For Immediate Release
Chicago, IL – December 5, 2023 – Zacks Equity Research shares AvidXchange Holdings, Inc. AVDX as the Bull of the Day and Sonos, Inc. SONO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Range Resources RRC, Coterra Energy CTRA and Cheniere Energy LNG.
Here is a synopsis of all five stocks.
Bull of the Day:
AvidXchange Holdings, Inc. is an accounts payable software and payment solutions firm. AvidXchange crushed our Q3 earnings estimates in early November and boosted its outlook.
AVDX stock has surged since its release to take it above key moving averages. AvidXchange is also gaining more attention from Wall Street.
On top of that, AvidXchange trades for around $11 per share and roughly 60% below its post-IPO highs in late 2021 right as the market peaked.
Simple & Essential
AvidXchange’s core business is focused on accounts payable automation software and payment solutions for mid-market businesses and their suppliers. AVDX aims to help boost efficiency, visibility, and control across the entire accounts payable process, while also attempting to reduce costs and risks.
AvidXchange’s customers can integrate its offerings within their current accounting systems and enterprise resource planning solutions from Intuit’s QuickBooks to Microsoft Dynamics and beyond. AVDX's specific offerings include AI-powered invoice automation software, purchase order software, purchase-to-pay automation, and much more.
AvidXchange’s accounts payable software is hardly flashy, but successfully operating in the background has helped it amass nearly 9,000 customers across real estate, construction, financial services, healthcare, technology, and beyond.
Recent Growth & Outlook
AvidXchange posted a solid beat-and-raise third quarter on November 8. The firm reported adjusted earnings of +$0.03 a share to blow away the Zacks estimate of a -$0.05 per share loss on the back of 20% revenue growth.
AVDX has crushed our bottom-line estimates for four periods running. AVDX’s boosted earnings outlook helps it land a Zacks Rank #1 (Strong Buy) right now.
AvidXchange is currently projected to trim its adjusted full year loss from -$0.24 a share to -$0.02 and then surge to +$0.03 in 2024.
Better still, AVDX’s most accurate/most recent estimate for FY24 came in at +$0.12 per share, 360% higher than its already hugely improved consensus. The company’s newly-boosted adjusted EPS estimates extended its streak of improving earnings outlooks that began in early 2022.
AvidXchange said when it reported its third quarter results that it is positioned to achieve its “medium and long-term Rule of 40 and 40-plus targets.” The Rule of 40, which is a metric many successful software firms aim to sustain, is when a firm achieves a combined growth rate and profit margin of 40% or higher.
Zacks estimates call for AvidXchange to post 19% revenue growth in both 2023 and 2024 to climb from $316 million last year to $444.6 million in fiscal 2024. The firm’s projected expansion comes on top of 27% revenue growth in FY22 (its first full year public).
Price Performance & Technical Levels
AvidXchange stock is up 10% in 2023 vs. the Zacks Tech sector’s 45%. AVDX’s YTD performance includes some large swings. AVDX stock has surged 40% since early November. The recent rebound sent AVDX shares back above their 50-day and 200-day moving averages.
AVDX went public in the fourth quarter of 2021 right before the market peaked. AvidXchange is currently trading roughly 60% below its highs of over $25 per share at $11. AVDX also trades about 12% below its average Zacks price target.
The company’s valuation levels in terms of earnings multiples are a bit out of whack considering that it is not projected to swing to positive adjusted earnings until next year. AvidXchange trades 72% below its highs at 5.1X forward 12-month sales vs. Tech’s 4X.
The stock is gaining more attention from Wall Street. Zacks currently has 12 brokerage recommendations for AvidXchange vs. 10 two months ago, and eight of those 12 brokerage recommendations are “Strong Buys.” Additional brokerage coverage could help AvidXchange stock in both the near term and the long run.
AvidXchange’s balance sheet is solid, and the firm continues to gain steam in an essential and critical area of business software, while also landing more key partnerships.
Bear of the Day:
Sonos, Inc. shares soared following its fourth quarter fiscal 2023 earnings release on November 15 despite its big bottom-line miss.
Some of the recent comeback might have been driven by the fact that Sonos also announced a new stock repurchase program that same day. Still, Sonos sits at a Zacks Rank #5 (Strong Sell) right now because of its downbeat EPS estimates which have been cut substantially for FY24 and FY25 since its Q4 report. Plus, its surge has the stock looking a bit overheated.
Sonos shipped its first product in 2005, helping usher in the modern, higher-end speaker era. Today, the speaker company competes in a somewhat crowded connected speaker space alongside Bose and other audio-focused firms, as well as global tech powers such as Apple.
Sonos specializes in wireless and multi-room sound systems, selling a range of sleek, connected speakers, subwoofers, soundbars for TVs, and more.
Sonos went public in 2018 and its stock moved mostly sideways until the initial Covid market-wide selloff and the boom that followed. The speaker firm posted 29% revenue expansion in its fiscal 2021 and 2% growth in FY22 before seeing its revenue slide 5.5% YoY in its recently-reported fiscal 2023 period.
The company’s adjusted earnings fell from $1.24 to $0.92 in FY23. Current Zacks estimates call for Sonos’ adjusted earnings to slide another 12% in FY24 on marginally lower revenue.
SONO’s FY24 consensus estimate has slipped by 24% since its mid-November earnings release, with its FY25 estimate now 19% lower. These negative EPS revisions help it land a Zacks Rank #5 (Strong Sell) right now.
Sonos currently trades over 60% below its all-time highs. SONO stock is down 7% in 2023 vs. its industry’s 12% gain and the S&P 500’s 20% climb. The underperformance includes a roughly 40% surge since its Q4 release on November 15.
The rebound has Sonos attempting to retake its 200-day moving average. But the rapid rise pushed SONO into deeply overbought RSI territory vs. way oversold just a month ago. Sonos is also trading at 56.9X forward 12-month earnings, which marks a huge premium to its low-ranked industry’s 15.1X average.
Natural Gas Extends Weekly Losing Streak on Surprise Build
The U.S. Energy Department's weekly inventory release showed an increase in natural gas supplies that defied analyst expectations for a seasonal draw. The bearish inventory numbers, together with high production and predictions of insipid weather-related demand, dragged down natural gas futures, which settled with a fourth consecutive loss week over week.
In fact, the market hasn't been kind to natural gas in 2023, with the commodity trading considerably lower year to date and briefly breaking below the $2 threshold for the first time since 2020. At this time, we advise investors to focus on stocks like Range Resources, Coterra Energy and Cheniere Energy.
EIA Reports a Surprise Climb
Stockpiles held in underground storage in the lower 48 states rose 10 billion cubic feet (Bcf) for the week ended Nov 24, in contrast to the guidance of a 10 Bcf withdrawal, per a survey conducted by S&P Global Commodity Insights. The increase compared with the five-year (2018-2022) average net shrinkage of 44 Bcf and last year’s decline of 80 Bcf for the reported week.
The unexpected build put total natural gas stocks at 3,836 Bcf, which is 341 Bcf (9.8%) above the 2022 level and 303 Bcf (8.6%) higher than the five-year average.
The total supply of natural gas averaged 111.9 Bcf per day, up 1.1 Bcf per day on a weekly basis due to higher shipments from Canada and an increase in dry production.
Meanwhile, daily consumption rose to 128.1 Bcf from 110.1 Bcf in the previous week, mainly reflecting a surge in residential/commercial usage as well as higher power burn and industrial consumption.
Natural Gas Prices Finish Lower
Natural gas prices trended downward last week following the unseasonal inventory increase. Futures for January delivery ended Friday at $2.81 on the New York Mercantile Exchange, retreating some 6.2% from the previous week’s closing. The decrease in natural gas realization is also the result of high supply and mild weather.
As is the norm with natural gas, changes in temperature and weather forecasts can lead to price swings. With mild weather across major parts of the United States and forecasts for above-normal temperature in the longer term, usage of the commodity to generate electricity is expected to be tepid.
As it is, natural gas is under pressure from near-record output, with current inventory levels well above the year-ago figure and the five-year average. The full restart of the Freeport LNG export plant in Texas is also likely to contribute significantly toward the global supply picture. The Quintana, TX facility — responsible for around 15% of U.S. liquefaction capacity — was knocked offline by a blast in June last year and has been functioning only partially since its resumption in February.
Having said all of that, there are signs of curtailment in domestic output. According to energy services provider Baker Hughes, the U.S. natural gas rig count — a pointer to where production is headed — is down some 25% from last year. Industry observers believe this could set the stage for a pullback in near-term drilling and supplies.
Meanwhile, a stable demand catalyst in the form of continued strong LNG feedgas deliveries is supporting natural gas. LNG shipments for export from the United States have been elevated for months, recently reaching record levels due to environmental reasons and Europe’s endeavor to move away from its dependence on Russian natural gas supplies due to the war in Ukraine.
Following last week’s decrease, the natural gas market is down more than 37% so far this year. Based on several factors, the space is currently quite unpredictable and spooked by the sudden changes in weather and production patterns. As such, investors are clueless about what to do. As of now, the lingering uncertainty over the fuel means that they should preferably opt for holding on to fundamentally strong stocks like Range Resources, Coterra Energy and Cheniere Energy.
Range Resources: RRC is a leading operator in the prolific Appalachian Basin — a premier natural gas play — with huge inventories of low-risk drilling sites that are likely to provide production for several decades. About 68% of the Zacks #3 Rank (Hold) company’s total output is natural gas.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Range Resources beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, with the average being 33.6%. Valued at around $7.9 billion, RRC has gained 29.8% in a year.
Coterra Energy: It is an independent upstream operator primarily engaged in the exploration, development and production of natural gas. Headquartered in Houston, TX, the firm owns some 183,000 net acres in the gas-producing Marcellus Shale of the Appalachian Basin. The Zacks Rank #3 company churned out an average of 2,204 million cubic feet on a daily basis from these assets in 2022.
Coterra beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 11.8%. Valued at around $19.7 billion, CTRA has edged down 0.2% in a year.
Cheniere Energy: Being the first company to receive regulatory approval to export LNG from its 2.6 billion cubic feet per day Sabine Pass terminal, Cheniere Energy certainly enjoys a distinct competitive advantage.
Cheniere Energy has a projected earnings growth rate of 602.5% for the current year. The Zacks Consensus Estimate for this #3 Ranked natural gas exporter’s 2023 earnings has been revised 17.3% upward over the past 60 days. LNG shares have gone up 5.4% in a year.
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