The rapid spread of the COVID-19 Delta variant has delayed the office reopening plans of many major companies by nearly a month. Though organizations are now imposing vaccine mandates for employees to reopen offices safely, vaccine efficacy has become a cause for concern. Recently, a couple of CDC studies have shown that the effect of vaccines is decreasing, and that fully vaccinated people are being infected by the new strain of the virus. In addition, a U.K based study reported that the effects of two of the most widely used vaccines start to wane after six months.
In addition, increased employee productivity and lower overhead costs should lead to the worldwide adoption of permanent remote work set-ups in the long run. A new study from Aspen Economic Strategy Group suggests that remote working structures can boost the economy up to $160 billion, provided secure internet access is available.
Because the work-from-home culture is here to stay, established software companies VMware, Inc. (VMW), Akamai Technologies, Inc. (AKAM), Dropbox, Inc. (DBX), and Box, Inc. (BOX), which all facilitate remote working, should grow substantially through the remainder of 2021. So, we think it could be wise to bet on their stocks now.
VMware, Inc. (VMW)
VMW is a subsidiary of Dell Technologies Inc. (DELL). It provides hybrid and multi-cloud solutions, modern applications, networking, security, and digital workspaces, that enable organizations to facilitate their employees' remote working. The company is currently spinning off from its parent organization DELL, following which VMW will be independent. The transaction is expected to close in October this year. The company is ranked #1 in terms of market share in the worldwide IT automation and configuration management software market in 2020 by analyst firm IDC.
On August 11, VMW teamed with GE Healthcare to provide cloud-based telehealth services to GE Healthcare customers. Given the rising demand for remote patient monitoring services and cloud-based analytics workloads, VMW’s collaboration reflects its strong foothold in the digital healthcare space.
Also in August, VMW introduced new capabilities in its industry-leading virtual desktop infrastructure and desktop-as-a-service platform. Given its higher management efficiency and improved employee productivity, the company is expected to see higher demand for its software offerings.
VMW’s revenue increased 9.1% year-over-year to $3.14 billion in its fiscal second quarter, ended July 30. This can be attributed to a 23% rise in subscription and SaaS revenues. Its net cash provided by operating activities stood at $864 million, indicating a 20.2% increase from the prior-year quarter.
Analysts expect VMW’s EPS to increase 9.8% year-over-year to $7.63 in the next year. The Street’s $12.83 billion revenue estimate for the current year reflects a 9% increase year-over-year. VMW has topped consensus EPS estimates in three of the four trailing quarters. The stock has gained 14.9% in price over the last six months to close yesterday’s trading session at $158.80.
VMW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
VMW has a Quality grade of A, and a Value grade of B. In the 61-stock Software – Business industry, it is ranked #8.
To see additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for VMW, click here.
Akamai Technologies, Inc. (AKAM)
AKAM is a tech-based company that sells cybersecurity and cloud services solutions and helps customers in configuring and managing its solutions. The company has also extended itself to handle COVID vaccine registrations through an alliance with Copenhagen-based website wait management company, Queue-it.
On June 16, AKAM launched its new Account Protector technology that prevents digital theft by analyzing logins and other threats. Eric Graham, AKAM’s Vice President, Security Product Management, said, “Account Protector is a powerful tool for enhancing trust and user satisfaction, reducing the burden of remediation, and empowering organizations to make better, data-driven security decisions. It’s a key element in Akamai’s strategy to provide the world’s most secure platform for edge computing, and we’re proud that customers want us to be a key partner on their digital journeys.”
The company has also integrated several platform security enhancements to strengthen protection for web applications, user accounts, and APIs. As companies invest heavily to secure their operations amid rising cybercrime, such enhancements should make AKAM’s services highly demanded.
In its fiscal second quarter, ended June 30, AKAM’s revenue increased 7.3% year-over-year to $852.82 million. Its non-GAAP operating income increased 4.5% from the prior-year quarter to $269.84 million. Its non-GAAP net income and non-GAAP EPS improved 2.8% and 2.9%, respectively, year-over-year to $232.75 million and $1.42.
A $5.61 consensus EPS estimate for the current year reflects a 7.5% improvement from the same period last year. Likewise, the $3.44 billion consensus revenue estimate for the current year indicates a 7.7% increase year-over-year. Moreover, AKAM has an impressive earnings history; it topped consensus EPS estimates in all four trailing quarters. Over the past six months, AKAM has gained 19.9% in price to close yesterday’s trading session at $113.32.
It’s no surprise that AKAM has an overall rating of B, which translates to Buy in our POWR Ratings system. In addition, the stock has a B grade for Value, Stability, and Quality. It is ranked #21 of 73 stocks in the Technology – Services industry.
Click here to see additional POWR Ratings for Growth, Momentum, and Sentiment for AKAM.
Dropbox, Inc. (DBX)
DBX is a cloud platform that provides storage and file-sharing services. The company operates a free platform and a subscription-based platform. The cloud storage company had more than 700 million registered users in 180 nations as of December 2020.
On March 23, DBX acquired secure document sharing and analytics company DocSend. This gave DBX access to DocSend’s more than 17,000 customers and is expected to boost its revenues and earnings substantially in the coming quarters.
DBX’s revenue for the second quarter, ended June 30, increased 13.5% year-over-year to $530.60 million. Its non-GAAP operating margin rose 1,030 basis points from the same period last year to 31.9%. Its non-GAAP net income improved 72.2% year-over-year to $160.5 million, while its non-GAAP EPS increased 81.8% year-over-year to $0.40.
A $1.43 consensus EPS estimate for the current year indicates a 53.8% year-over-year increase. DBX’s revenue is expected to increase 11.8% year-over-year to $2.14 billion in the current year. In addition, the company beat the Street’s EPS estimates in each of the trailing four quarters. DBX has gained 49.3% in price over the past year and 38.4% year-to-date.
DBX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy. In addition, DBX has an A grade for Quality, and a B grade for Growth. Moreover, it is ranked #2 in the Technology – Services industry.
In addition to the POWR Rating grades I’ve highlighted, one can see DBX ratings for Value, Momentum, Stability, and Sentiment here.
Box, Inc. (BOX)
BOX provides cloud content management solutions, such as data protection, develops applications, and provides users with a secure domain for content sharing with internal and external parties. It also operates as a Software-as-a-Service (SaaS) platform. BOX’s popular customers include leading vaccine producer AstraZeneca PLC (AZN).
On July 26, BOX announced that its e-signature capability, Box Sign, would be available for free to businesses. BOX had previously acquired this capability from cloud-based e-signature company SignRequest. Regarding the offering, Diego Dugatkin, Chief Product Officer of BOX, said, “With the addition of natively embedded e-signatures, Box customers will be able to manage the entire content lifecycle in the cloud, realizing the value of their content—at no additional cost. From the moment a file is created to when it’s shared, edited, published, approved, signed, classified, and retained, the entire content lifecycle can now happen in the Box Content Cloud.”
In its fiscal second quarter, ended July 31, BOX’s revenue climbed 11.5% year-over-year to $214.49 million. Its non-GAAP operating margin rose 500 basis points to 21%. Its non-GAAP net income attributable to common stockholders stood at $34.75 million, indicating a 16.2% increase year-over-year. And its non-GAAP EPS improved 16.7% from the prior-year quarter to $0.21.
Analysts expect EPS to be $0.78 for the current year, indicating 11.4% growth year-over-year. A $852.55 million consensus revenue estimate for the current year reflects a 10.6% improvement from the same period last year. In addition, BOX beat the Street’s EPS estimates in each of the four trailing quarters. Over the past six months, the stock has gained 37% to close yesterday’s trading session at $25.14.
BOX has an overall B rating, which equates to Buy on our POWR Rating system. In addition, it has a B grade for Growth, Value, and Quality. The stock is ranked #5 in the Technology – Services industry.
We also have graded BOX for Momentum, Stability, and Sentiment. Click here to access all of BOX’s ratings.
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VMW shares were trading at $144.54 per share on Friday morning, down $14.26 (-8.98%). Year-to-date, VMW has gained 3.05%, versus a 21.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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