SodaStream International, Mattel, AppFolio, Red Hat and Adobe Systems as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – December 13, 2017 – Zacks Equity Research highlights SodaStream International Limited SODA as the Bull of the Day and Mattel, Inc. MAT as the Bear of the Day. In addition, Zacks Equity Research provides analysis on AppFolio APPF, Red Hat RHT and Adobe Systems ADBE.

Here is a synopsis of all five stocks:

Bull of the Day:

SodaStream International Limitedis gaining momentum as health and wellness trends have boosted sales of its sparkling water system. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by the double digits in 2017.

SodaStream makes and distributes home beverage carbonation systems called Sparkling Water Makers. These allow consumers to turn tap water into sparkling water and flavored sparkling water. Products are available at more than 80,000 retail stores in 45 countries.

Natural Unsweetened Essences Launches in Stores

On Nov 20, SodaStream announced that it was launching its premier flavor essences, Fruit Drops, in stores after the entire line of natural unsweetened essences sold out online in just 2 weeks.

They are all-natural flavored, preservative-free and contain zero calories.

It comes in 5 flavors at retailers: Lemon, Lime, Raspberry, Orange and Mango.

The response to this product is in line with consumer demand for natural products, which has been steadily rising.

But can it keep the momentum?

SodaStream Beats Again in the Third Quarter

On Nov 1, SodaStream reported its third quarter fiscal 2017 results and, once again, beat the Zacks Consensus.

It was the 9th earnings beat in a row.

Earnings were $0.87 versus the Zacks Consensus of $0.74.

Revenue jumped 13% to $139.8 million from $124.2 million in the third quarter of 2016.

It saw record profitability in the quarter along with gross margin expansion. The increase in gas refill units was an all-time record of 8.4 million in the third quarter.

SodaStream saw strong growth across most of its geographic segments with revenue jumping 34% in Asia-Pacific and 13.5% in Western Europe. However, it lagged in the Americas, rising just 1.2%.

Western Europe is still its largest geography, as a percentage of total revenue, at 60.6% in the third quarter. Asia-Pacific, by contrast, accounted for just 12.4% with the Americas at 21.6%.

Raised Full Year Guidance

Given the solid performance in the quarter, the company slightly raised its full year 2017 guidance. Revenue is now expected to rise 13% to $536 million, up from $476.1 million in 2016.

Earnings are expected to be $2.90, up about 40% from the $2.07 it earned in 2016.

As a result, the analysts have tweaked their estimates to get them in line with the guidance.

The 2017 Zacks Consensus has risen to $2.96 from $2.77 since the earnings report. That's 6 cents higher than the guidance but given the earnings beat track record, analysts clearly feel confident about going above the company's guidance level.

That's earnings growth 42% compared to 2016.

However, analysts are more cautious about 2018. While those estimates have risen over the past 2 months as well, jumping to $3.24 from $2.92, that's just 9.6% earnings growth for next year.

Shares Near Multi-Year Highs

SodaStream's shares were left for dead in 2016 but have come storming back. They're up 75% in 2017 and are trying to retrace back to their 5 year highs.

Bear of the Day:

Mattel, Inc.recently warned on the full year as its brands struggle to compete this holiday season. This Zacks Rank #5 (Strong Sell) is expecting a plunge in earnings in 2017.

Mattel makes toys including such iconic toys as Barbie, Fisher-Price, Hot Wheels, Thomas & Friends and American Girl. It operates in 40 countries and sells products in more than 150.

Warns on the Full Year

But things are not well at the House of Barbie in 2017.

On Dec 9, the company announced it was lowering its 2017 full year guidance as Black Friday and the holiday season isn't shaping up well.

Its brands continue to under perform and retailers are also keeping tighter than normal inventory. Gross margins and earnings are expected to fall further in the fourth quarter.

However, in one bright spot, it did announce it will offer a $1 billion in senior unsecured notes due in 2025. This will replace the current revolving credit facility and give the company some financial breathing room.

It will use proceeds to repay all of its 1.700% Senior Notes due 2018 upon or before maturity and repay all outstanding borrowings related to its commercial paper program.

Full Year Estimates Slashed

Given the earnings warning, it's not surprising that the earnings estimates are being slashed.

6 have been cut for the full year in the last 60 days, pushing the Zacks Consensus to just $0.04 from $0.73 in that time. That's a decline in earnings of 96% as Mattel made $1.06 in 2016.

Estimates have also been cut for 2018 with the Zacks Consensus Estimate falling to $0.49 from $0.89. We will see how well this holds, however, as the recent warning is still being factored in by the analysts.

Already Suspended the Dividend

You know it's bad when a company cuts or suspends its dividend. In this case, Mattel announced on Oct 26 that the Board opted to suspend the $0.15 a share dividend starting in the fourth quarter, to conserve cash.

It will save the company $50 million per quarter.

Additionally, its cost savings plan is expected to total $650 million in savings.

Possible Hasbro-Mattel Acquisition?

There have been rumors that Hasbro may acquire Mattel. After all, its intellectual property, alone, is worth a hefty price.

But neither company has commented on that and now Mattel has moved forward with resolving its debt situation.

Still, the shares jumped off their lows on the acquisition hopes.

But they are, once again, sinking.

Additional content:

3 Cloud Stocks to Buy Right Now

In a matter of just a few years, “the Cloud” has evolved from the new feature that your grandmother just can’t quite seem to understand to one of the main factors driving growth in the technology sector. Cloud computing is now an essential focus for software-related companies, and cloud stocks have piqued the interest of many tech-focused investors.

New technologies and changing consumer behavior have changed the shape of the technology landscape, and an industry that was once centered on the personal computer has adapted to survive in the world of mobile computing and the Cloud. The markets have been paying attention, and some of the best tech stocks have been those that are either primarily cloud-based companies, or those that have shown growth in their cloud operations.

With this in mind, we’ve highlighted three stocks that are not only showing strong cloud-related activity, but also strong fundamental metrics. Check out these three cloud stocks to buy right now:

1.       Adobe Systems

Adobe Systems is a provider of graphic design, publishing, and imaging software for Web and print production. The company’s main offering is its “Creative Cloud,” which is a software-as-a-service (SaaS) product that allows users to access all of Adobe’s tools at one monthly price. The stock is currently a Zacks Rank #2 (Buy).

Adobe has had a great year, but shares recently exploded when company management released optimistic guidance for its next fiscal year. In response, we’ve seen eight positive estimate revisions for the period, and our consensus earnings estimate is now 32 cents higher.

Based on these latest figures, we now expect to see Adobe post EPS growth of 30% next year, and that’s on top of the 39% growth that’s expected this year. Current projections are also calling for sales to improve by around 20%, both this year and next year. Furthermore, the company is growing its cash flow by 48%, and management is generating a whopping $3.21 in cash per share, outpacing its industry average of just $0.68 per share.

2.       AppFolio

AppFolio offers cloud-based software solutions for the property management and legal industries. The company’s AppFolio Property Manager is a leading solution for property management, while its MyCase application is ideal for practitioners and small law firms. The young company has posted its first profits in the last three quarters, surpassing the respective Zacks Consensus Estimates in each.

A company’s first profitable quarters often mean huge profits for investors, and with shares up over 73% this year, that has certainly been the case with AppFolio. Earnings and revenue have also soared this year, but that expansion is expected to continue next year, with current estimates calling for EPS growth of 43% and sales growth of 28% in the upcoming fiscal period. And on top of this, strong earnings estimate revision activity and positive earnings surprises have earned the stock a Zacks Rank #1 (Strong Buy).

3.       Red Hat

Red Hat is a leading provider of open-source software and enterprise IT solutions, including cloud computing. The company has a strategic partnership with Amazon Web Services and is rapidly growing its cloud offerings. After another impressive bullish run, the stock is currently sporting a Zacks Rank #2 (Buy).

Red Hat has met or surpassed earnings estimates in every quarter that we have tracked the company, dating all the way back to early-2014. This year, the firm is looking to grow sales and earnings by around 20%. Furthermore, management is generating an impressive $2.29 in cash per share. Red Hat is also growing its cash flow by nearly 19% right now. And with shares continuously testing new 10-year highs, RHT has emerged as an interesting momentum pick recently.

Bottom Line

Cloud-based companies have been some of the best performing stocks in the tech sector this year, and these cloud stocks also boast strong fundamental metrics. If you’re looking to add tech stocks to your portfolio right now, this list is probably a good place to start.

Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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