February 16, 2021 7 min read
This story originally appeared on StockNews
Thanks to the pandemic-induced transition from COVID-19 to work-from-home and learn-from-home models, the introduction of Zoom Video Communications, Inc. (ZM – Get Rating) web conferencing software skyrocketed last year. While many other tech companies struggled to survive, ZM stock flourished.
With all the extra attention, however, ZM’s software products were soon subjected to public and media scrutiny for security and privacy issues. Given these and the offerings of similar services from some technology leaders, there is ample reason to believe that ZM’s popularity (and the dizzying spike in its stock price) may slow this year.
While ZM has taken many steps to address security issues, it doesn’t seem like it’s making sailing smooth for the company now. Since it may take a few more months for coronavirus vaccination programs to cover the world’s population, the remote work environment remains intact. This means that professionals concerned about possible data breaches are likely to move to safer and more secure online platforms. We believe these factors are likely to hurt ZM’s subscriber growth in the coming months.
With most companies planning to maintain a hybrid work model even as the risks associated with the pandemic subside, many leading tech players are preparing to gain market share for the services ZM offers. In particular, the company could face intense competition from large corporations such as Microsoft Corporation (MSFT – Get Rating), Adobe Inc. (ADBE – Get Rating), and Dropbox, Inc. (DBX – Get Rating). These IT giants are better positioned to capitalize on the trend because of their attractive tariffs and advanced security.
Microsoft Corporation (MSFT Received Rating)
MSFT was founded in 1975 and is one of the most famous and successful players in the technology industry. The company operates in three segments: Productivity and Business Processes, Intelligent Cloud and More Personal Computing. The company’s products have performed well during the pandemic, buoyed by the demand for internet-based software and cloud services necessary for a switch to remote working during the period.
This month, the Volkswagen Group teamed up with MSFT to build a cloud-based automated driving platform (ADP) on Microsoft Azure and to simplify its data functions in order to provide automated driving experiences even faster worldwide. MSFT intends to enable technology partners to develop tools that can further improve the platform and enhance the customer experience.
In January, the company entered into a multi-year partnership with the Broad Institute of MIT, Harvard and Verily to accelerate new innovations in biomedicine through the Terra platform. This should enable MSFT to make breakthrough advances by bringing together cloud, data and AI technologies to accelerate the development of global biomedical research.
MSFT revenue for the second fiscal quarter ended December 31, 2020 increased 16.7% year over year to $ 43.08 billion. Operating income rose 29% year over year to $ 17.9 billion, while earnings per share rose 34% year over year to $ 2.03. The company’s cash flow from operating activities increased 17.2% from the prior year quarter to $ 12.52 billion.
A consensus-based EPS estimate of $ 1.77 for the current quarter ended March 30, 2021 represents an improvement of 26.4% year over year. MSFT also outperformed the Street’s EPS estimates for each of the past four quarters. The consensus revenue estimate of $ 41.03 billion for the current quarter represents an increase of 17.2% over the same period last year. The share gained 32.6% last year.
MSFT’s POWR ratings reflect this promising outlook. The stock has an overall rating of B, which equates to a buy on our proprietary rating system. The POWR ratings are calculated taking 118 different factors into account, with each factor being optimally weighted.
MSFT has a grade of A for sentiment and B for momentum and quality. MSFT ranks 12th out of 107 stocks in the software application industry.
Overall, we rate MSFT on eight different levels. In addition to the above, we have also awarded MSFT grades for stability, value, and growth. Get all of the MSFT ratings here.
Adobe Inc. (ADBE rating received)
Headquartered in San Jose, California, ADBE is one of the largest diversified software companies in the world. The company operates in segments such as digital media, digital experience and publishing and advertising. The demand for ADBE tools for next-generation collaboration and productivity is expected to grow steadily when businesses work from home.
In December, the company acquired Workfront, a premier job management platform for marketers with more than 3,000 customers and 1 million users. This acquisition should allow ADBE to meet the growing expectations of its B2B and B2C customers using its Workfront platform.
ADBE revenue for the fourth fiscal quarter ended November 27, 2020 increased 14% year over year to $ 3.42 billion. The company’s digital media revenue was $ 2.50 billion, up 20% year over year. Gross profit increased 17.9% year over year to $ 2.99 billion, while earnings per share for the period increased 166.5% year over year to $ 4.69.
A consensus-based EPS estimate of $ 2.70 for the next quarter ended May 31, 2021 represents an improvement of 10.2% year over year. Additionally, ADBE has surpassed the street’s EPS estimates for each of the past four quarters, which is impressive. The consensus revenue estimate of $ 3.70 billion for the next quarter represents an increase of 17.1% over the same period last year. The share gained 33.3% last year.
It’s no surprise that ADBE has an overall rating of B, which means “Buy” in our POWR rating system. ADBE also has the grade A for quality and B for stability and dynamics. It ranks number 22 out of 107 stocks in the software application industry.
In addition to the POWR rating grades I just highlighted, here you can see the ADBE ratings for value, mood, and growth.
Dropbox, Inc. (DBX rating received)
DBX, formerly known as Evenflow, Inc., is a collaboration platform that allows individuals, teams, and organizations to sign up for free via their website or app and upgrade to a paid subscription with premium features. The company provides cloud storage, personal cloud, file synchronization and client software to more than 600 million registered users in 180 countries.
Last November, DBX introduced new features in its collaborative workspace – Dropbox Spaces – that enable teams to organize and work securely from anywhere. The latest announcement from DBX Virtual First also shows a holistic approach to leading the remote working revolution as more companies embrace the long-term relocation. This should help the company develop software that is specifically tailored to the needs of its customers.
DBX revenue for the third quarter ended September 30, 2020 increased 14% year over year to $ 487.40 million. The company’s paid user base increased 8.9% year over year to $ 15.25 million. DBX gross profit increased 18.8% to $ 384.2 million from the year-ago quarter, while gross margin was 78.8% compared to 75.5% for the same period last year. Net income was $ 32.7 million compared to a loss of $ 17.0 million for the same period last year.
A consensus-based EPS estimate of $ 1.04 for 2021 represents an improvement of 16.9% year over year. DBX has an impressive earnings surprise story. It beat Consensus Street estimates for each of the past four quarters. Consensus revenue estimate of $ 2.11 billion for the current year represents an increase of 10.6% over the same period last year. The share gained 32% over the past year.
The strong fundamentals of DBX are reflected in the POWR ratings. The stock has an overall rating of A, which translates into a strong buy in our POWR rating system. DBX has a grade of A for quality and B for growth and dynamism. It ranks number 3 among 82 stocks in the technology services industry.
Click here to see the additional POWR ratings for DBX (Stability, Value, and Sentiment).
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