Stocks’ Details

Zoom Video Communications, Inc.

ZM Plans to Expand in Singapore: Zoom Video Communications, Inc. (NASDAQ: ZM) was founded in 2011 and combines video, audio, phone, screen sharing and chat functionalities, which make remote-working and partnership uncomplicated. On December 15, 2020, the company stated that it plans to strengthen its foothold in Singapore by starting a new Research and Development Center, to hire hundreds of important engineering headcount. This move marks the company’s growing strategic investment in the country, where it already has existence for 2 years.

3QFY21 Key Highlights: During the quarter, the company reported adjusted earnings of 99 cents per share, as compared to earnings of 9 cents per share reported in 3QFY20. Revenues for the period came in at $777.2 million, skyrocketing 367% on pcp, owing to new customer subscriptions, which represented roughly 81% of growth. At the end of 3QFY21, the company has ~433,700 customers (with more than 10 employees), which soared 485% year over year. The company exited the quarter with a cash balance of $1.87 billion. Free cash flow during the quarter amounted to $388.2 million.

Key Results (Source: Company Reports)

Outlook: For 4QFY21, the company expects revenues to be in the range of $806 million and $811 million. Non-GAAP earnings per share are likely to be between 77-79 cents. For FY21, the company now expects revenues between $2.575 billion and $2.580 billion, whereas non-GAAP earnings are likely to be between $2.89-$2.91 per-share range.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months 

Stock Recommendation: The stock of ZM closed at $337.32 with a market capitalization of ~$96.48 billion as on 31 December 2020. The stock made a 52-week low and high of $65.52 and $588.84, respectively. The stock has delivered a positive return of ~28.88% in the last six months and 176.65% in the past nine months. On the technical analysis front, the stock has a support level of ~$331.5 and resistance of ~$350.5. We have valued the stock using a P/E multiple based illustrative relative valuation method and arrived at a target price with a correction high single-digit (in % terms). For the purpose, we have taken peers like - RingCentral Inc (NYSE: RNG), ServiceNow Inc (NYSE: NOW), and Five9 Inc (NYSE: FIVN), to name a few.  Considering the appreciation in the stock price over the last six-and nine-months, valuation, and current trading levels, we are of the view that most of the positive has been discounted at current trading levels. Hence, we suggest investors to wait for better entry level and give an “Expensive” rating on the stock at the closing price of $337.32, down by 4.55% on 31 December 2020.

Crescent Capital BDC, Inc.

A Look at CCAP’s 3QFY20 Results: Crescent Capital BDC, Inc. (NASDAQ: CCAP) is a business development company that is mainly focused on creating and investing in the debt of private middle-market companies. During the quarter, the company reported a net investment income of $12.2 million, or $0.43 per share, as compared to $9.2 million or $0.49 per share in the year-ago quarter. Net increase in net assets resulting from operations during the quarter came in at $38.3 million, up from $2.7 million reported in the year-ago period. At the end of 30 September 2020, the company reported a net asset value per share of $19.07, up from $18.12 as at June 30, 2020, owing to unrealized gains from the impact of credit spread strengthening as compared to the end of the second quarter. CCAP has also declared its 4QFY20 dividend of $0.41 per share, which will be paid on 15 January 2021 to its shareholders. As of September 30, 2020, CCAP had a cash balance of $11.6 million. The Company’s debt to equity ratio stood at 0.79x as of September 30, 2020.

3QFY20 Key Financial Highlights (Source: Company Reports)

CCAP to be Acquired by Sun Life Financial: On October 21, 2020, CCAP inked a deal with Sun Life Financial Inc., as per which, Sun Life will acquire a bulk economic interest in CCAP. CCAP will form part of Sun Life’s alternatives asset management business, SLC Management. The purchase will broaden SLC Management’s solutions in alternative credit, which will help current and potential clients. Also, the deal offers CCAP the chance to bring Sun Life’s investment capital and SLC Management’s relationships together with Crescent’s alternative credit expertise and track record, in order to meet the growing needs of its institutional client base.

Stock Recommendation: Over the last one month, the stock has corrected by 0.88% and went up by 52.4% in the past nine months. The stock of the company is currently trading above the average 52-weeks price level band. On the technical analysis front, the stock has a support level of ~$13.3 and resistance of ~$16.3. For Q3FY20, the company’s ROE stood at 7.3% in 3QFY20, lower than 11.6% in Q2FY20. Considering the definitive agreement to be acquired by Sun Life Financial, lower ROE, volatility in share price, and current trading levels, we suggest investors to “Avoid” the stock at the closing price of $14.57, down by 0.41%, as on 31 December 2020.

Infrastructure and Energy Alternatives, Inc.

IEA Awarded Wind Construction Contract: Infrastructure and Energy Alternatives, Inc. (NASDAQ: IEA) is one of the top infrastructure construction companies with dedicated energy and heavy civil capabilities. On December 29, 2020, the company stated that it has won a wind construction contract for the 185 MW Glacier Sands wind farm in Mason County, Illinois.  White Construction, a subsidiary of IEA, has already begun limited construction work on the Glacier Sands project and expects completion of the project in October this year.

3QFY20 Key Highlights: During the quarter, the company reported a net income of $11.3 million or 32 cents per share, as compared to $12.6 million or 24 cents per share reported in 3QFY19. Revenues for the period came in at $522.2 million, up 23.7% on pcp, owing to higher revenues from Renewable Segment, which increased 34.8% year over year in 3QFY20. Adjusted EBITDA stood at $43.1 million, up 11.3% year over year. The company exited the quarter with a cash balance of $57.3 million, with total debt amounting to $363.7 million.

3QFY20 Key Highlights (Source: Company Reports)

Outlook: For FY20, the company expects revenue in the range of $1.7 billion to $1.75 billion, and adjusted EBITDA is expected in the ambit of $117.5 million to $125 million.

Stock Recommendation: The stock of IEA gave a positive return of 184.7% in the span of three months and 327.02% in the past six-month period. The stock of the company is currently trading close to its 52-week high of $19.13. On the technical analysis front, the stock has a support level of ~$13.5 and resistance of ~$17.32. Considering the spike in the stock price over the last three-months, current trading levels, COVID-19 led uncertainties, and decline in net income in 3QFY20, we suggest investors to wait for better entry point and give an “Expensive” rating on the stock at the closing price of $16.57, down by 2.01% on 31 December 2020. Any positive change in Industry dynamics should be waited for in the long-run.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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