Work-from-home-related stocks have been leading the market for some time. The COVID-19 pandemic fueled the acceleration of a digital transformation because businesses were compelled to incorporate cloud-based technologies in their operations to stay in business. Tech industry stocks continue to be a prominent area of interest by investors because these securities have outperformed the broader market. This is evident in the Technology Select Sector SPDR ETF’s (XLK) 58.5% return over the past year. The S&P 500 Index, in contrast, has gained 43.7% over the period.
Wall Street expects the tech sector to thrive even after the pandemic irrespective of minor, intermittent setbacks. With rising productivity among employees participating in remote working structures and shrinking overhead costs for employers, several Fortune 500 companies are adopting hybrid working models and smaller companies are expected to follow suit.
Because the hybrid work environment will likely continue driving the burgeoning demand for digital solutions, we think work-from-home stocks Twilio Inc. (TWLO), Elastic N.V. (ESTC), and Upland Software, Inc. (UPLD) will remain among the most favored stocks by Wall Street.
Twilio Inc. (TWLO)
TWLO is an international cloud-communications Platform-as-a-Service (PaaS) company. Its platform consists of Programmable Communications Cloud, Super Network, and Business Model for Innovators, which enable developers to build, scale, and operate communications within software applications.
This month, TWLO entered a partnership with Syniverse to accelerate innovation in mobile communications networks and drive long-term growth. TWLO plans also to make a minority investment of $750 million cash in Syniverse and become a significant minority owner of the company. This partnership should help TWLO to build a best-in-class customer engagement platform.
Last November, TWLO acquired Segment, a market-leading customer data platform, for $3.20 billion worth TWLO class A stock. This transaction should help TWLO make its customer experience seamless by providing a personalized, timely, and impactful engagement service across multiple divisions.
TWLO’s revenues have increased 65.5% year-over-year to $548.09 million in the fourth quarter ended December 31. However, its top-line growth is unable has not translated into overall profitability. Its loss from operations has risen 97.5% from its year-ago value to $185.29 million, while its net loss per share has increased 71.2% to $1.13 over the same period.
Analysts expect TWLO’s EPS to decline 266.7% year-over-year to a negative $0.10 in the current quarter (ending March 31, 2021). However, the company has an impressive earnings surprise history; it beat the consensus Street estimates in each of the trailing four quarters. A consensus revenue estimate of $533.85 million in the first quarter represents a 46.3% improvement from the year-ago value. The stock has gained 66.8% over the past six months but has lost 13.6% over the past month.
Based on 23 analysts’ opinions, TWLO has a consensus rating of Strong Buy. The average price target of $508.38 indicates a potential gain of 35.84%.
Elastic N.V. (ESTC)
ESTC is an information technology (IT) company based in the Netherlands. Elastic offers three solutions for enterprise search, observability, and security, built on one technology stack that can be deployed anywhere. The company's business model is based on a combination of open source and paid subscriptions, which includes access to additional features as well as user support.
This month, ESTC formed a partnership with Grafana Labs with the goal of helping users combine the benefits of Grafana’s visualization platform with the full capabilities of Elasticsearch, thereby, delivering users the best integrated experience across the full breadth of the company’s functionality.
Also this month, ESTC announced new detection rules to protect cloud applications and hosts that will streamline security operations center (SOC) workflows and accelerate response times with improved alert management.
ESTC’s total revenues have increased 38.8% year-over-year to $157.12 million for its fiscal first quarter, ended January 31, 2021. Its gross profit has risen 44.3% from its year-ago value to $115.15 million. Its operating profit has risen 18.5% year-over-year, while its EPS has improved 21.8% over the same period.
Analysts expect ESTC’s EPS to decline 33.3% year-over-year to a negative $0.16 in the current quarter (ending April 30, 2021). However, the company has an impressive earnings surprise history; it beat consensus Street estimates in each of the trailing four quarters. The consensus revenue estimate of $158.91 million in the second quarter represents a 28.5% improvement from the year-ago value. The stock has gained 17.7% over the past six months but has lost 28.1% over the past month.
Based on 14 analysts’ opinions, ESTC currently holds a consensus rating of Strong Buy. The average price target of $181.21 indicates a potential upside of 52.7%.
Upland Software, Inc. (UPLD)
UPLD is a leading provider of cloud-based enterprise work management software. Its software applications under the Upland brand enable thousands of organizations to engage with customers on key digital channels, optimize sales team performance, manage projects and IT costs, and automate critical document workflows.
Earlier this month, UPLD acquired BlueVenn, a leading cloud-based customer data platform, to unify the consumer database sitting at the center of Upland’s CXM product suite. This strategic acquisition should allow customers to securely unify their consumer data, unlocking the insights needed to create omni-channel digital engagement strategies to drive their business forward, all from a single vendor.
In January, UPLD acquired Second Street Media, Inc., a leading audience engagement cloud software platform, to provide its customers the power to build promotions and email campaigns that grow revenue, customer databases, and consumer engagement. This should help the company attract a large number of potential customers.
UPLD’s revenue has increased 18.4% year-over-year to $78.25 million in the fourth quarter ended December 31, 2020. Its adjusted EBITDA has risen 6.5% from the year-ago value to $26.60 million, while its non-GAAP net income has improved 7.9% to $18.41 over the same period.
Analysts expect UPLD’s EPS to decline 43.1% year-over-year to $0.41 in the current quarter (ending March 31, 2021). However, the company has an impressive earnings surprise history, as it beat the consensus Street estimates in each of the trailing four quarters. A consensus revenue estimate of $73.24 million in the first quarter represents a 7.7% improvement from its year-ago value. The stock has gained 41.7% over the past six months but has lost 1.5% over the past month.
Based on six analysts’ opinions, UPLD has a consensus rating of Strong Buy. The average price target of $59.83 indicates a potential return of 21%.
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TWLO shares rose $0.47 (+0.13%) in after-hours trading Friday. Year-to-date, TWLO has gained 9.02%, versus a 5.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands.3 Work-From-Home Stocks Wall Street Loves appeared first on StockNews.com