For Immediate Release

Chicago, IL – August 30, 2024 – Zacks Equity Research shares Fidelity National Information Services FIS as the Bull of the Day and The Mosaic Company MOS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Super Micro Computer, Inc. SMCI, NVIDIA Corporation NVDA and Dell Technologies Inc. DELL.

Here is a synopsis of all three stocks.

Bull of the Day:

Fidelity National Information Services, a Zacks Rank #1 (Strong Buy), is engaged in the provision of financial services technology solutions for financial institutions, businesses, and developers worldwide. FIS shares are widely outperforming the market this year with the backing of a leading industry group. The stock is hitting a series of 52-week highs and displaying relative strength as buying pressure accumulates in this top-ranked stock.

FIS stock is part of the Zacks Financial Transaction Services industry group, which ranks in the top 29% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 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 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.

Company Description

Fidelity National Information Services provides banking and payment technology solutions and processing services to the financial industry. The company offers core processing and ancillary applications; mobile and online banking; fraud, risk management, and compliance; and card and retail payment services.

In addition, the financial company delivers electronic funds transfer, wealth and retirement products, lending, leveraged and syndicated loan markets, and treasury and risk solutions. Fidelity National Information Services was founded in 1968 and is headquartered in Jacksonville, Florida.

Earnings Trends and Future Estimates

The provider of financial solutions has put together an impressive earnings history, surpassing earnings estimates in two of the past three quarters. Earlier in August, the company reported second-quarter earnings of $1.36/share, a 10.6% surprise over the $1.23/share consensus estimate.

Consistently beating earnings estimates is a recipe for success and bolsters the bullish case.

FIS shares received a boost as analysts covering the company have been increasing their third-quarter earnings estimates lately. For the current quarter, earnings estimates have risen 4.88% in the past 60 days. The Q3 Zacks Consensus EPS Estimate now stands at $1.29/share, reflecting a staggering potential growth rate of 37.2% relative to the year-ago period.

Let’s Get Technical

FIS stock has advanced nearly 37% this year alone. 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 52-week highs, widely outperforming the major indices. With both strong fundamental and technical indicators, FIS 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, Fidelity National Information Services has recently witnessed positive revisions. As long as this trend remains intact (and FIS continues to deliver earnings beats), the stock will likely continue its bullish run into the end of this year and beyond.

Bottom Line

Fidelity National Information Services maintains a strategic focus on digital transformation positions as it leverages global economic changes. The company’s organic growth in banking and capital markets is buoying its results.

Backed by a top industry group and impressive history of earnings beats, it’s not difficult to see why this company is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly justify adding shares to the mix. The future looks bright for this highly-ranked, leading stock.

Bear of the Day:

The Mosaic Company is a producer and marketer of concentrated phosphate and potash for the global agriculture industry. The company was formed through the combination of fertilizer businesses including Cargill and IMC Global. Its products are processed into crop nutrients and shipped through rail, barge, and ocean-going vessels to customers in major agricultural centers.

While the company is among the four largest potash producers in the world, Mosaic faces headwinds from lower fertilizer prices. Prices of crop nutrients remain under pressure as the resumption of exports from top suppliers has led to higher supplies. Production cuts surrounding challenging potash market conditions may also affect potash volumes.

The company is exposed to higher raw material costs due to tight supply. Prices of ammonia, a key input for phosphate production, remain elevated partly due to the uncertainties over the supply from Russia amid the ongoing war. Plant closures and maintenances have also led to supply constraints.

The Zacks Rundown

Mosaic (MOS), a Zacks Rank #5 (Strong Sell) stock, is a component of the Zacks Fertilizers industry group, which currently ranks in the bottom 10% 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, just as it has over the past year:

Candidates in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when included in a lackluster industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.

Along with many other fertilizer stocks, MOS shares have been struggling 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 head deeper into the latter half of the year.

Recent Earnings Misses & Deteriorating Outlook

The agricultural company has fallen short of earnings estimates in three of the past four quarters. Earlier in August, Mosaic reported second-quarter earnings of $0.54/share, missing the $0.68/share Zacks Consensus estimate by -20.6%. The company has posted a trailing four-quarter average earnings miss of -10.17%.

Consistently falling short of earnings estimates is a recipe for underperformance, and MOS is no exception.

Mosaic has been on the receiving end of negative earnings estimate revisions as of late. Looking at the current quarter, analysts have slashed estimates by -8.96% in the past 60 days. The Q3 Zacks Consensus Estimate is now $0.61/share, reflecting negative growth of -10.3% 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.

Technical Outlook

As illustrated below, MOS stock is in a sustained downtrend. Notice how the stock has continued to meet resistance at important technical levels such as the 200-day moving average (red line). Also note how the 200-day average is sloping down – another good sign for the bears.

MOS 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 nearly 20% this year alone.

Final Thoughts

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 MOS is included in one of the worst-performing industry groups provides 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 MOS until the situation shows major signs of improvement.

Additional content:

Why SMCI Stock Is Falling, and Why It’s Time to Buy

The meteoric rise in demand for artificial intelligence (AI) chips has helped the $25 billion server manufacturer Super Micro Computer, Inc.’s shares to scale northward over the last three financial years.

However, the SMCI stock tanked on Wednesday and may continue to do so for some time following a bearish short-seller report. But should investors sell the stock, or remain bullish and consider this as a buying opportunity? Let’s have a look –

SMCI Stock Tanks – Short Seller Claims Bad Accounting Practices

Investment research firm Hindenburg Research LLC alleged that Super Micro is a serial offender regarding accounting manipulation. Hindenburg conducted the research over the past three months and questioned Super Micro’s export control letdowns, customer-related issues, and unidentified party transactions.

The bearish report compelled Super Micro to announce that the company would delay the annual 10-K filing with the Securities and Exchange Commission (SEC).

Super Micro’s postponement of financial filing led to its shares plummeting 19% yesterday, while the SMCI stock was also trading in the red in after hours. The SMCI stock has plunged 65.5% from its record closing high of $1,188.07 on March 13.

Market Overreacting to the News

Investors may feel jittery about the SMCI stock, but Super Micro has assured that it will complete the filing within the stipulated extension period with minor performance revisions.

Moreover, it’s not the first time that Super Micro has faced issues related to accounting irregularities. The company successfully settled a penalty imposed by the SEC on accounting disparities for fiscal years 2014 to 2017. So, in a way, Super Micro can come out of problems related to accounting disclosures.

Market participants should, thus, ignore the newsflash and focus on Super Micro’s fundamentals. Bears may argue that SMCI’s gross margins have dropped from more than 15% in fiscal years 2022-2023 to 11.2% in the fiscal fourth quarter of 2024. Yet it’s true that the company has notched $14.94 billion in sales for fiscal 2024, up 110% from a year ago.

Super Micro’s earnings outlook for the current year looks encouraging due to an uptick in demand for graphic processing units and rack-scale solutions required for AI applications. SMCI stock’s $33.50 Zacks Consensus Estimate for earnings per share is up 86.3% year over year.

SMCI Stock – Has a Scalable Business & NVIDIA’s Backup

NVIDIA Corporation is taking advantage of the flourishing AI-chip markets, expected to witness a CAGR of 38.2% from 2023 to 2032, to $383.7 billion by 2032, per Allied Market Research.

Super Micro’s business is intertwined with NVIDIA since SMCI’s AI servers are needed to mount AI chips. Hence, the SMCI stock is expected to scale upward driven by the ever-expanding AI-chip market.

Super Micro has room to expand its business since it only accounts for 10% of the AI server market share, and is providing stiff competition to dominant players like Dell Technologies Inc. The AI server market is estimated to witness a CAGR of more than 18% from 2024 to 2032, according to Global Market Insights.

SMCI Stock – Is Trading at a Discount

Despite yesterday’s hiccup and severe volatility in recent months, the SMCI stock has been able to outperform the industry year to date (+56% vs +51.8%).

Still, SMCI stock is less expensive compared to its peers, which has given the stock a competitive edge. This is because, per the price/earnings ratio, SMCI trades at 13.2X forward earnings. However, the industry’s forward earnings multiple is 17.9X.

Strong Price Upside for SMCI Stock

Banking on the positives, prominent brokers have increased the average short-term price target of SMCI by almost 68.5% from the stock’s last closing price of $574.64. The highest price target is set at $1,500, an upside of 173.9%.

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Dell Technologies Inc. (DELL) : Free Stock Analysis Report

Fidelity National Information Services, Inc. (FIS) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

The Mosaic Company (MOS) : Free Stock Analysis Report

Super Micro Computer, Inc. (SMCI) : Free Stock Analysis Report

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