Chicago, IL – January 4, 2024 – Zacks Equity Research shares Stronghold Digital Mining SDIG as the Bull of the Day and Elbit Systems ESLT as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon AMZN, CrowdStrike CRWD and Fortinet FTNT.
Here is a synopsis of all five stocks:
Stronghold Digital Mining is a Zacks Rank #3 (Hold) that has a D for Value and an A for Growth. Stronghold Digital is in the business of mining bitcoin and selling it to fund operations. The price of SDIG stock surges in December as investors piled into Bitcoin related names in anticipation of SEC approval of Bitcoin ETFs. On top of the ETF, there is a “halving” of Bitcoin coming in April of this year and that will be another strong catalyst for Bitcoin miners like Stronghold Digital. Let’s explore more about this company in this Bull of The Day article.
Stronghold Digital Mining, Inc. is a vertically integrated crypto asset mining company, which engages in mining Bitcoin. It operates the Energy Operations and Cryptocurrency Operations segments. The company was founded by Gregory Allan Beard and William B. Spence on March 19, 2021 and is headquartered in New York, NY.
When the Federal Reserve declined to increase interest rates in December they also released a dot plot that indicated that rates were likely to come down in 2024. The long awaited pivot will likely force cash from money market accounts and back into the market. Many investors rushed to buy some of the higher beta / beaten down small cap stocks like Stronghold Digital (SDIG)
Stronghold Digital (SDIG) saw its stock price more than double in the month leaving investors waiting for a dip in price in order to build a position in the name. That has come over the last few days as the stock has slipped from more than $11 back down to $6.
Those who have waited for pull back now have a great chance to see their investment prosper. On the flip side, the short sellers have not built a very large position in the stock with only 7.8% of the float sold short. There is a lag in reporting short interest data so we are working with data that was published on December 27 but was accurate as of December 15. The next publication date will be January 10, but again, the lag puts the date of accuracy closer to December 29 when the stock was peaking.
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
For Stronghold Digital, I see three beats of the Zacks Consensus Estimate and one miss over the last year. The average positive earnings surprise over the last year works out to be 34%.
Earnings Estimates Revisions
Earnings estimates revisions is what the Zacks Rank is all about.
For SDIG estimates are holding still.
The Zacks Rank tells us which stocks are seeing positive earnings estimate revisions so it makes sense that this stock has no positive or negative revisions over the last 60 days when it is a Zacks Rank #3 (Hold).
A key idea in the estimates for SDIG should be noted here. The company is slated to lose $1.56 for the full year 2023 but estimates are calling for the company to be profitable in 2024 by earning $0.08.
This year the company is looking for 21% topline contraction in 2023, but the story changes in 2024. The consensus estimate for revenue is calling for 47% year over year growth in 2024. Accelerating growth on top is a great signal.
The forward PE works out to be 82.5x, which might scare some investors off, but the probability of estimates increasing down the road will probably serve to help lower the forward PE. The price to book of 0.76x means that at current prices, investors are buying the stock for less than the assets on the books. Value investors love to see a low price to book multiple. Price to sales of 0.9x suggests that the market doesn’t fully value the sales of the company, but with Bitcoin set to surge thanks to the probable approval of ETFs and the halving, that should change dramatically.
Elbit Systems is a Zacks Rank #5 (Strong Sell) and has seen earnings estimates slide lower recently following a rough year with 4 misses of the Zacks Consensus Estimate. This article will look at why this stock is a Zacks Rank #5 (Strong Sell) as it is the Bear of the Day.
Elbit Systems Ltd. engages in the defense and homeland security sector. It develops and supplies airborne, land and naval systems and products for defense, homeland security, and commercial applications. The firm also provides training and support services. The company was founded in 1996 and is headquartered in Haifa, Israel.
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
In the case of ESLT, I see four misses of the Zacks Consensus Estimate. This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.
The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.
The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower. For ESLT I see annual estimates moving lower of late.
The current fiscal year (2023) consensus number moved lower from $6.90 to $6.30 over the last 60 days.
The next year moved from a gain of $7.75 to $6.60 over the last 60 days.
Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).
It should be noted that a lot of stocks in the Zacks universe are seeing negative earnings estimate revisions. That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).
CrowdStrike shares fell 3.3% to close at $246.89 on Jan 2. The dip presents a buying opportunity as CRWD is benefiting from a strong portfolio of innovative solutions that encompass endpoint security, threat intelligence and cyber-attack response domains.
In the trailing 12-month period, CrowdStrike shares have outperformed the Zacks Computer & Technology sector, as well as Zacks Internet Software peers like Fortinet and Palo Alto Networks.
CRWD shares have returned a whopping 139% compared with the sector's, Fortinet's and Palo Alto's growth of 53.8%, 19.1% and 108.7%, respectively.
Apart from strong fundamentals, CrowdStrike currently has a Growth Scoreof A and carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Per the Zacks proprietary methodology, a stock with such a favorable combination offers a good investment opportunity.
Let's delve deep into the factors that make CRWD an attractive stock in 2024.
Spending on cybersecurity and risk management is expected to hit new highs this year, as per projections from market research firms IDC and Gartner.
IDC, in its August 2023 update, projected cybersecurity spending to increase 18% this year. In its September 2023 report, Gartner projected worldwide end-user spending on security and risk management to reach $215 billion in 2024, indicating growth of 14.3% over 2023's estimate of $188.1 billion.
Ongoing digital transformation driven by continuing transition to cloud, hybrid work environment, rapid adoption of generative AI and increasing regulatory scrutiny are expected to drive spending, per Gartner.
Spending on cloud security and data privacy is expected to increase the most, which bodes well for CrowdStrike's growth prospects.
CRWD's Falcon platform has been purpose-built in the cloud to harness the power of data. It set itself apart from other players in the space by providing a single lightweight platform that detects and mitigates threats in real-time, a step up from older signature-based models.
Falcon's 23 cloud modules boost CrowdStrike's competitive edge and help add users. In third-quarter fiscal 2024, CrowdStrike's subscription customers who adopted five or more cloud modules represented 63% of the total subscription customers, those with six or more cloud modules accounted for 42% and those with seven or more cloud modules represented 26%.
More importantly, deals with eight or more modules increased 78% year over year in the reported quarter. The number of public cloud customers CrowdStrike protects increased 45% year over year, reflecting market share win.
Annual Recurring Revenue (ARR) surged 35% year over year to $3.15 billion. CrowdStrike witnessed strong demand for AI native XDR platform, continued momentum in cloud security and identity businesses, as well as a robust performance from the LogScale Next-gen Security Information Event Management (SIEM) business.
CRWD added $223 million to its net new ARR in the reported quarter. LogScale surpassed $100 million in ARR.
Portfolio innovation aids growth prospects with the addition of new solutions like Falcon for IT, a module that unifies IT and SecOps. Falcon data protection module (now available generally) offers smooth data security, while Falcon Foundry, a no-code application development solution, enables both customers and technology partners to build directly on Falcon.
A diversifying end-market is expected to boost growth. CrowdStrike's Falcon Go, launched in November last year, addresses the security requirements of small and medium businesses (SMBs), including ransomware attacks and data breaches.
A strong partner base that includes the likes of Optiv and Amazon has been a key catalyst.
CrowdStrike's strategy to launch Falcon Go on Amazon Business is noteworthy. Falcon Go became the first CRWD solution available on Amazon's business-to-business store. CRWD has become the first cybersecurity independent software vendor founded for the cloud to exceed $1 billion in software sales through AWS Marketplace.
Optiv recently surpassed the $1 billion milestone in sales of its AI-native CrowdStrike Falcon platform through the CrowdStrike Accelerate Partner Program.
CrowdStrike's growth trajectory has also been shaped by accretive acquisitions over the years. The acquisitions of Reposify, Humio and Preempt in 2020 have enhanced its capabilities in identity-based threat prevention, access control, SIEM and external attack surface management. The pending Bionic acquisition will enable CRWD to expand toward Application Security Posture Management.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
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