Chicago, IL –October 9, 2024 – Zacks Equity Research shares StepStone Group STEP, as the Bull of the Day and Altice USA ATUS, as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Robinhood Markets HOOD.
StepStone Group is a global investment firm that focuses on private markets, offering tailored investment solutions to institutional investors such as pension funds, insurance companies, and family offices. It provides access to a broad range of private market opportunities, including private equity, private debt, infrastructure, and real estate.
The firm helps clients build customized investment portfolios and also offers advisory services to guide investment strategies. StepStone’s approach involves several key areas: investing directly in new private market funds, partnering with private equity firms to co-invest in specific companies, acquiring existing private market assets through secondaries, and investing in private debt. Additionally, the company focuses on real assets like infrastructure and real estate, leveraging its global network and data-driven analysis to help investors achieve long-term, risk-adjusted returns.
Demand for StepStone Group’s services are growing nicely, and the company is expecting top line growth of 25.4% this year and 15.7% next year. Earnings too are expected to inflect upward, with analysts forecasting profits to climb 51.2% this year and 18.2% next year.
StepStone Group’s industry positioning and growth forecasts haven’t gone unnoticed as the stock has appreciated nearly 100% over the last 12 months. But with a top Zacks Rank and rising earnings revisions there may still be upside in STEP stock.
Private Market Investments Growth
Private market investment firms like Private Equity, Credit and Infrastructure have truly been a juggernaut in the financial industry over the last several years, cannibalizing much of the asset management industry.
Private markets have swelled to over $13 trillion accounting for some 40% of all invested capital today in the US. And it’s no surprise they have garnered such assets as they have largely outperformed traditional investments, with lower volatility. Although it is debatable whether the volatility is actually lower, or it just appears lower because portfolios aren’t marked to market daily like public market investing, investors in these products enjoy the psychological advantage, nonetheless.
With private market investments expected to grow to $15 trillion by 2025 and $18 trillion by 2027, according to S&P Global, StepStone Group can expect client to continue to flock to them for consulting in the industry.
Should Investors Buy STEP Shares?
Although StepStone Group is trading at a valuation of 32.9x forward earnings—well above the industry average of 16.9x and its three-year median of 23.3x—it sits in a unique and rapidly growing vertical within the financial services industry. Furthermore, the stock offers a dividend yield of 1.6%, making it appealing to both growth and income-oriented investors.
Given the company's strong growth forecasts, favorable industry tailwinds, and rising demand for private market investment solutions, StepStone Group appears to offer substantial upside potential, particularly for investors looking to capitalize on the continuing expansion of private markets.
Bear of the Day:
Altice USA, one of the country's largest broadband communications and video services providers has struggled in recent years due to intense competition and shifting consumer trends. Topline sales have fallen in recent years, while earnings have recently flipped negative and huge debt obligations stress financial security.
Altice USA stock has cratered over the last five years, falling 91.9% and massively underperforming the broad market and its respective industry. Though the company maintains a huge customer base, numerous products and considerable infrastructure, the company has faced challenges, including customer service issues and competition from other telecom and streaming service providers.
Furthermore, ATUS has a Zacks Rank #5 (Strong Sell) rating, indicating falling earnings estimates and further increasing the odds of another move lower in the stock price. Based on this setup, investors should avoid Altice USA stock until its outlook improves.
Altice USA Earnings Estimates Plunge
Quarterly earnings reports continue to disappoint with the last three missing estimates and the most recent quarter missing earnings forecasts by a whopping -62.5%. Analysts have been steadily downgrading earnings estimates since mid-2021 and continue to do so today.
FY24 earnings estimates have been lowered by -16.7% over the last two months and are projected to fall 16.7% YoY, while FY25 earnings estimates have declined by 66.7% and are expected to crater 89.2%. Sales forecasts aren’t any better with the top line expected to contract 2.8% this year and 2.9% next year.
Altice's Debt Burden
Altice USA's financial struggles are compounded by its massive debt load, which has created additional pressures on the company’s ability to operate effectively. As of the latest reports, Altice carries over $24 billion in debt, a substantial figure that severely limits its financial flexibility. Interest payments on this debt have eaten into profit margins, making it even harder for Altice to reinvest in necessary upgrades to its network infrastructure, customer service, and product offerings.
In the face of growing competition and customer churn, this financial strain becomes even more significant. The company’s inability to significantly grow revenues or improve customer retention makes servicing this debt increasingly difficult. As a result, Altice's financial health has continued to deteriorate, contributing to the dramatic decline in its stock price.
Should Investors Avoid ATUS Stock?
Given Altice USA's dismal financial performance, mounting debt, and negative earnings revisions, it's hard to justify an investment in the stock right now. The company is battling significant headwinds, from intense competition to a shrinking subscriber base and declining revenues. While its large customer base and extensive infrastructure are assets, they haven’t been enough to offset the broader challenges it faces.
For investors looking for opportunities in the telecom space, there are other companies with stronger fundamentals, growth prospects, and less financial strain. Until Altice can turn around its earnings trajectory and stabilize its business, it’s a stock better left avoided.
Additional content:
Don't Overlook This Top Stock for Crypto Exposure?
Cryptocurrency is a digital or virtual currency that uses cryptography for security. Unlike traditional currencies issued by governments (fiat money), cryptocurrencies operate on decentralized networks based on blockchain technology – a distributed ledger that records all transactions across a network of computers.
And for those seeking exposure through stocks, the Zacks Cryptocurrencies & Blockchain Technology thematic screen focuses on companies ranging from creators of software and hardware that power blockchain to those applying this technology, like crypto mining firms.
See the full list of Zacks Thematic Screens – Zacks Thematic Screens.
Let’s take a closer look at a top-ranked stock that the screen has returned.
Robinhood Sees Strong Crypto Volume
Robinhood Markets offers a comprehensive suite of financial products aimed at addressing critical financial needs, including crypto trading and crypto staking (staking in EU only). The stock sports the highly-coveted Zacks Rank #1 (Strong Buy), with its earnings outlook notably bullish across the board.
Up more than 80% in 2024, HOOD shares have been quietly strong, widely outperforming relative to the S&P 500. Quarterly results have helped aid the move, with the stock seeing a great reaction following record revenue and net deposits throughout the mentioned period.
And consumers keep flocking to the platform for their crypto needs, with cryptocurrencies revenue of $81 million climbing a staggering 161% from the same period last year. Crypto Notional Trading Volumes throughout the period also saw a 140% climb year-over-year to $21.5 billion.
Keep an eye out for the company’s next quarterly release currently scheduled for October 30th. Top line revisions have been positive along with EPS expectations, with the $672 million expected revised 12% higher since mid-July and suggesting 44% growth from the year-ago period.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Bottom Line
Zacks Thematic Screens lets you dive into 30 dynamic investment themes shaping the future.
While stocks in each theme aren't direct recommendations, they offer a solid starting point. Leverage the Zacks Rank and other metrics to identify the best stocks for your strategy. Each featured stock comes with a Zacks report, giving you the tools to analyze performance and potential.
Robinhood Markets was a top selection that the Zacks Cryptocurrencies & Blockchain Technology thematic screen churned out.
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Altice USA, Inc. (ATUS) : Free Stock Analysis Report
StepStone Group Inc. (STEP) : Free Stock Analysis Report
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