CyberArk Flourishes as Ulta Faces Challenges in Today’s Market
Chicago, IL – October 29, 2024 – Zacks Equity Research highlights CyberArk Software (CYBR) as its Bull of the Day, while Ulta Beauty (ULTA) has been flagged as the Bear of the Day. Furthermore, analysis is provided for Meta Platforms Inc. (META), NVIDIA Corp. (NVDA), and Thomson Reuters Corp. (TRI).
Here’s an overview of these three companies:
CyberArk Software stands out as a leading player in identity security. The firm delivers extensive security solutions for identities across various business applications, catering to remote workforces, hybrid cloud setups, and the DevOps lifecycle.
Analysts maintain a positive outlook on the company’s earnings potential, earning a Zacks Rank #1 (Strong Buy). Its stock is backed by upward revisions in earnings estimates and is positioned within the Zacks Computers – IT Services sector, which is currently in the top 20% of all Zacks industries. Let’s delve deeper into the firm’s standing.
CyberArk Upgrades Its Forecast
The forecast for CyberArk’s current fiscal year is very optimistic. The Zacks Consensus EPS estimate of $2.29 has surged over 60% year-over-year, pointing to a remarkable 105% growth rate. Additionally, sales are projected to increase significantly, with expected figures of $940 million representing a 25% rise compared to FY23.
After a strong quarterly report, CyberArk’s shares have hit all-time highs. Historically, stocks achieving new highs often continue to rise, especially when bolstered by positive earnings estimate revisions.
In its recent performance, CyberArk reported record revenues and an uptick in profitability, exceeding previous guidance across all metrics. Subscription revenue rose to $158.4 million, nearly 50% higher than the same period last year, reflecting a surge in demand.
Following its earnings report, the company raised its full-year guidance, explaining investors’ positive response to these results. Future growth prospects look promising, as indicated below.
Though the valuation may seem high, it represents investors’ strong growth expectations. Currently, shares are trading at an 11.4X forward 12-month price-to-sales ratio, above the five-year median of 9.1X but lower than the high of 14.2X observed in the past five years.
The stock has a Style Score of ‘F’ for Value. Despite high valuation concerns, the company’s impressive growth trajectory is compelling.
Conclusion
Smart investors can gain an edge in identifying potential winners by utilizing Zacks Rank, one of the most effective tools in the market. Stocks rated Zacks Rank #1 (Strong Buy), accounting for the top 5% of all stocks, are expected to outperform the market significantly.
With a Zacks Rank #1 (Strong Buy), CyberArk Software could be a worthy investment consideration.
Ulta Beauty is recognized as a prominent beauty retailer in the United States, offering an extensive range of products including cosmetics, fragrances, skincare, and hair care in its stores.
Currently, analysts have adopted a negative outlook on Ulta’s performance, leading to lowered earnings expectations and a Zacks Rank #5 (Strong Sell).
The company is also categorized in the Zacks Retail – Miscellaneous industry, which sits in the bottom 42% of Zacks industries. Let’s examine the company’s recent performance.
Ulta’s Stock Struggles
In 2024, ULTA shares have declined by 23%, markedly trailing the S&P 500. Disappointing quarterly results have played a significant role in this drop, with the stock failing to show sustained improvement post-earnings in recent months.
Despite strong sales growth over previous years, the growth rates have noticeably slowed, as indicated below. For reference, the chart outlines the year-over-year changes in sales percentages, not specific sales figures.
Historically, Ulta traded at high multiples due to exceptional growth rates, yet the current forward 12-month earnings multiple of 16.1X is considerably lower than its five-year high of 80.8X. While the stock may appear historically affordable, investors might benefit from waiting for improved earnings estimates before diving in.
Conclusion
With slowing growth rates, Ulta’s near-term prospects look challenging.
Ulta Beauty holds a Zacks Rank #5 (Strong Sell), indicating a pessimistic outlook from analysts regarding the company’s earnings. For investors in search of strong stocks, focusing on those with a Zacks Rank #1 (Strong Buy) or #2 (Buy) can enhance the likelihood of finding opportunities for substantial gains.
Additional Insights:
Invest in Meta Platforms: Q3 Earnings on the Horizon
Meta Platforms Inc., the largest social media platform globally, has transformed its offerings from the original Facebook app to a suite of applications including Instagram and WhatsApp through strategic acquisitions. Together with Messenger, these applications form Meta’s diverse product family.
The tech giant is set to announce its third-quarter 2024 earnings results on October 30, following the market close. Currently, it holds a Zacks Rank #2 (Buy) and a positive Earnings ESP of 2.83%. For those interested, here is the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.
Research highlights that stocks with a Zacks Rank of #3 (Hold) or better, coupled with a positive Earnings ESP, have about a 70% chance of exceeding earnings expectations. Such stocks are typically projected to see price increases following their earnings releases. Utilize our Earnings ESP Filter to identify the best stocks to buy or sell before these announcements.
Meta Platforms is heavily investing in generative artificial intelligence (AI). Some financial experts have questioned the timing of monetizing these substantial investments.
A potential earnings and revenue beat could significantly impact META’s ability to monetize its AI spending, and a favorable Zacks Rank is likely to bolster its stock price in the near future.
Important Elements for the Upcoming Quarter
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Meta Platforms: Capitalizing on AI and User Growth for Strong Financial Performance
Meta Platforms is seeing consistent user growth in all regions, especially in Asia Pacific. The company, known as META, utilizes AI to enhance its platform services, which now reach over 3.3 billion users each day. In the United States, user growth is robust, highlighted by WhatsApp surpassing 100 million monthly users and Threads nearing 200 million users.
Strong Advertising Revenue Fuels META’s Growth
Meta is experiencing significant growth in advertising revenue. In the second quarter of 2024, it reported a year-over-year increase of 21.7%, reaching $38.33 billion, which makes up 97.9% of its total revenue. The company’s strong advertising revenue performance is expected to rise as advertisers increasingly leverage its advanced AI capabilities.
Thanks to investments in machine learning, META has improved its social media platforms, including WhatsApp, Instagram, Facebook, and Threads. As a result, these enhancements are projected to boost its share in the digital advertising market.
Key metrics, such as family daily active users, ad impressions, and average advertisement pricing, are anticipated to remain stable on a year-over-year basis in the third quarter. This reflects META’s stronghold in the competitive digital advertising sector.
However, the Meta Platforms Reality Labs division, which encompasses virtual reality, augmented reality, and metaverse ventures, continues to hinder profits. The company’s approach toward profitability for this segment, alongside its AI investments, remains to be clarified.
Encouraging Earnings Estimates for META Shares
Looking ahead to the third quarter of 2024, the Zacks Consensus Estimate predicts revenues of $40.16 billion, an impressive 17.6% increase compared to the previous year. Earnings per share (EPS) are projected at $5.17, reflecting a 17.8% year-over-year rise. Moreover, META has frequently exceeded earnings expectations, with an average surprise of 12.6% over the last four quarters.
In the past week, META has also enjoyed positive revisions in earnings estimates for both 2024 and 2025. The current consensus suggests growth of 20% for revenues and an impressive 44.2% for EPS in 2024.
Looking ahead to 2025, the estimates indicate a 14% and 13.3% increase in revenues and EPS, respectively. Additionally, META’s long-term EPS growth rate stands at 19.1%, considerably outpacing the S&P 500’s growth rate of 13.1%.
Additional Growth Catalysts for META Stock
Meta is poised to receive initial shipments of NVIDIA Corp.’s latest AI chip, which is expected to be a game changer. The upcoming Blackwell AI chip will enhance META’s capabilities, particularly with the B200 Blackwell chips.
With its AI-driven platform, META is boosting advertising efficiency and improving return on investment for advertisers. Strong performances in sectors such as e-commerce, gaming, entertainment, and media are working in the company’s favor.
Company management indicated plans for substantial capital investments ranging from $37-$40 billion in AI initiatives during 2024, with projections of exceeding $50 billion in 2025.
On July 24, META introduced its Llama 3 AI model. With NVIDIA’s HDX H200 chip supporting Llama 3, for every $1 spent by an API provider, projections show it could generate $7 in revenue over four years. This free Llama 3 model and its advanced version set to launch next year are geared to compete with established players like OpenAI.
On October 24, Meta formed a multi-year partnership with Thomson Reuters Corp, allowing its AI chatbot access to news content. This marks a significant collaboration between a major technology firm and a news giant.
Potential Upside for META Shares
Meta’s stock has seen an impressive growth of approximately 62% year-to-date, significantly outperforming the Internet Software Industry, which gained 23.1%. Despite this surge, META remains attractive, trading at a forward price/earnings (P/E) ratio of 26.5X, lower than the industry average of 32.9X. META also boasts a solid return on equity of 34.2%.
Brokerage firms have set an average short-term price target for the stock that suggests a 9.1% increase from the last closing price of $573.25. Target prices range between $425 and $811, indicating a possible maximum upside of 41.5% and a maximum downside of 25.9%.
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NVIDIA Corporation (NVDA): Free Stock Analysis Report.
Ulta Beauty Inc. (ULTA): Free Stock Analysis Report.
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