The pandemic has significantly changed the way we work. And in the absence of any effective treatment or vaccine, the work from home trend is going to continue. Many large companies have already told their employees that offices will be closed well into 2021 or even longer in some cases. 

According to a Washington Post article, “companies are hiring executives to lead the virtual work experience.” This is an indication that the work-from-home culture is here to stay. The rapid digital transformation by corporations to facilitate remote working further ensures the continuation of this culture.  

According to an S&P Global Market Intelligence survey released in June, 67% of organizations surveyed expect their work-from-home policies to remain in place either permanently or for the long-term. As a result, Microsoft Corporation (MSFT), Zoom, Inc. (ZM), Wayfair, Inc. (W), Okta, Inc. (OKTA) that facilitate work from home for corporations should keep soaring.

Microsoft Corporation (MSFT)

Starting as a creator of Windows operating systems, MSFT quickly expanded into the development and support of software, services, devices, and solutions. After dwindling for decades, the company bounced back under the vigilant leadership of Satya Nadela in 2014. Under his leadership, MSFT became a leader in cloud-based solutions and also introduced Surface Pro laptops and Xbox games. Recently, the company announced its plans to acquire ZeniMax Media, the parent company of Bethesda Softworks, one of the largest privately-held game developers and publishers in the world.

MSFT’s revenue increased 13% year-over-year to $38 billion in the fiscal fourth quarter ended June 2020. The increase in revenue was led by the company’s cloud service segment Azure, which witnessed a revenue increase of 47%. Microsoft’s Surface and Xbox revenues grew 28% and 65%, respectively, in the quarter. For the period, EPS came in at $1.46, surpassing the consensus estimates by 9%.

MFST significantly benefited from the “new normal” of working and learning from home. As more and more people demanded laptops and personal computers, and more people shifted to MSFT Teams, the company saw its sales going up. The backdrop is expected to be like this for the foreseeable future, thus, MSFT will continue to benefit from its leadership position.

On September 15th, MFST announced a quarterly dividend of $0.56 per share to be paid in the coming December. The market expects the company’s revenue to grow 8% in the current quarter and 9.6% in the current year. EPS is expected to grow 11.6% in the current quarter and 12.0% in the current year. Also, the market expects the EPS to grow at a rate of 15% per annum over the next five years. 

MSFT has gained more than 67.1% since hitting its 52-week low in mid-March. The stock hit its 52-week high of $232.86 in September. MSFT pays an annual dividend of $2.04 per share, yielding 0.99%. Over the past six years, MSFT has issued more dividends than 98.4% of other dividend-issuing US stocks in the StockNews.com universe.

How does MSFT stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

B for Peer Grade

B for Industry Rank                                                                                                                   

A for Overall POWR Rating.

It is ranked #19 out of 96 stocks in the Software – Application industry.

Zoom, Inc. (ZM)

ZM provides an easy, reliable, and innovative video-first unified communications platform. It offers video meetings, webinars, and chat across desktops, phones, mobile devices, and conference room systems. ZM helps enterprises create elevated experiences with leading business app integrations and developer tools to create customized workflows.

The company is gearing up for its annual event to be held on October 14, Zoomtopia, to celebrate its users and showcase how video-first unified communications are empowering the workforce. In September end, the company announced a partnership with Lumen Technologies, Inc. which would allow ZM to deliver an enhanced quality experience, as well as combine its embedded network security with Zoom’s built-in security features to proactively protect customers using the combined services.

ZM reported a 355% year-over-year increase in total revenues to $663.5 billion for the second quarter ending July 2021. EPS increased 1050% from the year-ago value to $0.9, surpassing the consensus estimates by 104.4%.  The company’s customer base grew 458% year-over-year.

In today’s pandemic struck economy, where working and learning-from-home has become the “new normal,” connecting on Zoom’s video-first platform has almost become a necessity.

The market expects the company’s revenue to grow 315.3% in the current quarter and 285.90% in the current year. EPS is expected to grow 744% in the current quarter and 611.4% in the current year. Also, the market expects ZM’s EPS to grow at a rate of 38.5% per annum over the next five years.  The company’s cash from operations and free cash flow stood at $401.3 million and 1.32 million, respectively. This cash position is sufficient to meet the expected increase in demand.

ZM is one of the few stocks that were not affected by the mid-March market crisis. ZM has gained more than 357.4% since mid-March.   

ZM’s strong fundamentals are reflected in its POWR Ratings. It is rated a “Buy” with a grade of “A” in Trade Grade, and a “B” in Buy & Hold Grade, Peer Grade, and Industry Rank. In the 54 stock Technology – Services industry, ZM is ranked #5.

Wayfair, Inc. (W)

Headquartered in Boston, Massachusetts, with operations throughout North America and Europe, W provides a wide variety of items across home furnishings, décor, home improvement, housewares for online shopping.

The company has a portfolio of brands including Wayfair, Joss & Main, AllModern, Birch Lane, and Perigold. The company employs more than 16,200 people and had 26 million active customers as of June 2020, up 46% year-over-year.

For the quarter ending June 2020, total net revenue grew 83.7% year-over-year to $4.3 billion. This increase was primarily driven by the company’s International segment’s 90.5% year-over-year revenue growth. Non-GAAP EPS was $3.13, exceeding the market expectations by 201.0%.

The market expects the company’s revenue to grow 58.2% in the current quarter, 51.9% in the current year, and 13.4% next year. EPS is expected to grow 135.4% in the current quarter and 129.8% in the current year. Also, the market expects the EPS to grow at a rate of 14% per annum over the next five years. The company’s cash situation looks impressive as cash flow from operation and free cash flow stood at $1.13 billion and 11.11 million, respectively. W gained almost 1286% since hitting its 52-week low of $21.7 in mid-March.  

W’s strong fundamentals are reflected in its POWR Ratings. It is rated “Buy” with a grade of “A” in Trade Grade, and a “B” in Peer Grade and Industry Rank. In the 34-stock Specialty Retailers industry, W is ranked #5.

Okta, Inc. (OKTA)

OKTA is a leading independent provider of identity for enterprises. The Okta Identity Cloud enables organizations to securely connect the right people to the right technologies at the right time. Over 8,950 organizations, including Engie, JetBlue, Nordstrom, Takeda Pharmaceutical, Teach for America, T-Mobile, and Twilio, trust OKTA for protecting the identities of their workforces and customers.

On October 7th, OKTA made a few important announcements relating to partnerships and product enhancements. The company announced a partnership and new integration between the Okta Identity Cloud and Salesforce Work.com designed to help organizations and communities build trust with their employees and customers. The company also announced major advancements to its Advanced Server Access to accelerate scalability and compliance of cloud infrastructure. The company also launched Okta Customer Identity Workflows, a new product that enables product builders and IT professionals to automate the most complex digital transformation identity processes.

For the second quarter ending July 2020, the company reported total revenue of $200.4 million, an increase of 43% year-over-year. Subscription revenue grew 44% year-over-year. OKTA reported an EPS of $0.07, exceeding the market expectations by 450%. For the entire fiscal year ending 2021, the company expects its total revenue to grow 37% year-over-year.

The market expects the company’s revenue to grow 32.5% in the current quarter, 37.1% in the current year, and 30.0% next year. EPS is expected to grow 85.7% in the current quarter and 96.8% in the current year. Also, the market expects the EPS to grow at a rate of 25.0% per annum over the next five years.  The company’s cash from operations and free cash flow stands at $10.9 million and $0.05 million, respectively. Since hitting its 52-weeks low e in mid-March, OKTA gained around 150% since. The stock is currently trading close to its 52-week high.

OKTA’s promising outlook is reflected in its POWR Ratings. It is rated a “Strong Buy” with a grade of “A” in Trade Grade, Buy & Hold Grade, and Peer Grade and a “B” in Industry Rank. In the 48-stock Software – Business industry, OKTA is ranked #3.

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MSFT shares . Year-to-date, MSFT has gained 42.44%, versus a 10.34% rise in the benchmark S&P 500 index during the same period.

About the Author: Madhavi Taneja

Madhavi is a seasoned financial analyst with a focus in valuing early-stage technology companies and evaluating potential mergers and acquisitions. After majoring in economics, she developed a deep understanding of investment strategies while working with EX Service. More...

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