BlackBerry Adds Safety Certified Filesystem to its QNX Software

Cadence Design Systems CDNS stock has declined 15.8% in the past three months, underperforming its industry and the broader technology sector. Within the same time frame, the sub-industry and the Zacks Computer and Technology sector have declined 2.5% and 4.3%, respectively. It also lags the S&P 500’s growth of 2.4%.

Three-Month Price Performance

CDNS shares have been declining as the company’s guidance for the current quarter revenues and earnings per share came in lower than anticipated despite positive business trends. The guidance is largely affected by the timing of Verification revenues and headwinds associated with China revenues.

This considerable decline in stock price has caught the attention of investors, prompting questions about whether to maintain their positions or cut their losses.

What Ails CDNS Stock?

The transition to next-generation Verification systems will weigh on the near-term revenues from the Functional Verification segment. CDNS launched new Verification hardware systems in April 2024. As a result, upfront revenues are expected to be skewed toward the second half of 2024 as the company works to build inventory of new systems.

Management noted that the ‘shape of the revenue curve’ is driving the guidance. It does not expect massive revenue growth in the Verification business in 2024 but it will be an improved performance over 2023. Verification revenues are likely to pick up pace in 2025 once the company completes building inventory of its new systems.

Moreover, CDNS cut the full-year EPS outlook, owing to the dilutive impact of 12 cents of the BETA CAE acquisition. Non-GAAP earnings per share for the full year are expected to be between $5.77 and $5.97 compared with the previous guidance of $5.88 and $5.98.

Uncertainty prevailing over global macroeconomic conditions and substantial exposure to the semiconductor vertical is concerning. Any reduction in R&D spending for companies within the semiconductor sector could affect CDNS' performance.

Higher operating costs and stiff competition in the EDA space from the likes of Keysight Technologies KEYS, Synopsys SNPS and ANSYS ANSS are additional headwinds. The pending acquisition of ANSYS by Synopsys is likely to amp up competition in the EDA space for all players.

CDNS' Premium Valuation & Bearish Technical Indicators

Cadence’s stock is trading at a premium with a forward 12-month Price/Earnings of 41.59X compared with the industry’s 32.56X. Though the lofty valuation reflects high expectations for future growth, the near-term prospects of the company remain somewhat muddled.

CDNS’ technical indicators suggest that further downside could be ahead. The stock has been trading below both the 100-day and 200-day moving averages, indicating that investors may be losing confidence in the stock. High valuation and bearish technical indicators suggest that CDNS stock may face more volatility, at least in the near term.

TELUS Corporation TU recently announced a C$9.6 million investment in Quebec's Chaudière-Appalaches region. This investment will be supported by an additional C$2.7 million from the government of Quebec and C$2.2 million from the Canadian Radio-television and Telecommunications Commission (“CRTC”), enabling the installation of 20 new 5G wireless sites in the area.

The government of Quebec's investment, announced in April 2024, will support the development of 16 new sites to boost cellular coverage in the region. While planning and preparatory work will begin this year, TELUS anticipates that the first sites will be operational by 2025. Additionally, as part of the CRTC Fund, detailed last year, two new wireless sites will be activated in Saint-Pamphile and Saint-Adalbert by the end of the year. The activation of a second site in Saint-Adalbert and another in Saint-Paul-de-Montminy will commence in 2025.

The combined financial contribution will facilitate the implementation and upgrade of TELUS' network, improving wireless connectivity in rural and remote areas. In the fourth quarter of 2023, the company projected a capital expenditure of C$2.6 billion for 2024. This guidance was reaffirmed in the second quarter of 2024, underscoring the company’s commitment to its planned investment strategy for the year.

TELUS Aims to Enhance Innovation & Connectivity Across Quebec

TELUS remains focused on its corporate social responsibility. The company aims to invest C$73 billion in Canada by 2028, including C$10 billion specifically for Quebec. As of June 30, 2024, TELUS provided 5G network coverage to nearly 32 million Canadians, representing more than 86% of the population.

In August, TELUS unveiled new additions to EnContinu+, a streaming bundle tailored specifically for Quebec residents. The new offering aims to boost the entertainment experience for TELUS and Koodo customers. Subscribers can enjoy a diverse selection of content, including French language programs and popular international shows and movies while benefiting from savings of up to 20% on the individual package.

In July, the company announced a C$6.6 million private investment in the North Shore region of Quebec, supported by an additional investment of C$6.8 million from the government of Quebec and C$5.5 million from CRTC for the addition of roughly 10 new 5G wireless sites in this region.

TELUS Corporation Price and Consensus

TELUS Corporation price-consensus-chart | TELUS Corporation Quote

Since 2023, the TELUS Friendly Future Foundation has contributed nearly $100,000 to local organizations in the Chaudière-Appalaches region, supporting projects that benefit youth. Beneficiaries include the Association Renaissance des Appalaches, Maison de la Famille Nouvelle-Beauce and Alliance Jeunesse des Chutes-de-la-Chaudière.

Vancouver, British Columbia-based TELUS is one of the leading telecom carriers in Canada (the largest in western Canada), with more than C$20 billion in annual revenues and 19 million customer connections. It provides wireless, wireline and Internet communications services for voice and data to businesses and consumers.

TU’s Zacks Rank & Stock Price Performance

TU currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 3.8% in the past year compared with the sub-industry's growth of 6.8%.

Dolby Laboratories, Inc. DLB has launched a new suite of cloud video products and solutions designed for real-time interactive streaming. Available as standalone tools or integrated solutions, they offer superior live sports and entertainment experiences.

This launch follows Dolby’s recent acquisition of THEO Technologies, a leading provider of premium video streaming tools used by prominent sports, media and entertainment companies globally.

THEOads is an advanced ad insertion tool that enhances advertising quality, flexibility and targeting within THEOplayer. Using server-guided ad insertion (SGAI) functionality, THEOads can optimally leverage THEOplayer’s capabilities to deliver more personalized and less intrusive ads, boosting viewer engagement and ad revenues without disrupting the viewing experience.

Apart from THEOads, Dolby and THEO’s combined solutions include Dolby Millicast for ultra-low latency streaming, Dolby Hybrik for transcoding and THEO’s cross-platform playback and live streaming tools like THEOplayer and THEOlive. These cutting-edge solutions are trusted by major sports, streaming and iGaming brands, such as FanDuel, ITV, Las Vegas Sands, NASCAR and the NFL, to enhance their live streaming services.

The combined offerings from Dolby and THEO elevate live experiences to be more interactive, personalized and delivered with minimal latency. With the introduction of THEOads at IBC 2024, these experiences now include advertisements tailored to the dynamic nature of live content, Dolby highlighted.

Synergies From Acquisitions to Aid DLB’s Top-Line Expansion

Dolby acquired THEO Technologies in July 2024, worth $55 million, to expand its Dolby.io offerings. With THEO, the company plans to address the growing demand for designing customized experiences in sports and entertainment.

Also, DLB announced the buyout of GE Licensing from GE Aerospace for $429 million in an all-cash transaction in June 2024. GE Licensing, a leading innovator in patent licensing and management, is a subsidiary of GE Aerospace that designs, develops and produces jet engines, components and integrated systems for military, commercial and business aircraft.

With this acquisition, Dolby expects to bolster its intellectual property portfolio through the strategic integration between its existing licensing businesses and GE Licensing's portfolio of video codec technologies (HEVC and VVC). The deal, likely to close by the end of fiscal 2024, is anticipated to be accretive on a non-GAAP basis to operating margins and earnings per share in fiscal 2025.

Synergies from the deal are likely to drive top-line expansion. Apart from inorganic growth, Dolby’s performance is gaining from the increasing adoption of Dolby Atmos and Dolby Vision.

Dolby Laboratories Price and Consensus

Dolby Laboratories price-consensus-chart | Dolby Laboratories Quote

In the fiscal third quarter, the company made significant strides in expanding the availability of its Dolby Vision and Dolby Atmos technologies across major verticals of autos, TVs and mobile. In May 2024, Dolby joined forces with VIZIO to make Dolby Atmos reachable to an expanded customer base. It is offering multi-dimensional sound experiences to consumers at a minimal price of $99. In April 2024, it announced that it was making Dolby Vision and Dolby Atmos available to all premium theater exhibitors.

Lower unit shipments of audio devices and cinema products due to weak demand trends at the box office are negatively impacting the top-line growth. Owing to these factors and the dynamic market conditions, management expects full-year revenues to be down 1-2%.

DLB’s Zacks Rank & Stock Price Performance

DLB currently carries a Zacks Rank #3 (Hold). Shares of the company have lost 11.8% in the past year against the sub-industry's growth of 5%.

Looking for broad exposure to the Mid Cap Blend segment of the US equity market? You should consider the Invesco S&P MidCap Quality ETF (XMHQ), a passively managed exchange traded fund launched on 12/01/2006.

The fund is sponsored by Invesco. It has amassed assets over $5.26 billion, making it one of the larger ETFs attempting to match the Mid Cap Blend segment of the US equity market.

Why Mid Cap Blend

Mid cap companies have market capitalization between $2 billion and $10 billion. They usually have higher growth prospects than large cap companies and are less volatile than small cap companies. These types of companies, then, have a good balance of stability and growth potential.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.25%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 5.13%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 35% of the portfolio. Consumer Discretionary and Financials round out the top three.

Looking at individual holdings, Williams-Sonoma Inc (WSM) accounts for about 3.72% of total assets, followed by Manhattan Associates Inc (MANH) and Carlisle Cos Inc (CSL).

The top 10 holdings account for about 26.5% of total assets under management.

Performance and Risk

XMHQ seeks to match the performance of the S&P MIDCAP 400 QUALITY INDEX before fees and expenses. The S&P MidCap 400 Quality Index is designed to provide equal-weighted exposure to approximately 800 securities of medium-sized companies in the larger US equity market.

The ETF return is roughly 17.07% so far this year and was up about 27.37% in the last one year (as of 09/16/2024). In the past 52-week period, it has traded between $75.71 and $110.05.

The ETF has a beta of 1.04 and standard deviation of 21.69% for the trailing three-year period. With about 82 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P MidCap Quality ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XMHQ is a reasonable option for those seeking exposure to the Style Box - Mid Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard Mid-Cap ETF (VO) and the iShares Core S&P Mid-Cap ETF (IJH) track a similar index. While Vanguard Mid-Cap ETF has $67.95 billion in assets, iShares Core S&P Mid-Cap ETF has $88.17 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Zacks Investment Research

The latest trading session saw BlackBerry (BB) ending at $2.48, denoting a +0.4% adjustment from its last day's close. The stock's performance was behind the S&P 500's daily gain of 0.54%. Elsewhere, the Dow saw an upswing of 0.72%, while the tech-heavy Nasdaq appreciated by 0.65%.

Coming into today, shares of the cybersecurity software and services company had gained 6.01% in the past month. In that same time, the Computer and Technology sector gained 3.3%, while the S&P 500 gained 4.86%.

Market participants will be closely following the financial results of BlackBerry in its upcoming release. The company plans to announce its earnings on September 26, 2024. It is anticipated that the company will report an EPS of -$0.03, marking a 25% rise compared to the same quarter of the previous year.

In terms of the entire fiscal year, the Zacks Consensus Estimates predict earnings of -$0.05 per share and a revenue of $608 million, indicating changes of -200% and -28.72%, respectively, from the former year.

Investors should also take note of any recent adjustments to analyst estimates for BlackBerry. Recent revisions tend to reflect the latest near-term business trends. Therefore, positive revisions in estimates convey analysts' confidence in the company's business performance and profit potential.

Empirical research indicates that these revisions in estimates have a direct correlation with impending stock price performance. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, ranging from #1 (Strong Buy) to #5 (Strong Sell), possesses a remarkable history of outdoing, externally audited, with #1 stocks returning an average annual gain of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. At present, BlackBerry boasts a Zacks Rank of #3 (Hold).

The Computer - Software industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 75, putting it in the top 30% of all 250+ industries.

The strength of our individual industry groups is measured by the Zacks Industry Rank, which is calculated based on the average Zacks Rank of the individual stocks within these groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Zacks Investment Research

Onto Innovation’s ONTO shares have been performing well on the trading front, with a gain of 48.6% in the past year compared with the S&P 500 composite and sub-industry’s growth of 23.5% and 44.1%, respectively.

Closing at $192.97 as of yesterday’s trading session, ONTO stock is currently trading 19.2% below its 52-week high of $238.93, attained on July 16, 2024.

Solid financial performance has been aiding the stock’s trajectory. ONTO outpaced estimates in each of the trailing four quarters, with the average surprise being 6.6%.