Chicago, IL – December 20, 2024 – Zacks Equity Research shares Celestica CLS as the Bull of the Day and AMC Networks AMCX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Rigetti Computing RGTI, Microsoft MSFT and NVIDIA NVDA.
Here is a synopsis of all five stocks.
The price movement is a sign of strength as we approach the New Year. Increasing volume has attracted investor attention as buying pressure accumulates in this top-ranked stock.
Celestica is part of the Zacks Electronics – Manufacturing Services industry group, which currently ranks in the top 6% out of more than 250 industries. Because this group is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months, just as it has over the prior 3 months.
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top industries, we can dramatically improve our stock-picking success.
Celestica provides a range of services such as new product design and development, engineering and component sourcing, complex mechanical assembly, systems integration, and logistics.
The company has also been involved in the AI movement in terms of delivering platform solutions, which includes development of infrastructure platforms along with hardware and software design services.
Celestica offers their products and services to hyperscalers, cloud-based providers, and original equipment manufacturers. The company serves a variety of industries such as aerospace and defense, industrial, capital equipment, and communication markets.
A leading electronics manufacturer, Celestica (CLS) has built up an impressive reporting history and hasn’t missed the earnings mark in many years. The company has delivered a trailing four-quarter average earnings beat of 13.2%.
Back in October, Celestica reported third-quarter earnings of $1.04 per share, a 10.6% surprise over the $0.94/share consensus estimate. Revenues of $2.5 billion also exceeded projections by 3.7%.
Analysts are bullish on the stock and have been raising earnings estimates across the board. The fourth-quarter consensus EPS estimate has been revised upward in the past 60 days by 7.22% to $1.04/share. If the company is able to achieve this, it would translate to a 36.8% growth rate versus the same quarter last year.
This market leader has seen its stock advance more than 200% in 2024 alone. Only stocks that are in extremely powerful uptrends are able to experience this type of outperformance. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been making a series of higher highs throughout the year. With both strong fundamental and technical indicators, CLS stock is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Celestica has recently witnessed positive revisions. As long as this trend remains intact (and CLS continues to deliver earnings beats), the stock will likely continue its bullish run.
Backed by a leading industry group and history of earnings beats, it’s not difficult to see why Celestica stock is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly justify adding shares to the mix.
Recent positive earnings estimate revisions should also serve to create a ‘floor’ in terms of any sudden or unexpected downside moves. If you haven’t already done so, be sure to put CLS on your shortlist.
AMC Networks is a global provider of video entertainment products that are delivered to audiences, advertisers, and a platform of distributors. The company operates various national programming networks including the AMC, We tv, BBC AMERICA, IFC and Sundance TV.
AMC Networks also provides a suite of subscription streaming services such as AMC+, Shudder, Sundance Now, and Acorn TV. In addition, the company is engaged in the film distribution business under the IFC Films, RLJ Entertainment Films, and Shudder brands.
The stock was recently downgraded by analysts at Morgan Stanley, who cited weak pricing power given the company’s smaller scale. As we’ll see, the consensus trend for earnings estimates shows a clear negative tilt.
AMC Networks, a Zacks Rank #5 (Strong Sell) stock, is a component of the Zacks Broadcast Radio and Television industry group, which currently ranks in the bottom 48% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months.
Stocks in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when they’re part of a lagging industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
AMCX shares have been underperforming this year while the general market returned to new heights. The stock is hitting a series of lower lows and represents a compelling short opportunity as we approach the New Year.
Despite a quarterly earnings beat back in November, the company’s bottom line fell 50.8% year-over-year. Affiliate revenue decreased 13% due to basic subscriber declines, while advertising revenues fell 10% amid a challenging ad market and linear ratings declines.
AMC Networks has fallen short of earnings estimates in two of the past three quarters. The company has delivered a trailing four-quarter average earnings surprise of -6.8%.
Consistently falling short of earnings estimates is a recipe for underperformance, and AMCX is no exception.
The entertainment company has been on the receiving end of negative earnings estimate revisions as of late. Looking ahead to fiscal 2025, analysts have slashed estimates by a whopping -37% in the past 60 days. The Zacks Consensus EPS Estimate is now $3.15 per share, reflecting negative growth of -23% relative to the prior year.
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
AMCX stock is in a sustained downtrend. Notice how the stock has made a series of lower lows, widely underperforming the major indices. Also note that shares are trading below a downward-sloping 200-day moving average – another good sign for the bears.
AMCX stock has experienced what is known as a “death cross,” whereby the stock’s 50-day moving average (blue line) crosses below its 200-day moving average. The stock would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. Shares have fallen more than 50% this year alone.
A deteriorating fundamental and technical backdrop show that this stock is not set to make its way to new highs anytime soon. The fact that AMCX is included in one of the worst-performing industry groups adds yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of AMCX until the situation shows major signs of improvement.
Rigetti Computing shares have skyrocketed 691.9% in the past month compared with the Zacks Internet - Software industry’s return of 2% and the broader Zacks Computer & Technology sector’s growth of 2%.
RGTI shares have outperformed peerslike Microsoft, which offer quantum computing hardware and software solutions.
Shares of IBM and Microsoft have gained 34.6% and 16.5%, respectively, in the same time frame.
The outperformance can be attributed to RGTI’s expanding clientele and its growing influence in the quantum computing space.
RGTI’s partnership with Riverlane, NVIDIA and Quantum Machines has been a major growth driver for its success, positioning the company as a key player in the rapidly evolving quantum computing space.
Rigetti recently announced the successful application of AI, in collaboration with Quantum Machines, to automate the calibration of its 9-qubit Novera QPU. This was achieved by leveraging NVIDIA DGX Quantum, enabling high gate fidelities and marking a significant advancement in quantum computing operations.
Rigetti’s partnership with Riverlane to develop quantum error correction technology has been noteworthy. This collaboration is essential for improving the reliability of quantum computing, a key hurdle in scaling up quantum systems.
In October, Rigetti, in collaboration with Riverlane, successfully demonstrated real-time and low-latency quantum error correction on Rigetti’s 84-qubit Ankaa-2 system, achieving faster decoding times to avoid backlog issues and ensure fault tolerance in quantum computing.
Rigetti’s advancement in quantum computing technology has been a key catalyst in driving the company’s success.
In the third quarter of 2024, RGTImade advancements in quantum computing, including the development of its multi-chip architecture for scaling up qubit systems. This positions Rigetti at the forefront of the industry, enhancing its capabilities in quantum computing.
Building on this momentum, Rigetti successfully demonstrated 9-qubit chips with 99.4% median 2-qubit gate fidelity and announced plans to release a 36-qubit system by mid-2025. These advancements in quantum hardware are vital for RGTI’s future growth.
Further enhancing its role as a leader in the quantum computing space in the third quarter of 2024, Rigetti’s 24-qubit Ankaa system was made operational at the U.K. National Quantum Computing Centre, which officially opened its facility. The system is now available for testing and exploration, marking another step forward in the company’s expansion and influence within the quantum computing field.
As the quantum computing market continues to evolve, RGTI is poised to benefit from its growth. Per a Grand View Research report, the quantum computing market is expected to witness a CAGR of 20.1% from 2024 to 2030.
Rigetti’s advancements in the quantum computing space are continuously benefiting the company’s top-line growth.
However, challenging macroeconomic uncertainties and intense competition in the rapidly evolving and highly competitive quantum computing market have negatively impacted the company’s top-line growth.
In the third quarter of 2024, revenues decreased to $2.4 million, down from $3.1 million in the same period of the prior year. This drop was attributed to the variable nature of contract deliverables, especially with major government agencies, which led to fluctuating revenue streams.
Gross margin fell significantly to 51% in the third quarter of 2024 from 73% in the third quarter of 2023. This decrease was partly due to a contract for a 24-qubit quantum system, which had a lower gross margin profile compared to most other revenue sources.
The Zacks Consensus Estimate for fourth-quarter revenues is currently pegged at $2.40 million, indicating a decline of 28.99% year over year.
The consensus mark is currently pegged at a loss of 8 cents per share, unchanged over the past 30 days.
Rigetti Computing, Inc. price-consensus-chart | Rigetti Computing, Inc. Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
RGTI stock is not so cheap, as suggested by the Value Score of F.
In terms of the forward 12-month Price/Sales, RGTI is trading at 135.46X, higher than the sector’s 6.35X.
Currently, Rigetti carries a Zacks Rank #3 (Hold), implying that investors should wait for a better entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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