Remote work structures will likely become more organized this year, with businesses taking steps to streamline their operational workflow and delivery processes. While 2020 abruptly kickstarted the work-from-home culture globally, the rise in overall productivity and lower cost of operating this way is making organizations initiate more-permanent structural changes to their working arrangements. According to a survey by Enterprise Technology Research, the percentage of remote workers is expected to double this year, with big tech companies leading the change. And a CFO survey conducted last year by Gartner found that approximately 74% of CFOs and Finance leaders plan to set up a permanent remote working structure post pandemic.
The technology and cloud computing industries stand to be the biggest beneficiaries with the change in workforce structures because integrated secure cloud services are the backbone of remote working. Major cloud computing services companies have already identified this emerging trend and have made significant investments in research and development and vertical acquisitions to position themselves for growing demand. Moreover, as the remote lifestyle raises the demand for virtual entertainment, given people’s increased spare time and time at home, interactive entertainment and video gaming companies should grow substantially this year.
Despite delivering impressive gains over the past year, we think Microsoft Corporation (MSFT), Take-Two Interactive Software, Inc. (TTWO), Akamai Technologies, Inc. (AKAM) and Dropbox, Inc. (DBX) have plenty of upside. Their strong fundamentals coupled with industry tailwinds place them among the most ideal investment picks currently.
Microsoft Corporation (MSFT)
MSFT has made its name on innovative software design and user-friendly operating systems. MSFT’s proprietary Windows operating systems are some of the most popular worldwide, with in excess of 30% of global market share. MSFT has been one of the biggest gainers in 2020, with its cloud computing platform Azure and communications platforms Skype and Teams becoming some of the most popular services sustaining remote working and learning globally.
This week, MSFT launched an employee experience platform, Microsoft Viva, to integrate its productivity and collaboration capabilities in its 265 and Teams platforms. The new platform leverages the technology from Teams and Office 365 to develop a new employee experience focused on four key areas – Engagement, Wellbeing, Learning and Knowledge.
MSFT partnered with Verily and Broad Institute last month to quicken technological developments in the field of Biomedicine through its ‘Terra’ platform. Moreover, MSFT is currently planning to launch a digital directory to assist with the COVID-19 vaccine deployment. The directory is designed to keep track of the people who have been inoculated through Microsoft Cloud for Healthcare.
And last December, the company entered a seven-year partnership with Deutsche Telekom to enhance productivity and facilitate cloud computing services globally.
MSFT’s revenues have increased 17% year-over-year to $43.10 billion in the fiscal second quarter ended December 31, 2020. Operating income has grown 29% from the same period last year to $17.90 billion, while net income rose 33% from the year-ago value to $15.50 billion. EPS has grown 34% from the same period last year to $2.03.
A consensus EPS estimate for MSFT for the current quarter ending March 31, 2021 represents a 26.4% improvement year-over-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $41.03 billion for the current quarter represents a 17.2% improvement year-over-year.
MSFT has gained more than 80% since hitting its 52-week low of $132.52 in March last year. The stock hit its 52-week high of $245.09 on February 3. Analysts expect MSFT to hit $270.78 in the near term, indicating a potential upside of 11.4%.
MSFT has an overall grade of A, which equates to Strong Buy in our proprietary POWR Ratings system. In total, we rate MSFT on eight different levels, considering 118 different factors with each factor weighted to an optimal degree.
MSFT has a grade of A for Sentiment, and a B for Momentum, Stability, Quality. In the 108-stock Software – Application industry, MSFT is ranked #15.
You can check the additional MSFT POWR Ratings (Growth and Value) here.
Take-Two Interactive Software, Inc. (TTWO)
TTWO develops and markets interactive gaming and entertainment solutions under Rockstar Games, 2K labels, its private division, and social point labels. TTWO’s games are designed for console gaming systems, computers, and smartphones.
Over the past couple of months, TTWO has rolled out multiple upgrades for its most famous gaming series, Grand Theft Auto, through its subsidiary Rockstar Games. The company has also launched new versions of its NBA series and “Everything is game” franchise over the past two months.
TTWO’s digitally delivered net revenue has increased 16% year-over-year to $711.30 million in the fiscal second quarter ended September 30, 2020. Its recurrent consumer spending, which is an indication of long-term consumer engagement with TTWO’s products, has increased 56% from the prior-year quarter. Its net income has risen 38% from the year-ago value to $99.30 million, while its EPS rose 36.5% from the same period last year to $0.86.
A consensus EPS estimate of $5.72 for fiscal 2021 represents a 7.5% rise year-over-year. TTWO’s EPS is expected to rise at a rate of 18.2% per annum over the next five years. It has an impressive earnings surprise history as well; it beat the Street’s EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $3.30 billion for the current year represents a 10.3% improvement versus the same period last year.
TTWO has more than doubled since hitting its 52-week low of $100 in March. The stock hit its 52-week high of $211.44 on January 8th.
TTWO has an overall grade of B, equating to Buy in our proprietary rating system. It has a grade of B for Value, Momentum and Quality. The company is currently ranked #6 of 22 stocks in the Entertainment – Toys & Video Games industry.
Click here to check out additional POWR Ratings for TTOW (Growth, Sentiment and Stability).
Akamai Technologies, Inc. (AKAM)
AKAM markets content delivery network cloud services and business management solutions through cloud applications internationally. In addition, the company provides security services through its proprietary Web Application Protector and Kona Site Defender applications. Its diverse product range and professional services are designed to integrate, configure and optimize a business’s core operational model. In October, AKAM was listed as an Industry Leader in the 2020 Magic Quadrant for the fourth year in a row.
AKAM has made several tactical acquisitions over the past couple of months to consolidate its industry position. In October, it acquired Asavie, a global platform providing Internet of things (IoT) offerings and security technology for mobile phones and inter-connected devices. And on February 1 it acquired Inverse Inc., a developer of zero trust and secure access service edge solutions for IoT.
AKAM’s revenues have increased 12% year-over-year to $793 million in the third quarter ended September 30, 2020. Its revenues from its cloud security solutions segment rose 23% versus the year-ago value to $266 million, while its revenues from its media and carrier division segment rose 16% from the same period last year to $375 million. Its income from operations have improved 26% from the prior year quarter to $181 million. The company reported non-GAAP EPS of $1.31, up 19% year-over-year.
A consensus EPS estimate of $1.31 for the fourth quarter, ended December 31, 2020, represents a 6.5% rise year-over-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $829.46 million for the about-to-be-reported quarter indicates a 7.4% improvement from the same period last year.
AKAM has gained nearly 50% since hitting its 52-week low of $75.18 in March 2020. The stock hit its 52-week high of $124.91 on January 27. Currently trading at $112.11, analysts expect AKAM to hit $126.86 soon, reflecting a potential upside of 13.7%.
It is no surprise that AKAM has an overall grade of B, which equates to Buy in our POWR Ratings system. It has a grade of B for Value, Momentum and Quality.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Dropbox, Inc. (DBX)
DBX is known for its cloud storage solutions and file sharing services. Its ancillary features include Dropbox paper, Dropbox showcase and Dropbox smart sync, which allow users and businesses to efficiently collaborate on tasks. The company offers a free version of its platform to users upon signing up, which can then be upgraded to a paid subscription offering.
Last December, DBX was named as a leader in the Globe for Digital Work Hubs, 2021 by Aragon Research. The company has been included on this list for the last two years, demonstrating the company’s broadening market reach in remote connectivity.
In November 2020, DBX launched Dropbox Spaces 2.0, an upgraded version of its collaborative platform that allows users to create and work on projects on a single platform. It also added several new workflow features, new enterprise features and certification features to ensure an integrated remote work environment.
DBX’s revenues have increased 14% year-over-year to $487.40 million in the third quarter, ended September 30, 2020. Its operating income has risen 261% from its year-ago value to $30 million. Its paid user base has grown 8.9% from the same period last year to 15.25 million. DBX reported net income of $32.70 million, up 292.4% from the prior-year quarter. Its EPS has risen 300% year-over-year to $0.08.
A consensus EPS estimate of $0.24 for the fourth quarter ended December 2020 represents a 50% rise year-over-year. DBX also surpassed the Street’s EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $498.64 million for the about-to-be-reported quarter represents an 11.8% improvement from its year-ago value.
DBX gained 72.9% to hit its 52-week high of $25.16 in December last year, since hitting its 52-week low of $14.55 in March. Analysts expect DBX to hit $28.33 soon, indicating a potential upside of 18.4%.
DBX has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. It has a grade of A for Growth and Quality, and B for Value and Momentum. It is currently ranked #6 in the Technology – Services industry.
Click here to view additional POWR Ratings (Stability and Sentiment) for DBX.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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MSFT shares were trading at $242.20 per share on Friday afternoon, up $0.19 (+0.08%). Year-to-date, MSFT has gained 8.89%, versus a 3.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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