HPE, INTU, ADSK, CRM and ATHM

Emilee Geist

Chicago, IL – August 27, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Hewlett Packard Enterprise Company HPE, Intuit Inc. INTU, Autodesk, Inc. ADSK, salesforce.com, Inc. CRM and Autohome Inc. ATHM.

The first wave of tech sector earnings came and went weeks ago. But with each new wave, there was increased conviction about the better-than-expected scenario, which sent markets to new highs.

Yesterday was no different, as tech stocks continued to show their strength. Here, I’ve touched on five buy-ranked stocks from the list-

Formed as a result of the split of Hewlett-Packard Company into two separate entities, i.e., Hewlett Packard Enterprise and HP Inc., the company focuses on enterprise-facing hardware and services primarily for hybrid operating environments. It also offers some networking products and Financial services.

Earnings of 32 cents beat the Zacks Consensus Estimate of 25 cents. Revenue of $6.82 billion beat the Zacks Consensus Estimate of $6.18 billion.

HPE’s results in the last quarter were helped by strength across its hybrid products, GreenLake Cloud Services, compute and storage offerings. Supply chain disruptions eased, allowing the company to reduce backlog by $500 million. Backlog remains at historic highs but is expected to normalize by the end of the fourth quarter.

Management also offered EPS guidance for the year. Accordingly, diluted earnings for 2020 are expected to be $1.30 to $1.34 on a non GAAP basis and $0.35 to $0.31 on a GAAP basis. Workplace site strategy, product portfolio simplification and new digital customer engagement models are expected to generate annualized net run rate savings of at least $800 million by the end of fiscal year 2022.

Zacks Rank #2

Value A

Momentum B

Industry: Computer – Integrated Systems (bottom 28%)

Autodesk develops model-based design, engineering and documentation software for customers in architecture, engineering and construction; product design and manufacturing; and digital media and entertainment industries. It generates revenue through sale of products and subscriptions, as well as licenses, consulting, training and services.

Autodesk was early to build cloud-based solutions and a subscription-based business model, which is helping it generate revenue in the current environment. With the transition to the subscription model substantially complete, the revenue retention rate was at 100-110% in the last quarter.

Accordingly, China, Korea and Japan are seeing usage rates above pre-COVID levels and recovery in parts of Europe. The Americas (its largest market) likely bottomed in the last quarter.

Net subscription additions topped 10,000 with renewal rates picking up right through the quarter.

Committed revenue for the next 12 months was up 15% at quarter-end and total committed revenue was up 19%.

Online billings grew double-digits.

However, the pace of closing larger transactions slowed modestly

Guidance: Revenue retention for the rest of the year to be 100-110% as most of the transition to the subscription model is complete. The third-quarter should be better than the second and the recovery is expected to continue in the fourth. Full-year operating margin is expected to increase 3-4.5 percentage points. The free cash flow estimate for fiscal 2021 remains at $1.3-$1.4 billion as strong cash collections continue. Fiscal 2023 free cash flow target of $2.4 billion also remains unchanged.

Zacks Rank #2

Growth A

Industry: Computer – Software (top 28%)

Intuit develops and sells business and financial software, including accounting and tax preparation software and offers related services to small businesses, consumers and accounting professionals globally.

Earnings of $1.81 beat the Zacks Consensus Estimate of $1.21. Revenue of $1.82 billion beat the Zacks Consensus Estimate of $1.57 billion.

The company saw unprecedented strength in the taxation business in its fiscal fourth quarter, where the stimulus drove the DIY category. Customer additions were strongest in four years and along with continued strength in the customer retention rate, helped drive the third consecutive year of double-digit growth. Underpenetrated segments including Latinx, Self-Employed and customers-with-investments saw double-digit growth in new customers.

TurboTax Live customers jumped nearly 70%, of which 70% were upgrades from assisted systems in the prior year.

Its migration to the cloud is complete and its online business is gathering momentum.

The Small Business category remains a bit of a concern although it grew double-digits in the last quarter. Many small businesses are struggling or shut down. But Intuit is meeting the challenge with new solutions that are seeing strong uptake. And more is in the pipeline.

However, management didn’t provide guidance for fiscal 2021 because of the uncertainties in this business as well as the strength in the consumer business that will make for tougher comparisons next year.

Zacks Rank #2

Growth A

Industry: Computer – Software (top 28%)

salesforce.com, founded in 1999, is the leading provider of on-demand Customer Relationship Management (CRM) software, which enables organizations to better manage critical operations, such as sales force automation, customer service and support, marketing automation, document management, analytics and custom application development. Salesforce is currently the largest CRM vendor in the world with a market share of nearly 20% according to research firm Gartner.

Earnings of $1.44 beat the Zacks Consensus Estimate of 67 cents. Revenue of $5.15 billion beat the Zacks Consensus Estimate of $4.90 billion.

It was a record-revenue quarter, in which the company surpassed $5 billion for the first time. Strength was broad-based across products and geographies and helped by the Tableau acquisition. Large (seven-figure) deals jumped 63% from a year ago.

The recurring revenue model remains a big positive. At quarter-end, future revenue under contract was 21% above year-ago levels.

Operating margin guidance for the full year (ending January) was raised 75 basis points. Operating and free cash flow guidance was also raised.

Zacks Rank #2

Industry: Computer – Software (top 28%)

Beijing-based Autohome offers an online destination for automobile consumers primarily in the People’s Republic of China. Its content is delivered through its autohome.com.cn and che168.com websites. It also offers advertising services, dealer subscription services, used automobile listing services, automobile dealer subscription services and automotive aftermarket services including real-time feedback on service providers.

Earnings of $1.04 met the Zacks Consensus Estimate of $1.04. Revenue of $237 million missed the Zacks Consensus Estimate of $329 million.

Daily active users were up slightly from last year but up 20% from March, demonstrating strength in demand.

Revenue from new initiatives increased 38% year over year.

Live stream remains an important driver of momentum. There were 93 live-streamed events in the second quarter, including training course for dealers from 40+ brands with average viewership reaching 420,000. Major events such as the 818 Global Super Auto Show were also integrated into Live Streams.

The road trip business was very strong, with GMV in the first seven months of 2020 doubling the number for full-year 2019. Trip reviews and the short media posts reached a million.

Zacks Rank #2

Momentum A

Industry: Internet – Services (top 42%)

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.

The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.

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