Acxiom: The Next Great Billion-Dollar Company
Technology investors are giddy because the NASDAQ surged to within 86 points of breaking the 7,000 level last week, something that I must admit has come sooner than I thought.
At the start of the year, I estimated that a 15% move to around 6,200 was within reach if everything panned out. Now, we are looking at 7,000 and a 30% gain. Don’t be surprised; the index has returned in excess of 30% on nine occasions since 1975.
My view is that technology will continue to be the engine driving the market, albeit the moves will likely be smaller in the year ahead.
In the mid-cap space, an excellent trade on the demand for big data solutions is Acxiom Corporation (NASDAQ:ACXM), a developer of applications for enterprise data, analytics, and software-as-a-service. The company collects key third-party consumer data and delivers solutions used by over 3,250 global clients for more effective marketing. Clients are found in financial, insurance, healthcare, telecommunications, automotive, travel, government, and retail.
ACXM stock has underperformed the S&P 500 with a muted 1.7% move year-to-date and 2.73% over the past year, so the stock is due for a rally.
My Fundamental Bull Thesis for ACXM Stock
Acxiom revenues have grown sequentially in two straight fiscal years (ended in March), although the growth rates of 5.7% and 3.5% for FY16 and FY17, respectively, were disappointing.
I’m optimistic because Acxiom is expected to ramp up its revenue growth rate to 11.7% (to $1.03 billion) in FY19. (Source: “Acxiom Corporation (ACXM),” Yahoo! Finance, last accessed December 1, 2017.)
In addition, Acxiom has done a decent job of cost control, expanding gross margins. The improving gross margins translate into stronger earnings growth, which ultimately could drive up the price of Acxiom stock.
Acxiom has reported two straight years of generally accepted accounting principles (GAAP) profits, and the positive trend is expected to hold. The earnings growth could jump from 16.9% in FY18 to 27.7% in FY19.
Over the past 30 days, Wall Street has raised earnings per share (EPS) estimates for Acxiom five times for FY18 and two times for FY19. Higher revisions generally translate into a higher share price.
Going back 14 quarters to the start of calendar 2014, Acxiom has fallen short of its EPS in only one quarter while beating its EPS in eight quarters.
The improving fundamentals suggest Acxiom is on the right path to a higher stock price.
A look at the ACXM stock chart shows the steady rally from the breakout at $22.00 in August to above the 50-day and 200-day moving averages. Supporting the rally was a stronger relative strength indicator (RSI) and an upward trending moving average convergence/divergence (MACD) indicator.
Chart courtesy of StockCharts.com
The chart shows the emergence of a bullish golden cross for ACXM stock in mid-November when the 50-day moving average crossed above the 200-day moving average.
The next price targets for Acxiom stock are $30.00 and the $39.30 high that was set in March 2014.