The Zacks Analyst Blog Highlights: IBM, Cisco Systems, NetSuite, Rackspace Hosting and Veeva Systems
For Immediate Release
Chicago, IL – April 04, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the IBM Corp. (IBM-Free Report), Cisco Systems, Inc. (CSCO-Free Report), NetSuite Inc. (N-Free Report), Rackspace Hosting, Inc. (RAX-Free Report) and Veeva Systems Inc. (VEEV-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Thursday’s Analyst Blog:
Dark Clouds Hover Over These Cloud Stocks
According to a study, cloud-related tech spending is expected to witness an almost three-fold jump from $78.2 billion in 2011 to $235.1 billion in 2017. Multibillion-dollar investments in cloud-based architectures are expected to follow as more and more companies turn to cloud computing to offer online storage, computing, analytics and provisioning services to tackle a proliferation of huge data.
But before joining the bandwagon, companies must realize that technology is just a mere tool and not necessarily the only route to success. It is true that cloud computing can play wonders in transforming a business by offering a competitive edge, but a company requires more than just tools and technologies to succeed in the long run.
As each player in the industry strives to win a greater market share with reduced barriers-to-entry and competitive pricing, the battle gets increasingly murkier. With the global consumer cloud subscription tally projected to rise to 730 million this year from 630 million in 2013, the fight for dominance is understandably fierce. However, not all companies have been able to cash-in on the euphoria and have visibly lagged far behind in the race. Before we zero-in on such stocks that investors should avoid currently, let us have a quick look across the cloud to gauge the movements of the movers and shakers.
Price Wars
As commoditization of cloud services gains steam, service providers are reducing prices to gain more market share. This has led to intense price wars among rivals as one tries to outwit the other.
Key Differentiators
However, not all companies are aggressively following the pack. Price is one of three factors in the decision-making process for availing cloud computing services, the other two being quality and innovation. Experts argue that in order to maintain margins, tech companies will try to offset the price cuts with over-subscription of their services. This is expected to culminate in performance degradation, thereby eroding the financial benefits and leaving the customer at status quo.
Cloud services provider IBM Corp. (IBM-Free Report) has resisted itself from across-the-board price cuts and instead introduced special pricing deals for volume customers. Cisco Systems, Inc. (CSCO-Free Report) further pushed the envelope when it announced an ambitious plan to invest over $1 billion to build the world’s largest global Intercloud (a network of clouds) over the next two years. The Cisco global Intercloud is expected to raise the performance bar with an expanded suite of value-added application- and network-centric cloud services to accelerate the Internet of Everything.
3 Cloud Stocks to Avoid
Not all companies are able to capitalize on such positive vibes in the industry. Let’s take a closer look at these companies that appear to be falling much behind in the race and are expected to perform abysmally in the short-term.
NetSuite Inc. (N-Free Report): Headquartered in San Mateo, CA, NetSuite offers cloud-based financials and enterprise resource planning (:ERP) and omni-channel commerce software suites in the U.S. and internationally. This Zacks Rank #3 (Hold) stock has a poor year-to-date return of -8.1% (as of April 2, 2014).
The current Zacks Consensus Estimate for the recently concluded quarter is pegged at a loss of 24 cents, which represents a year-over-year decrease of 43.5%. The earnings estimate for full-year 2014 has also declined by 6 cents or 7.3% in the last 90 days to a loss of 88 cents.
Rackspace Hosting, Inc. (RAX-Free Report): Headquartered in San Antonio, TX, Rackspace provides cloud computing services for small and medium-sized businesses through dedicated hardware and multi-tenant pools of virtualized hardware. With a year-to-date return of -15.7%, this Zacks Rank #3 (Hold) stock has witnessed a steady drop in earnings estimates.
The current Zacks Consensus Estimate for the recently completed quarter is pegged at 12 cents, which represents a year-over-year decrease of 39.0%. The earnings estimate for full year 2014 has declined by 12 cents or 16.7% in the last couple of months to 60 cents.
Veeva Systems Inc. (VEEV-Free Report): Headquartered in Pleasanton, CA, Veeva provides industry-specific cloud-based software solutions for the life sciences industry in North America, Europe, the Asia Pacific, and Latin America. This Zacks Rank #4 (Sell) stock has a dismal year-to-date return of -18.4%.
Earnings estimate for both the recently completed quarter and the ongoing fiscal have been revised downward. The earnings estimate for fiscal 2015 has declined by 4 cents or 16.7% in the last month to 20 cents.
With such disappointing metrics and grim earnings outlook, investors may be better off if they avoid these stocks.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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