The Federal Reserve raised interest rates four times this year to reduce the surging inflation. After the 75-basis-point hike in July, at least four regional Fed presidents have indicated that a large interest rate increase is on the table in September and the following months to bring the surging inflation down to around the 2% target, despite the possibility of a recession.
According to strategists at Goldman Sachs, the recent rebound in the U.S. stock is expected to be short-lived, as investors continue to weigh on hot inflation, a slowdown in economic growth, and a possible decline in U.S. hiring.
However, despite the prevailing headwinds, better-than-expected corporate earnings and some positive economic data should offer some support to the market's downside. According to Refinitiv, of the nearly 300 companies in the S&P 500 that have reported quarterly earnings as of July 30, almost 78% beat Wall Street estimates.
Therefore, we think it could be wise to invest in fundamentally sound stocks, Microsoft Corporation (MSFT), SIGA Technologies, Inc. (SIGA), and Fortinet, Inc. (FTNT), which have recently traded in high volume.
Microsoft Corporation (MSFT)
MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. The company has two segments, Productivity and Business Processes, which offers Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Skype for Business, as well as related Client Access Licenses (CAL); Skype, Outlook.com, OneDrive, and LinkedIn; and Dynamics 365, a set of cloud-based and on-premises business solutions for organizations and enterprise divisions. It has traded at an average volume of 29,791,038 over the past three months.
Last month, Oracle Corp (ORCL) and MSFT announced the general availability of Oracle Database Service for Microsoft Azure. This new offering will allow Microsoft Azure customers to easily access and monitor enterprise-grade Oracle Database services in Oracle Cloud Infrastructure (OCI) with a familiar experience. Users can migrate or build new applications on Azure and then connect to high-performance, high-availability managed Oracle Database services such as Autonomous Database running on OCI.
In June, The Procter & Gamble Company (PG) and MSFT announced a new multiyear collaboration that will leverage the Microsoft Cloud to help create the future of digital manufacturing at P&G.
The two companies will co-innovate to increase and expand P&G's digital manufacturing platform and leverage the Industrial Internet of Things (IIoT) to bring products to consumers quicker, increase customer satisfaction and enrich productivity to reduce costs.
Also, in June, Accenture (ACN) and MSFT, together with their joint venture Avanade, are joining forces to handle climate change, one of the most critical and urgent challenges for both businesses and people.
With an immediate focus on delivering solutions to help organizations change their operations, products, services, and value chains to help increase the transition to net-zero, the three companies will widen their focus to broader environmental, social, and governance (ESG) challenges in the future.
During the fourth quarter ended June 31, 2022, MSFT's total revenue increased 12.4% year-over-year to $51.87 billion. The operating income grew 7.5% from its year-ago value to $20.53 billion, while its net income improved 1.7% from its prior-year quarter to $16.74 billion. The company's EPS rose 2.8% year-over-year to $2.23.
Analysts expect MSFT's revenue to increase 9.9% year-over-year to $49.80 billion for the first quarter ending September 2022. The company's EPS is expected to grow 2.2% year-over-year to $2.32 for the first quarter ending September 2022.
Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters. The company's shares have soared 9% over the past year.
MSFT's POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has a B grade for Stability and Quality. Within the C-rated Software - Business Industry, it is ranked #12 of 55 stocks. Click here to see MSFT's additional POWR Ratings for Growth, Sentiment, Value, and Momentum.
SIGA Technologies, Inc. (SIGA)
SIGA, a commercial-stage pharmaceutical company, emphasizes the health security and infectious disease markets in the United States. Its lead product is TPOXX, an oral formulation antiviral drug to cure human smallpox disease caused by the variola virus. The stock has traded at an average volume of 15,882,166 over the past three months.
Last month, SIGA announced a collaboration with KaliVir Immunotherapeutics to make TPOXX available for use with KaliVir’s proprietary oncolytic vaccinia immunotherapy platform.
This novel oncolytic platform includes multiple proprietary genetic modifications that can be combined to generate a unique oncolytic virus optimized for systemic delivery and anti-tumor immune stimulation. Through this partnership, SIGA is providing its TPOXX oral capsules to support future clinical programs.
Also, last month, SIGA announced that the United Kingdom had approved SIGA’s oral tecovirimat (known in the U.S. as oral TPOXX) for the treatment of smallpox, monkeypox, cowpox, and vaccinia complications following vaccination against smallpox in adults and children with a body weight of at least 13kg.
In the first quarter ending June 30, 2022, SIGA’s total revenues increased 92.6% year-over-year to $16.67 million. Its operating income grew significantly from its year-ago value to $3.07 million, while its net and comprehensive income amounted to $2.04 million, up 1104% from its year-ago value. The company's EPS came in at $0.03.
The stock has gained 201.4% over the past year and 207.6% over the past six months.
SIGA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Quality and a B for Value. Within the F-rated Biotech industry, it is ranked #21 of 401 stocks.
In total, we rate SIGA on eight different levels. Beyond what we've stated above, we have also given SIGA grades for Growth, Sentiment, Momentum, and Stability. Get all the SIGA ratings here.
Fortinet, Inc. (FTNT)
FTNT provides broad, integrated, and automated cybersecurity solutions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. It offers FortiGate hardware and software licenses that offer various security and networking functions, including firewall, intrusion prevention, anti-malware, virtual private network, application control, web filtering, anti-spam, and wide area network acceleration. FTNT has traded at an average trading volume of 6,357,185 over the past three months.
Recently, FTNT announced the FortiGate 4800F series of hyperscale firewalls, which sets new standards for security, scale, performance, and innovation to cater to the requirements of hyperscale customers, and 5G mobile network operators (MNOs).
Also, recently, Comcast Business announced a strategic partnership with FTNT to deliver enterprises a new set of secure access service edge (SASE) and security service edge (SSE) solutions to assist enterprises in protecting their distributed workforces using a cloud-delivered approach to security policy enforcement.
This alliance expands Comcast Business’s managed services expertise while giving enterprises better flexibility to choose the cloud architecture and vendor mix that is right for them.
FTNT’s total revenue increased 28.6% year-over-year to $1.03 billion for the second quarter ending June 30, 2022. The non-GAAP operating income grew 25.6% from its year-ago value to $255.40 million, while its non-GAAP net income improved 22.3% from its prior-year quarter to $194.10 million. Its non-GAAP EPS amounted to $0.24, up 26.3% from its year-ago value.
The consensus EPS estimate of $0.27 during the third quarter ending September 2022 represents a 37.9% improvement year-over-year. Analysts expect FTNT's revenue to increase 29.7% year-over-year to $1.12 billion for the third quarter ending September 2022.
In addition, the company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
It is no surprise that FTNT has an overall B rating, equating to Buy in our POWR Ratings system. It also has an A grade for Quality and a B for Growth and Sentiment. In the F-rated Software - Security industry, it is ranked #4 of 29 stocks.
Click here to see the additional POWR Ratings for FTNT (Stability, Value, and Momentum).
MSFT shares were trading at $279.89 per share on Friday morning, down $3.76 (-1.33%). Year-to-date, MSFT has declined -16.41%, versus a -12.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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