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This story originally appeared on StockNews
Improving macroeconomic metrics have lately triggered a stock market slump because investors expect the Fed to tighten its monetary policy. However, projected GDP growth and rising consumer spending should help the market rebound soon. Therefore, we think it wise to buy Salesforce.com (CRM), Horizon Therapeutics (HZNP), and Vipshop (VIPS) at their current price levels. Read on for an explanation.
Higher-than-expected inflation and rising Treasury yields have caused the U.S. stock market to slump in recent days. The Dow Jones Industrial Average (DJIA) declined by 800 basis points over the past five days, while the Nasdaq Composite declined by 2.8% over this period. However, macroeconomic factors suggest a quick recovery by the market.
Among other factors, the country’s GDP is expected to grow even more robustly in the second quarter than the first (6%) and consumer spending is expected to continue rising with improving employment levels.
Therefore, we think the recent price dip in the stocks of Salesforce.com, Inc. (CRM), Horizon Therapeutics Public Limited Company (HZNP), and Vipshop Holdings Ltd. (VIPS) provide attractive entry points because these stocks are well positioned to capitalize on their respective industry tailwinds.
Salesforce.com, Inc. (CRM)
CRM provides enterprise cloud computing solutions–with a focus on customer relationship management–to businesses and industries worldwide. Its solutions include sales force automation, customer service and support, marketing automation, digital commerce, community management, analytics and a cloud platform for building custom applications.
On May 5, The Walt Disney Company’s (DIS) StudioLAB partnered with CRM to use CRM’s Customer 360 platform in managing and accelerating DIS’ content production lifecycle and to support the creation of content through post-production and marketing. With this partnership, CRM hopes to introduce innovations that continue to set the industry standard for media production.
Sonos, the world’s leading sound experience company, revealed on April 21 that it is using CRM to transform its digital shopping capabilities and deliver more personalized customer experiences. After seeing huge demand for its multi-room wireless home audio systems, Sonos was able to generate 84% year-over-year growth in its direct-to-consumer business last year using CRM’s platform. According to a Goldman Sachs analyst, CRM is well-positioned to reap benefits with Sonos’ digital transformation, which is likely to surpass its overall IT budget for the “foreseeable future.”
CRM’s revenue for the fourth quarter, ended January 31, increased 19.9% year-over-year to $5.82 billion. The company’s gross profit increased 19.7% year-over-year to $4.34 billion. Its non-GAAP income from operations is $1.02 billion, which represents a 36.6% year-over-year improvement. CRM’s non-GAAP net income has increased 62% year-over-year to $975 million. And its non-GAAP EPS increased 57.6% from the prior-year period to $1.04.
A $4.16 consensus EPS estimate for its next fiscal year, ending January 31, 2023, represents a 20.7% rise year-over-year. CRM surpassed consensus EPS estimates in each of the trailing four quarters. The $30.58 billion consensus revenue estimate for its next fiscal year represents a 18.8% gain year-over-year. CRM’s EPS is expected to grow at a 12.9% per annum over the next five years. The stock has gained 17.1% over the past year to close yesterday’s trading session at $215.56. However, CRM has declined 7.5% over the past month.
CRM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Growth, Sentiment and Quality. We have also graded CRM for Value, Momentum and Stability. Click here to access all CRM’s ratings.
CRM is ranked #18 of 125 stocks in the Software – Application industry.
Horizon Therapeutics Public Limited Company (HZNP)
HZNP is an Ireland-based biopharmaceutical company that focuses on the research, development and commercialization of medicines that address needs for people impacted by rare and rheumatic diseases internationally.
On March 30, the U.S. Food and Drug Administration (FDA) delivered a prior approval supplement (PAS) to HZNP’s Biologics Licensing Application (BLA) to manufacture more TEPEZZA, a drug for the treatment of Thyroid Eye Disease. HZNP expects TEPEZZA’s net sales to be more than $1.28 billion in 2021.
For its fiscal year 2021 first quarter, ended March 31, HZNP’s net sales from the Orphan segment increased 4.9% year-over-year to $257.50 million. The company had $815.45 billion in cash and cash equivalents as of March 31, 2021.
For the current quarter, ending June 30, analysts expect HZNP’s EPS to be $0.87, which represents a 117.5% improvement year-over-year. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Analysts expect the stock’s revenue to be $701.68 million for the current quarter, up 51.6% from the prior-year period. The company’s EPS is expected to grow at 14% per annum over the next five years. HZNP has gained 89.5% over the past year and closed yesterday’s trading session at $87.40. Over the past month, the stocks declined 5.7%.
HZNP’s POWR Ratings reflect this promising outlook. The stock has a B grade for Value. Click here to see the additional ratings for HZNP (Growth, Momentum, Quality, Sentiment and Stability).
The stock is ranked #78 of 230 stocks in the Medical – Pharmaceuticals industry.
Vipshop Holdings Ltd. (VIPS)
VIPS operates as an online discount retailer for various brands in China. The company provides men’s, women’s and children’s apparel, accessories, sportswear and sporting goods, skin care and cosmetic goods, home and lifestyle products. It offers these products through its vip.com and vipshop.com online platforms, as well as through its internet website and cellular phone application.
In March, VIPS announced a $500 million share repurchase program over the 24 months. The company expects to fund the repurchases from cash on hand. The buyback program is expected to increase the company’s earnings over the long term.
For the fourth quarter, ended December 31, 2020, VIPS’ total net revenues increased 22% year-over-year to RMB35.77 billion ($5.48 billion). Its gross profit was RMB7.85 billion ($1.20 billion), which represents a 12.1% rise from its prior quarter. Its non-GAAP income from operations is RMB2.82 billion ($432.11 million), up 30.2% from the prior-year period. Its non-GAAP net income increased 33.4% year-over-year to RMB2.58 billion ($394.84 million) for the quarter. Also, its non-GAAP net income per ADS increased 30.3% year-over-year to RMB3.70 ($0.57).
Analysts expect VIPS’ EPS to be $0.39 for the current quarter ending June 30, 2021, which represents a 34.5% improvement year-over-year. Analysts expect the stock’s revenue to be $4.78 billion for the current quarter, up 32.8% from the prior-year period. The company’s EPS is expected to grow at 3% per annum over the next five years. The stock has gained 49.7% over the past year and closed yesterday’s trading session at $25.75. However, the stock is down 9.5% over the past month.
It’s no surprise that VIPS has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Growth, and a B grade for Value and Sentiment.
In addition to the POWR Ratings grades we’ve just highlighted, one can see VIPS’ ratings for Quality, Momentum and Stability here.
VIPS is ranked #6 of 77 stocks in the China group.
CRM shares were trading at $211.29 per share on Wednesday afternoon, down $4.27 (-1.98%). Year-to-date, CRM has declined -5.05%, versus a 9.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.