Failure to Adapt Dooms This Stock
This firm’s late transition to the cloud based software market has left it with falling profits, lagging margins, and a significantly overvalued stock.
Position Close Update: MDLZ, PRGO, ORCL & VZ
Our Long Idea and Danger Zone research reports are part of an ongoing effort to identify hidden gems in the market and help clients avoid portfolio blowups. In this Position Update report, we are closing out two Long Ideas and two Danger Zone picks previously published on the Research Blog.
Danger Zone: Verint Systems (VRNT)
This firm has seen seen margins contract as early success brought more competition. To try and offset competitors taking market share, the firm made numerous shareholder value-destroying acquisitions. Now the stock is pricing in aggressively optimistic improvements in revenue growth and profit margins.
Danger Zone: LivePerson Inc. (LPSN)
This Danger Zone pick has seen its profitability decline as new competition has entered the scene. As the market commoditized, this firm’s negative margins and limited service offering undermined its ability to compete.
Danger Zone: Tableau Software (DATA)
This stock is on the upswing and is up 23% year-to-date, while the S&P is up just 6%. The fundamentals of the business don’t justify this price move. In fact, negative margins, strong competition, and the overvalued stock price land Tableau Software (DATA) in the Danger Zone this week.
Danger Zone: Bottomline Technologies (EPAY)
Red flags appear when a firm sacrifices profitability to join the cloud and transitions to a business model with negative margins. Add in significant competition and an overvalued stock price and investors should be running for the hills.
Danger Zone: Acxiom Corp (ACXM)
Unfortunately for this firm, profits are falling, competition is rising, and the stock’s valuation is priced for perfection. These issues land Acxiom in the Danger Zone this week.
Danger Zone: PROS Holdings (PRO)
With losses piling up, a weak competitive position, and expectations of tremendous profitability already embedded in the stock price, PROS Holdings is in the Danger Zone this week.
Information Technology Sector 4Q16: Best and Worst
The Information Technology sector ranks third out of the ten sectors as detailed in our 4Q16 Sector Ratings for ETFs and Mutual Funds report. It gets our Neutral rating.
Why Companies Overpay For Acquisitions
Overpriced acquisitions are far from a new phenomenon, but they’ve been especially prevalent in recent months. As a result, we’ve gathered some ideas about the various reasons companies ignore the evidence and continue to overpay for acquisitions.
Danger Zone: Imperva Inc. (IMPV)
This week’s Danger Zone pick has since rebounded and might have investors thinking now is the time to buy. Unfortunately, the fundamentals of this company reveal a different story. Growing losses, misleading non-GAAP metrics, and significant competition land Imperva Inc. (IMPV) in the Danger Zone this week.
Danger Zone: Cornerstone OnDemand (CSOD)
Companies with long histories of profit losses often attempt to sell investors on their plans to “reach scale.” But, what happens when a company reaches scale and profits remain elusive? Profitless since going public, Cornerstone OnDemand (CSOD) lands in the Danger Zone this week.
Danger Zone: Blackbaud Inc. (BLKB)
Our call on Valeant (VRX) showed how dangerous it is to trust non-GAAP earnings because they cannot be used to cover true cash costs. For these reasons and more, Blackbaud Inc. (BLKB) lands in the Danger Zone this week.
Danger Zone: Traditional Corporate Consulting
Those consultants who adopt cutting-edge tools will experience more success than those that remain wedded to older, more manual techniques. It’s time we place Traditional Corporate Consulting in the Danger Zone.
How To Boost Oracle’s Value By $65 Billion Webinar
In case you missed it, or in case you wanted to watch it again, here is our live webinar from this week. David Trainer will discuss how undervalued Oracle is relative to real cash flows and ROIC and more.
Open Letter to Larry Ellison: How To Boost Oracle’s Value By $65 Billion
Thesis: Management can boost the market value of ORCL in the amounts provided by aligning the firm’s strategy and performance compensation with real cash flows or what we call return on invested capital.
Stocks To Hold Through A Bear Market
It’s time to look beyond technical price movements, earnings estimates, or analyst opinions. The reconciliation between cash flows and valuations has arrived. The market is beginning to distinguish between those companies that earn a quality ROIC and those that do not.
How Buybacks Destroy Shareholder Value
Corporate America has the resources to deploy a large amount of capital and invest in new technologies and innovations that can drive growth. Instead, they just keep spending more and more money on buybacks.
1Q16 Style Ratings for ETFs & Mutual Funds
At the beginning of the first quarter of 2016, only the Large Cap Blend style earns an Attractive-or-better rating. Our style ratings are based on the aggregation of our fund ratings for every ETF and mutual fund in each style.
Danger Zone: Qlik Technologies (QLIK)
Despite deteriorating margins, lack of competitive advantage, and a sky-high valuation, Qlik Technologies (QLIK: $31/share) is up nearly 33% over the past two years and finds itself in the Danger Zone this week.