentum, and Quality Value.
AT&T, Inc (T)
AT&T, Inc nudged down 0.3% Friday to $28.34 per share, ending the day with 26.2 million trades on the books. The stock is down over 1.5% for the year and trading close to 9x forward earnings.
AT&T is trending this week thanks to a new 10-year agreement between longstanding frenemies AT&T and Dish Network. The partnership cements AT&T as the primary network provider for Dish going forward, with AT&T replacing rival T-Mobil. This move may signal a precursor to the oft-rumored (but never-realized) DirecTV-Dish merger.
And in other news, DirecTV announced this week that it’s selling $6.2 billion worth of debt on the high-yield and leveraged loan markets to help finance its split from AT&T. The spin-off, which was reported earlier this year, sets the stage for a direct venture with TPG, a private equity firm, to run the television provider’s pay-TV operations.
Between these two deals, AT&T is likely hoping to capitalize on its lumbering – but continuous – bottom line growth. Over the last three fiscal years, AT&T’s revenue has climbed just 1.3% from $170.7 billion to $171.7 billion, though the pandemic ate into the telecom giant’s operating income as it fell from $31.6 billion to just $25.6 billion. Meanwhile, per-share earnings dropped from $2.85 to just 75 cents, with return on equity falling from 11.9% to a paltry 2%.
Currently, our AI rates AT&T, Inc. A in Growth and Low Volatility Momentum and C in Technicals and Quality Value.
Dish Network Corporation (DISH)
Dish Network Corporation slipped almost 1.2% Friday to close out the week at $39.45 per share with 1.45 million trades on the books. The stock is up 22% for the year and currently trades at 12.4x forward earnings.
Unsurprisingly, AT&T’s new partnership with Dish also thrust this media conglomerate into the spotlight as it attempts to transition to a nationwide wireless operator. While Dish has discussed multiple times building a competitive network to challenge AT&T, Verizon, and T-Mobile’s wireless service, the conversation has ultimately run nowhere.
At the end of the day, Dish needs a partnership with an existing nationwide wireless provider because it doesn’t have a national network of its own – and the costs to introduce service to non-established, but essential, rural communities are prohibitive at best. For now, it appears that Dish is willing to settle for doing business with the competition.
Fortunately, the massive tv provider can afford it. Over the last three fiscal years, revenue grew over 23% to $15.5 billion compared to $13.6 billion, while operating income leaped 53.8% to $2.94 billion from $2.15 billion. Meanwhile, EPS nicked up 2 cents to $3.02 in the same period – though return on equity did lose some ground as it dropped from 20.2% to 14.3%.
All told, our AI rates Dish Network Corporation exactly average, with Cs across the board in Technicals, Growth, Low Volatility Momentum, and Quality Value.
International Business Machines Corporation (IBM)
International Business Machines Corporation slipped 1.1% to close the week at $138.90 on Friday on volume of 4.1 million trades for the day. The stock is up 10.3% for the year, though it’s trading below the 22-day price average of $143 and change.
IBM’s trending status this week comes courtesy of the tech behemoth’s second quarter earnings, which proved incrementally stronger than analyst expectations. The company’s $18.75 billion in revenue outpaced the $18.3 billion expected, with adjusted per share earnings sitting four cents above projections of $2.29 for the quarter. All told, revenue is up 3% year over year.
The bulk of IBM’s revenue came from three crucial segments. Global Technology Services raked in over a third of the total, with another third going to the Cloud & Cognitive Software business (including Red Hat’s contribution). Meanwhile, a slightly smaller portion flowed in from IBM’s Global Business Services consulting unit. But systems revenue – including hardware sales – only contributed $1.71 billion, meeting consensus.
These earnings bring a little relief to a company that has seen its revenue fall nearly $6 billion in the past three fiscal years, coming in at just $73.6 billion in the most recent year. Operating income fell substantially as well to $8.58 billion from $13.2 billion, with per-share earnings down by a third at $6.23. And return on equity was slashed nearly in half as it plunged from 50.3% to just 26.4%.
Still, despite IBM’s lackluster 2020 – and in light of its hopeful 2021 prospects – our AI rates this tech giant B in Quality Value and C in Technicals, Growth, and Low Volatility Momentum.
Exxon Mobil Corporation (XOM)
Exxon Mobil Corporation slid down 2.8% on Friday to $57.32 before losing another $2 per share by Monday close. The stock is up around 38% for the year and trading around 12.5x forward earnings, though it’s slipped from the 22-day price average of almost $62.
Good news for consumers often signals dips in stock prices when it comes to the energy sector, and this last week proved no different. Thanks to rising inflation worries – not to mention rising inflation – as well as investor and traveler angst about the spreading delta variant, ExxonMobil’s stock is one of several that’s fallen consistently throughout the last few weeks.
And in this last week, falling oil prices, as well as a tense OPEC meeting where oil groups couldn’t initially agree on who gets to produce how much to meet rising demand, led to ExxonMobil giving up substantial gains in share prices. Unfortunately, solving the OPEC quandary did little to boost ExxonMobil’s gains, as a consensus of regular, but modest, production increases over the next two years is sure to exert downward pressure on oil prices.
Over the last three fiscal years, ExxonMobil’s revenue declined over $101 billion, falling from $281 billion three years ago to just $179.8 billion. Operating income plunged significantly, too, falling from $23.3 billion to a mere $3.98 billion.
That said, per-share earnings actually rose in the period from $4.88 to $5.25, while return on equity jumped from 10.9% to 12.8%.
Currently, ExxonMobil is expected to see 12-month revenue growth around 1.7%. Our AI rates this energy stock below average overall: C in Technicals and Low Volatility Momentum and D in Growth and Quality Value.
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