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Semiconductor stocks have surged over the last year and a return to sales and earnings growth appears to be in the cards for 2020. And Inphi Corporation, which has crushed its industry’s recent expansion, looks like a chip stock that investors might want to buy at the moment.
The Basics
Inphi makes semiconductor components and optical subsystems for networking OEMs, cloud computing and telecom companies, and more. Inphi’s pitch to clients and investors is straightforward: the firm helps “move big data fast, around the globe, with high quality and reliability.”
The Santa Clara, California-based firm topped our third-quarter 2019 estimates in the fall, reporting record revenue and EPS in the process. Cloud computing and telecom unit strength helped drive Inphi’s Q3 performance.
More recently, Inphi officially announced on January 13 that it completed its previously announced acquisition of eSilicon for $216 million in both cash and the assumption of debt. The company expects the deal will “further reinforce its premier positioning in data center interconnects, expand its presence into strategic geographic regions for talent acquisition and accelerate its strategic roadmap in developing electro-optics solutions for our Cloud and telecom customers.”
In terms of the broader semiconductor market picture, investors should note that the chip space is coming off one of its worst years since the early 2000s, with overall sales projected to fall roughly 13% in 2019, according to the Semiconductor Industry Association. Looking ahead, the chip space is set to bounce back in 2020 in terms top and bottom line growth, as the industry continues to act as the backbone of the technological revolution.
Other Fundamentals
IPHI shares have skyrocketed roughly 140% in the last year to easily surpass its Electronic-Semiconductors Market’s 37% average climb and the S&P 500’s 24%. Inphi also outpaced Micron and Nvidia and nearly matched high-flying Advanced Micro Devices.
Jumping back further, we can see that Inphi stock is up around 337% in the past five years, despite a roughly year-long downturn that began in February 2017.
The company’s recent surge has stretched its valuation picture, but IPHI sports an “A” grade for Growth and a “B” for Momentum in our Style Scores system. Plus, Inphi’s Semiconductor - Analog and Mixed industry rests in the top 30% of our more than 250 Zacks industries at the moment.
Bottom Line
Our current Zacks estimates call for the firm’s adjusted Q4 earnings to come in flat from the year-ago period at $0.45 per share on the back of 15.5% sales growth.
Meanwhile, the company’s full-year fiscal 2019 revenues are projected to jump over 23% from $294.5 million in 2018 to $362.6 million. Inphi’s fiscal 2020 sales are then expected to climb 21.2% above our current-year estimate to reach $439.6 million.
The firm’s top-line expansion is expected to lift its adjusted fiscal 2019 earnings by 84% and an additional 32% in 2020 to hit $2.09 a share.
Inphi is a Zacks Rank #1 (Strong Buy) right now, based on its positive earnings revision activity. Peeking further ahead, its adjusted earnings are projected to expand by roughly 40% on an annualized basis over the next three to five years, which easily tops AMD’s 24% and Nvidia’s 9.4%.
Therefore, growth-minded investors should think about considering Inphi stock. IPHI did touch a new 52-week high on January 17. This means some might wait for a pullback, but who knows when that will be as the market continues to climb in 2020.
Shares of iRobot have tumbled 40% in the last six months even as its industry and the S&P 500 jumped 12%. The drop came after the robotic vacuum maker narrowed its earnings and revenue outlook as the U.S.-China trade war takes its toll.
What’s Going On?
The firm’s Roomba robotic vacuums have driven sales for years. Today, iRobot’s portfolio includes multiple vacuum models, its Braava Robot mops, and its soon-to-be-launched Terra lawn mower. Another product that could prove to be a hit is the Root, which is a robotic device designed to help children learn the fundamentals of computer coding.
iRobot revenues have climbed for years, including 9% growth in the third quarter, which was driven by 25% international expansion. Despite the overall strength, the company’s U.S. sales slipped 7% last quarter and its gross margin dipped to 47.6% during the first nine months of fiscal 2019, down from 52.1% in the prior-year period.
The Bedford, Massachusetts-based company has been adversely impacted by the U.S. and China trade war. The firm has tried to move production of some of its “more easy to build products” outside of China to help counteract tariffs. iRobot executives have said that these moves would help it create better long-term supply chain flexibility.
Despite its efforts, iRobot narrowed its fiscal 2019 outlook for both its top and bottom-line expansion. The company lowered the high-end of its sales guidance to $1.21 billion, down from $1.25 billion. Meanwhile, its new EPS outlook came in at the $2.60 to $2.80 range, compared to its previous $2.40 through $3.15.
Plus, iRobot lowered the high-end of its operating income guidance from $100 million to $80 million. Clearly, iRobot’s outlook is much less optimistic but management remains confident. “Despite the severity of U.S. tariffs on robotic vacuum cleaners, and the direct and indirect disruptions they are having on U.S. category growth, we remain committed to delivering exceptional value to consumers and are mobilizing accordingly,” CEO Colin Angle said in prepared Q3 remarks.
Other Fundamentals
Investors can see in the chart that IRBT stock is up 70% in the last five years. But the last several years have been more volatile and shares are down 39% during the past two years. More recently, iRobot stock is down 38% in the past year and 40% in the last six months, as we mentioned at the top.
IRBT stock is currently trading at around $55 a share, after trading near $130 per share in April 2019. With this in mind, iRobot shares have surged 14% since January 6, after they bounced up off their 50-day moving average. This might attract some investors but it seems others might want to see further signs of a comeback before trying to buy IRBT on the dip.
In terms of valuation, iRobot holds a “D” grade for Value in our Style Scores system and is trading at 55.2X forward 12-months Zacks earnings estimates. This marks a significant premium compared to its industry’s 21X average and its own five-year median of 26.4X. IRBT’s forward sales picture does look far better.
Outlook
The company’s Q4 fiscal 2019 revenue is projected to climb 7.7%, based on our current Zacks estimates. This growth is expected to help FY19 sales jump by 10% to $1.20 billion, with its 2020 figure projected to climb another 9% to reach $1.31 billion.
Despite the expected continued top-line expansion, iRobot’s adjusted fourth quarter earnings are projected to tumble 50% to $0.42 a share. On top of that, its fiscal 2019 EPS figure is projected to fall 49%. Then its adjusted full-year fiscal 2020 sales figure is expected to sink another 65% below our 2019 estimate.
Bottom Line
The chart helps us see just how much worse iRobot’s earnings outlook has turned, with its Q4 estimate down from $0.82 to $0.42 a share and its 2020 figure down from $2.35 to $0.93. This negative earnings estimate revision activity helps IRBT earn a Zacks Rank #5 (Strong Sell) right now.
The stock also holds “F” grades for Growth and Momentum and its Industrial Automation and Robotics industry rests in the bottom 6% of our more than 250 Zacks industries.
Additional content:
Netflix Q4 Earnings On Deck: Time for Investors to Worry?
Netflix is set to report its fourth-quarter fiscal 2019 earnings results after the closing bell on Tuesday, January 21. The streaming giant’s stock price has climbed over the last several months but Wall Street is worried about Netflix’s growing competition.
Netflix stock is down roughly 1% over the last year, which stands in stark contrast to the S&P 500 and many of its fellow tech giants. The company is coming off back-to-back subscriber growth misses and those came before Disney and Apple entered the fray in November.
The early numbers from Disney+ appear strong and Apple TV+ has some big names in front of and behind the camera. Despite the competition, Netflix is still the largest streaming TV company in the world. But the firm has taken on debt to fund its original content.
NFLX is currently a Zacks Ranks #3 (Hold) heading into its report. Investors need to pay close attention to its subscriber growth and what management has to say about its new, deep-pocketed competition.
Netflix’s upcoming report and guidance could prove to be a pivotal for the firm that went on an insane run during the 2010s.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.
These 7 were selected because of their superior potential for immediate breakout.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Inphi, iRobot, Netflix, Disney and Apple highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – January 21, 2020 – Zacks Equity Research Shares of Inphi Corporation as the Bull of the Day, iRobot (IRBT - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Netflix (NFLX - Free Report) , Disney (DIS - Free Report) and Apple (AAPL - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Semiconductor stocks have surged over the last year and a return to sales and earnings growth appears to be in the cards for 2020. And Inphi Corporation, which has crushed its industry’s recent expansion, looks like a chip stock that investors might want to buy at the moment.
The Basics
Inphi makes semiconductor components and optical subsystems for networking OEMs, cloud computing and telecom companies, and more. Inphi’s pitch to clients and investors is straightforward: the firm helps “move big data fast, around the globe, with high quality and reliability.”
The Santa Clara, California-based firm topped our third-quarter 2019 estimates in the fall, reporting record revenue and EPS in the process. Cloud computing and telecom unit strength helped drive Inphi’s Q3 performance.
More recently, Inphi officially announced on January 13 that it completed its previously announced acquisition of eSilicon for $216 million in both cash and the assumption of debt. The company expects the deal will “further reinforce its premier positioning in data center interconnects, expand its presence into strategic geographic regions for talent acquisition and accelerate its strategic roadmap in developing electro-optics solutions for our Cloud and telecom customers.”
In terms of the broader semiconductor market picture, investors should note that the chip space is coming off one of its worst years since the early 2000s, with overall sales projected to fall roughly 13% in 2019, according to the Semiconductor Industry Association. Looking ahead, the chip space is set to bounce back in 2020 in terms top and bottom line growth, as the industry continues to act as the backbone of the technological revolution.
Other Fundamentals
IPHI shares have skyrocketed roughly 140% in the last year to easily surpass its Electronic-Semiconductors Market’s 37% average climb and the S&P 500’s 24%. Inphi also outpaced Micron and Nvidia and nearly matched high-flying Advanced Micro Devices.
Jumping back further, we can see that Inphi stock is up around 337% in the past five years, despite a roughly year-long downturn that began in February 2017.
The company’s recent surge has stretched its valuation picture, but IPHI sports an “A” grade for Growth and a “B” for Momentum in our Style Scores system. Plus, Inphi’s Semiconductor - Analog and Mixed industry rests in the top 30% of our more than 250 Zacks industries at the moment.
Bottom Line
Our current Zacks estimates call for the firm’s adjusted Q4 earnings to come in flat from the year-ago period at $0.45 per share on the back of 15.5% sales growth.
Meanwhile, the company’s full-year fiscal 2019 revenues are projected to jump over 23% from $294.5 million in 2018 to $362.6 million. Inphi’s fiscal 2020 sales are then expected to climb 21.2% above our current-year estimate to reach $439.6 million.
The firm’s top-line expansion is expected to lift its adjusted fiscal 2019 earnings by 84% and an additional 32% in 2020 to hit $2.09 a share.
Inphi is a Zacks Rank #1 (Strong Buy) right now, based on its positive earnings revision activity. Peeking further ahead, its adjusted earnings are projected to expand by roughly 40% on an annualized basis over the next three to five years, which easily tops AMD’s 24% and Nvidia’s 9.4%.
Therefore, growth-minded investors should think about considering Inphi stock. IPHI did touch a new 52-week high on January 17. This means some might wait for a pullback, but who knows when that will be as the market continues to climb in 2020.
Bear of the Day:
Shares of iRobot have tumbled 40% in the last six months even as its industry and the S&P 500 jumped 12%. The drop came after the robotic vacuum maker narrowed its earnings and revenue outlook as the U.S.-China trade war takes its toll.
What’s Going On?
The firm’s Roomba robotic vacuums have driven sales for years. Today, iRobot’s portfolio includes multiple vacuum models, its Braava Robot mops, and its soon-to-be-launched Terra lawn mower. Another product that could prove to be a hit is the Root, which is a robotic device designed to help children learn the fundamentals of computer coding.
iRobot revenues have climbed for years, including 9% growth in the third quarter, which was driven by 25% international expansion. Despite the overall strength, the company’s U.S. sales slipped 7% last quarter and its gross margin dipped to 47.6% during the first nine months of fiscal 2019, down from 52.1% in the prior-year period.
The Bedford, Massachusetts-based company has been adversely impacted by the U.S. and China trade war. The firm has tried to move production of some of its “more easy to build products” outside of China to help counteract tariffs. iRobot executives have said that these moves would help it create better long-term supply chain flexibility.
Despite its efforts, iRobot narrowed its fiscal 2019 outlook for both its top and bottom-line expansion. The company lowered the high-end of its sales guidance to $1.21 billion, down from $1.25 billion. Meanwhile, its new EPS outlook came in at the $2.60 to $2.80 range, compared to its previous $2.40 through $3.15.
Plus, iRobot lowered the high-end of its operating income guidance from $100 million to $80 million. Clearly, iRobot’s outlook is much less optimistic but management remains confident. “Despite the severity of U.S. tariffs on robotic vacuum cleaners, and the direct and indirect disruptions they are having on U.S. category growth, we remain committed to delivering exceptional value to consumers and are mobilizing accordingly,” CEO Colin Angle said in prepared Q3 remarks.
Other Fundamentals
Investors can see in the chart that IRBT stock is up 70% in the last five years. But the last several years have been more volatile and shares are down 39% during the past two years. More recently, iRobot stock is down 38% in the past year and 40% in the last six months, as we mentioned at the top.
IRBT stock is currently trading at around $55 a share, after trading near $130 per share in April 2019. With this in mind, iRobot shares have surged 14% since January 6, after they bounced up off their 50-day moving average. This might attract some investors but it seems others might want to see further signs of a comeback before trying to buy IRBT on the dip.
In terms of valuation, iRobot holds a “D” grade for Value in our Style Scores system and is trading at 55.2X forward 12-months Zacks earnings estimates. This marks a significant premium compared to its industry’s 21X average and its own five-year median of 26.4X. IRBT’s forward sales picture does look far better.
Outlook
The company’s Q4 fiscal 2019 revenue is projected to climb 7.7%, based on our current Zacks estimates. This growth is expected to help FY19 sales jump by 10% to $1.20 billion, with its 2020 figure projected to climb another 9% to reach $1.31 billion.
Despite the expected continued top-line expansion, iRobot’s adjusted fourth quarter earnings are projected to tumble 50% to $0.42 a share. On top of that, its fiscal 2019 EPS figure is projected to fall 49%. Then its adjusted full-year fiscal 2020 sales figure is expected to sink another 65% below our 2019 estimate.
Bottom Line
The chart helps us see just how much worse iRobot’s earnings outlook has turned, with its Q4 estimate down from $0.82 to $0.42 a share and its 2020 figure down from $2.35 to $0.93. This negative earnings estimate revision activity helps IRBT earn a Zacks Rank #5 (Strong Sell) right now.
The stock also holds “F” grades for Growth and Momentum and its Industrial Automation and Robotics industry rests in the bottom 6% of our more than 250 Zacks industries.
Additional content:
Netflix Q4 Earnings On Deck: Time for Investors to Worry?
Netflix is set to report its fourth-quarter fiscal 2019 earnings results after the closing bell on Tuesday, January 21. The streaming giant’s stock price has climbed over the last several months but Wall Street is worried about Netflix’s growing competition.
Netflix stock is down roughly 1% over the last year, which stands in stark contrast to the S&P 500 and many of its fellow tech giants. The company is coming off back-to-back subscriber growth misses and those came before Disney and Apple entered the fray in November.
The early numbers from Disney+ appear strong and Apple TV+ has some big names in front of and behind the camera. Despite the competition, Netflix is still the largest streaming TV company in the world. But the firm has taken on debt to fund its original content.
NFLX is currently a Zacks Ranks #3 (Hold) heading into its report. Investors need to pay close attention to its subscriber growth and what management has to say about its new, deep-pocketed competition.
Netflix’s upcoming report and guidance could prove to be a pivotal for the firm that went on an insane run during the 2010s.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.