Stock of the Day

December 24, 2019

Broadridge Financial Solutions (BR)

$174.47
+$0.36 (+0.2%)
Market Cap: $19.69B

About Broadridge Financial Solutions

Broadridge Financial Solutions, Inc. provides investor communications and technology-driven solutions for the financial services industry. The company's Investor Communication Solutions segment processes and distributes proxy materials to investors in equity securities and mutual funds, as well as facilitates related vote processing services; and distributes regulatory reports, class action, and corporate action/reorganization event information, as well as tax reporting solutions. It also offers ProxyEdge, an electronic proxy delivery and voting solution; data-driven solutions and an end-to-end platform for content management, composition, and omni-channel distribution of regulatory, marketing, and transactional information, as well as mutual fund trade processing services; solutions for public corporations and mutual funds; data and analytics solutions; SEC filing and capital markets transaction services; registrar, stock transfer, and record-keeping services; and omni-channel customer communications solutions, as well as operates Broadridge Communications Cloud platform that creates, delivers, and manages communications and customer engagement activities. Its Global Technology and Operations segment provides solutions that automate the front-to-back transaction lifecycle of equity, mutual fund, fixed income, foreign exchange and exchange-traded derivatives, order capture and execution, trade confirmation, margin, cash management, clearing and settlement, reference data management, reconciliations, securities financing and collateral management, asset servicing, compliance and regulatory reporting, portfolio accounting, and custody-related services. This segment also offers business process outsourcing services; technology solutions, such portfolio management, compliance, fee billing, and operational support solutions; and capital market and wealth and investment management solutions. The company was founded in 1962 and is headquartered in Lake Success, New York.

Broadridge Financial Solutions Bull Case

Here are some ways that investors could benefit from investing in Broadridge Financial Solutions, Inc.:

  • Broadridge Financial Solutions, Inc. recently announced that its Distributed Ledger Repo platform processed an average of $359 billion in daily repo transactions during September, with total volumes reaching $7.5 trillion, demonstrating significant institutional scale and growth in its digital asset infrastructure beyond traditional services.
  • The company reported strong financial performance in its most recent quarter, with earnings per share of $3.82 exceeding the consensus estimate of $3.76 and revenue of $2.22 billion surpassing the expected $2.17 billion, indicating robust demand for its technology and data solutions.
  • Investors can benefit from a recent dividend increase, as the company raised its quarterly dividend to $1.09 per share, representing an annualized yield of approximately 2.6% and signaling confidence in its ability to generate consistent cash flow for shareholders.
  • The stock currently trades at $165.13, which is below the consensus price target of $216.00 from analysts who maintain a Moderate Buy rating, suggesting potential for significant upside as the market re-evaluates the company's valuation relative to its growth trajectory.
  • Broadridge Financial Solutions, Inc. has demonstrated consistent year-over-year revenue growth, with the most recent quarter showing a 7.5% increase, reflecting the company's ability to expand its market share in the competitive financial technology and services sector.

Broadridge Financial Solutions Bear Case

Investors should be bearish about investing in Broadridge Financial Solutions, Inc. for these reasons:

  • The stock price of $165.13 is significantly below its 52-week high of $237.39, indicating a substantial decline in value over the past year that may reflect broader market concerns or specific challenges facing the company's business model.
  • Recent insider activity includes the sale of 2,501 shares by VP Thomas Carey in October, which, while disclosed as covering tax withholding obligations, contributes to a pattern of insider selling that some investors may interpret as a lack of confidence in the stock's near-term performance.
  • Several institutional investors, including Fenimore Asset Management Inc. and Confluence Investment Management LLC, have reduced their positions in Broadridge Financial Solutions, Inc. during the third quarter, suggesting that large holders are taking profits or reallocating capital away from the stock.
  • The company's debt-to-equity ratio stands at 1.15, which indicates a relatively high level of leverage compared to its equity base, potentially increasing financial risk if interest rates remain elevated or if revenue growth slows down.
  • Despite strong earnings, the stock has experienced multiple 52-week lows in recent months, with the most recent low of $133.83 occurring in June, highlighting volatility and the difficulty the stock has faced in sustaining upward momentum in the current market environment.

Oracle's Roar Turns To A Whimper (NYSE: ORCL)

Written By Sam Quirke on 12/17/2019

Shares of software giant Oracle (NYSE: ORCL) were under continued pressure on Monday as the selling from last week’s earnings refused to let up. After reporting a miss on revenue following the close of Thursday’s session, traders took the stock down 2% in after-hours trading. It gapped down at the open on Friday and by yesterday’s close was down a full 5% from pre-earnings levels.

The weakness will be a bitter pill for investors to swallow as the stock looks set to finish 2019 on a whimper despite having started out the year so strong. A blistering first 4 months had shares up 30% from last December’s lows through April but it’s been a lackluster 8 months since then. Their underperformance is made all the more obvious when compared against the tech-heavy Nasdaq index which is up over 40% in 2019; more than double Oracle’s return.

Warning Signs

It was the second quarter in a row that revenue missed analyst expectations. And not only did they miss expectations, but they also registered practically no growth compared to the same time period last year. Oracle sticks out like a sore thumb in this regard when compared against the headline numbers posted by the likes of Adobe (NASDAQ: ADBE) and Microsoft (NASDAQ: MSFT) who can both boast of double-digit percentage growth year on year in the revenue department and many others.

To be fair to management, in their March report they did warn Wall Street about the potential for 2019 to end weakly when they lowered forward guidance. Investors were also warned by the likes of Macquarie, Nomura and DZ Bank who all hit the stock with downgrades at various points during the year. On top of this, there were negative headlines in February when Warren Buffet’s firm Berkshire Hathaway (NYSE: BRK.A) announced they were unloading a stake in Oracle they’d only taken at the end of 2018.

It seems the company is struggling to adapt to the cloud infrastructure the way some of the other big names in tech are. For example, on Monday we wrote about Adobe’s successful transition to the cloud and how that was a big factor in their 22% year on year revenue growth.

Oracle needs to adapt and adapt fast. To that end, they announced in October their plans to hire 2,000 employees to help roll out their cloud computing services around the world along with a goal to expand on the number of ‘cloud regions’ they operate. It was to this initiative that their CTO, Larry Ellison, spoke to after Thursday’s release; "it's still early days, but the Oracle Autonomous Database already has thousands of customers running in our Gen2 Public Cloud. Currently, our Autonomous Database running in our Public Cloud business is growing at a rate of over 100%. We expect that growth rate to increase dramatically as we release our Autonomous Database running on our Gen2 Cloud@Customer into our huge on-premise installed base over the next several months."

Technical Troubles

The results of these initiatives will play out over the coming months but the short term doesn’t look pretty. Crucially, shares have crossed under both their 50-day moving average and 200-day moving average in the last two trading sessions alone and there’s little reason to expect them catching a bid this side of the new year. Investors could see the stock trickle down towards $50 where the first real levels of support are. This offered stubborn resistance each time shares tried to poke through in the past 3 years and the bulls will be hoping it can lend its weight to their cause now.

After setting all-time highs as recently as July, shares are now down 10% from those levels which is more telling than the fact that they remain up 20% for 2019 to date. It looks like the stock is starting to print lower highers rather than the other way around. With zero growth happening in their revenue as the S&P 500 and NASDAQ indices continue to notch regular all-time highs, investors will be wondering what’ll happen to Oracle shares if the market takes a dip. If they’re already becoming unattractive, that can only increase in a risk-off environment.

Oracles Roar Turns To A Whimper (NYSE: ORCL)

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