With inflation moderating for the sixth consecutive month, the Fed halting interest-rate hikes may not be too distant a possibility. Hence, shares of fundamentally strong and growing businesses Salesforce (CRM), ADT (ADT), and Rambus (RMBS) could be worth investing in. Continue reading….
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In line with consensus estimates, the consumer price index (CPI) for December 2022 fell for the sixth consecutive month to register an increase of 6.5% from a year ago. The 0.1% decline from the prior month marked the largest month-over-month decrease since April 2020. The core CPI increased 5.7% year-over-year, compared to 6% in November.
With aggressive interest-rate hikes by the Federal Reserve during the previous year starting to bring the current inflation cycle down from its peak of 9.1%, hopes of a sooner-than-expected moderation in the monetary stance of the Fed have been rekindled.
Given the expectations of buoyancy returning to markets in the not-too-distant future, it could be wise to load up on shares of fundamentally strong businesses Salesforce, Inc. (CRM), ADT Inc. (ADT), and Rambus, Inc. (RMBS), which are well-positioned to keep meeting their growth expectations.
Salesforce, Inc. (CRM)
CRM is a customer relationship management platform provider. The company’s Customer 360 platform connects customer data across systems, applications, and devices to help companies conduct commerce from anywhere.
On December 15, CRM announced its contribution towards helping Casey’s General Stores, Inc. (CASY) to achieve increased revenue and engagement with its customer base. By consolidating fragmented technologies and transitioning to CRM’s platform, CASY has been able to use automation effectively to conduct more marketing while incurring a lesser expenditure.
Similarly, on December 1, CRM announced that RBC Wealth Management has been able to leverage CRM’s technology to improve its bottom line with significant cost savings and efficiency across multiple areas of its business while continuing to deliver on client and advisor expectations.
For the third quarter of fiscal 2023 ended October 31, 2022, CRM’s total revenues increased 14.2% year-over-year to $7.84 billion, while its gross profit increased 14.5% year-over-year to $5.75 billion.
During the same period, the CRM’s non-GAAP income from operations increased 30.9% year-over-year to $1.78 billion, while its non-GAAP net income increased 9.8% and 10.2% year-over-year to $1.40 billion and $1.40 per share, respectively.
Over the past five years, CRM revenue and EBITDA have increased at 24.9% and 21% CAGRs, respectively. The company’s net income also increased at 22.1% CAGR during the same period.
Analysts expect CRM’s revenue and EPS for fiscal 2023 to increase 17.2% and 3.5% year-over-year to $31.05 billion and $4.95, respectively. These metrics are expected to increase to $38.82 billion and $6.90, respectively, by fiscal 2025. The company has also impressed by surpassing consensus EPS estimates in each of the trailing four quarters.
Over the past month, CRM’s stock has gained 9.4% to close the last trading session at $144.90.
CRM’s POWR Ratings reflect solid prospects. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CRM has an A grade for Growth and a B for Sentiment. It is ranked #19 out of 139 stocks in the Software – Application industry.
Click here to see additional ratings for CRM’s Value, Momentum, Stability, and Quality.
ADT Inc. (ADT)
ADT provides security, interactive, and innovative home solutions to serve residential, small business, and commercial customers in the United States. Its segments include Consumer and Small Business (CSB); Commercial; and ADT Solar business (Solar).
On October 26, 2022, ADT announced an oversubscription of its tender offer to purchase shares of its common stock. Based on the final count by the depositary for the tender offer, 732,113,312 shares of common stock were validly tendered towards purchasing up to 133,333,333 shares of its common stock.
On October 13, ADT announced it had issued and sold in a private placement to State Farm 133.3 million shares (approximately 15% stake) of ADT common stock for a gross purchase price of $1.2 billion. This deepens the partnership between the companies, initially announced on September 6, which expect to deliver safe, smart, and sustainable solutions through innovative offerings, unrivaled safety, and premium experiences.
On August 30, ADT announced its partnership with Uber (UBER) to integrate ADT mobile safety solutions into the Uber app for riders and drivers in the United States to get live help, via phone or text, from ADT professional monitoring agents. This marks yet another addition to ADT’s growing Clientele that utilizes Safe by ADT to power their app-based mobile safety features.
For the third quarter of the fiscal year 2022 ended September 30, ADT’s total revenue increased 21.8% year-over-year to $1.60 billion, while the company’s adjusted EBITDA grew 11.9% year-over-year to $620 million. The company reported an adjusted net income of $83 million or $0.10 per share, compared to an adjusted net loss of $54 million or $0.07 per share in the previous-year quarter.
During the past five years, ADT’s revenue and EBITDA have grown at 7.6% and 0.8% CAGRs, respectively.
Analysts expect ADT’s revenue for the fiscal year ended December 2022 to come in at $6.37 billion, up 20% year-over-year. During the same period, the company’s EPS is expected to come in at $0.53, compared to a loss of $0.25 per share during the previous fiscal. For fiscal 2023, its revenue and EPS are expected to increase 7.8% and 34.9% year-over-year to come in at $6.86 billion and $0.72, respectively.
ADT’s stock has gained marginally over the past month and 45.8% over the past six months to close the last trading session at $9.72.
ADT has an overall rating of B, translating to a Buy, in our POWR Ratings system. It has an A grade for Growth and a B for Stability and Sentiment.
ADT is ranked #5 of 59 stocks in the Home Improvement & Goods industry.
Click here to see the additional ratings of ADT for Value, Momentum, and Quality.
Rambus, Inc. (RMBS)
RMBS provides semiconductor products in the United States, Taiwan, South Korea, Japan, Europe, Canada, Singapore, China, and internationally through direct sales and distributors. The company offers DDR memory interface chips, silicon IP, physical interface, and digital controller IP.
On October 31, RMBS announced that it had extended its comprehensive patent license agreement with Samsung Electronics. This would provide Samsung broad access to the full RMBS patent portfolio through late 2033 while enabling deep collaboration between the two organizations on products.
For the fiscal 2022 third quarter ended September 30, 2022, RMBS reported total revenue of $112.2 million, up 38% year-over-year, while the company’s operating income increased 260% over the previous-year quarter to $16.92 million. During the same period, its net income came in at $939 thousand, or $0.01 per share.
During the past ten years, RMBS’ revenue and EBITDA have increased at 5% and 15.4% CAGRs, respectively. During the same period, the company’s total assets have grown at 24.4% CAGR.
Analysts expect RMBS’s revenue and EPS for the fiscal ended December 31, 2022, to increase 25.5% and 16.8% year-over-year to $568.37 million and $1.75, respectively. Both metrics are expected to increase to $660.62 million and $1.90 during the fiscal ending December 31, 2024.
The stock has gained 1.7% over the past month and 80.1% over the past six months to close the last trading session at $38.07.
RMBS has an overall rating of B, equating to a Buy, in our POWR Ratings system. It has an A grade for Growth and a B for Sentiment and Quality.
RMBS is ranked #22 of 93 stocks in the B-rated Semiconductor & Wireless Chip industry.
We’ve also rated RMBS for Momentum, Value, and Stability. Get all RMBS ratings here.
CRM shares were trading at $148.57 per share on Thursday afternoon, up $3.67 (+2.53%). Year-to-date, CRM has gained 12.05%, versus a 3.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant.
With a master’s degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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