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Finance

Take-Two Interactive, Align, Baidu, and Synopsys

The Nasdaq Composite Index is one of the three most widely followed stock market indexes.  While the index is heavily concentrated in technology companies, it includes other new and trendy businesses.

So far this year, the index has outperformed the S&P 500, gaining more than 42%. This excellent performance can be attributed primarily to the increased dependence by individuals and businesses on technology solutions. But some of the index’s non-tech members have also proved their business strength this year.

Because the U.S. Congress has now approved a long-awaited $900 billion COVID-19 rescue package, investors are optimistic about the performance of the index going into 2021.

So, it is wise to bet on Baidu, Inc. (BIDU), Align Technology, Inc. (ALGN), Synopsys, Inc. (SNPS), and Take-Two Interactive Software, Inc. (TTWO). They are strategically positioned to gain in the upcoming months and drive the index higher we think.

Baidu, Inc. (BIDU)

Based in Beijing, China, BIDU is a Chinese language internet search provider. China has the world’s largest internet user population, and the company is strategically placed to gain in the near term.

BIDU operates through two segments — Baidu Core which includes search services and transaction services, and iQIYI, which is an online video platform with a content library that includes licensed movies, television series, cartoons, variety shows and other programs.

The company’s top line has increased 8.4% sequentially to $4.2 billion for the third quarter ended September 30, 2020. In the iQIYI segment, its subscribers hit104.8 million in the third quarter, and membership revenue increased 7% year-over-year. Non-GAAP net income increased 59.3% year-over-year to $1 billion. And non-GAAP earnings per ADS increased 61.4% year-over-year to $3.

Analysts expect BIDU’s revenue to increase 23.9% for the quarter ending March 31, 2021, 6.7% this year, and 15.1% next year. The company’s EPS is expected to increase 25.9% this year, 12.1% next year, and at a rate of 1.4% per annum over the next five years. BIDU has an impressive earnings surprise history, with the company beating consensus EPS estimates in each of the trailing four quarters.

On December 8, BIDU announced that its board of directors had authorized a change to the company’s 2020 Share Repurchase Program, which is effective through December 31, 2022. It increased the aggregate value of shares that may be repurchased from $3 billion to$4.5 billion. Also, BIDU entered into definitive agreements with JOYY Inc. (YY) in November. The stock has gained 51.5% over the past year to close yesterday’s trading session at $193.08.

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How does BIDU stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

A for Peer Grade

B for Industry Rank

A for Overall POWR Rating

The stock is also ranked #1 of 115 stocks in the China group.

Align Technology, Inc. (ALGN)

Founded in 1997, ALGN is a global medical device company. The company designs, manufactures and markets a system of clear aligner therapy, intra-oral scanners, and computer-aided design/computer-aided manufacturing (CAD/CAM) digital services used in dentistry, orthodontics, and dental records storage. It operates through two segments — Clear Aligner, and Scanner and Services (Scanner) segment.

ALGN’s revenues have increased 20.9% year-over-year to $734.1 million for the third quarter ended September 30, 2020. Clear Aligner cases for teenage patients increased 25.6% year-over-year to 162.7 thousand cases. Imaging Systems and CAD/CAM Services revenues climbed 24.5% year-over-year to $113.4 million. Net income increased 35.9% year-over-year to $139.4 million, and non-GAAP EPS increased more than 52% year-over-year to $2.25.

Analysts expect ALGN’s revenue to increase 33.8% for the quarter ending March 31, 2021, and 34.4% next year. The company’s EPS is expected to increase 141.1% for the quarter ending March 31, 2021, 76.5% next year, and at a rate of 18.9% per annum over the next five years. The stock has gained 103.4% in the past six months. It is currently trading just 0.8% below its 52-week high of $535.

On October 21, ALGN announced the introduction of Invisalign G8 with SmartForce Aligner Activation, which is the latest of the company’s biomechanics innovations. On October 16, ALGN announced the commercial availability of previously announced Clincheck Pro 6.0 and Clincheck “In-face” visualization of Invisalign treatment. The company announced the addition of the Steraligner aligner cleaning system to the Invisalign Doctor Site web store and InvisalignAccessories.com on September 14.

ALGN’s POWR Ratings reflect the stock’s promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade, and a “B” for Industry Rank. Among the 144 stocks in the Medical – Devices & Equipment industry, it is ranked #5.

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Synopsys, Inc. (SNPS)

SNPS provides software, intellectual property (IP) and services and has been in business for more than 30 years. It offers products and services in four categories — core electronic design automation (EDA), IP, Systems and Software Integrity, Manufacturing Solutions, and Professional Services and Other. For the fourth quarter ended October 31, 2020, SNPS’ top line increased 20.5% year-over-year to $1 billion, driven primarily by the semiconductor & system design segment. The segment, which increased 22% year-over-year to $934.6 million, contributed more than 91% of total revenue. Net income increased 22.6% year-over-year to $197 million. Non-GAAP EPS increased 37.4% year-over-year to $1.58.

Analysts expect SNPS’ revenue to increase 18% for the quarter ending April 30, 2021, 9.3% in 2021, and 8.2% in 2022. The company’s EPS is expected to increase 25.4% for the quarter ending April 30, 2021, 13.5% in 2021, and at a rate of 11.5% per annum over the next five years. SNPS has an impressive earnings surprise history, with the company beating consensus EPS estimates in each of the trailing four quarters.

On December 16, SNPS announced that it had entered an accelerated share repurchase agreement (ASR) with Mizuho Markets Americas LLC to repurchase an aggregate $250 million of its stock. The company announced on November 19, that it acquired Light Tec, which is a global provider of optical scattering measurements and measurement equipment. Over the past year, SNPS has rallied 81.8% to close yesterday’s session at $254.24.

It is no surprise that SNPS is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. In the 30-stock Technology – Hardware industry, it is ranked #5.

Take-Two Interactive Software, Inc. (TTWO)

Founded in 1993, TTWO is a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe. The company develops and publishes products through its labels Rockstar Games, 2K, Private Division, and Social Point, which is a leading developer of mobile games. Its products are designed for console gaming systems including Sony Corporation’s (SNE) PlayStation 4, Microsoft Corporation’s (MSFT) Xbox One, as well as for personal computers, smartphones, and tablets.

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TTWO’s revenue has climbed 1.2% sequentially to $841.1 million for the quarter ended September 30, 2020. Digitally delivered net revenue increased 15.5% year-over-year to $711.3 million, driven primarily by NBA 2K20 and NBA 2K21, Grand Theft Auto Online, and Grand Theft Auto V, among others. Revenue generated from the U.S.  contributed 60% of total revenue. Net income increased 38.3% year-over-year to $99.3 million, while EPS of $2 surpassed the consensus estimate by 35.1%.

Analysts expect TTWO’s revenue to increase 9.4% in 2021 and 5.2% in 2022. The company’s EPS is expected to increase 4.9% in 2021, 1.6% in 2022, and at a rate of 15.3% per annum over the next five years. TTWO’s earnings surprise history looks impressive, with the company missing the consensus estimate in just one of the trailing four quarters.

The company announced on December 15 that ‘The Cayo Perico Heist,’ which is Grand Theft Auto Online’s biggest update yet, is now available to download for free by all its users. On November 10, TTWO announced that NBA 2K21 for next-generation consoles is now available worldwide. The company’s Rockstar Games acquired Ruffian Games in October.

The stock has gained 63.2% over the past year and is currently trading just 2% below its 52-week high of $205.84, which it hit on December 18.

TTWO’s strong fundamentals are reflected in its POWR Ratings, it has a “Strong Buy” rating with an “A” for Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. Within the Entertainment – Toys & Video Games industry, it is ranked #4 of 15 stocks.

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BIDU shares were trading at $191.39 per share on Tuesday morning, down $1.69 (-0.88%). Year-to-date, BIDU has gained 51.42%, versus a 15.84% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More…

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