2 Intriguing Stocks to Watch After Exceeding Quarterly Expectations: AGYS, W

Several stocks are already standing out in this week’s much-anticipated earnings lineup, including UPS UPS and PayPal PYPL, but Agilysys AGYS and Wayfair W have stolen the show so far after impressively exceeding their quarterly expectations and offering positive guidance.

As two of the top movers, Agilysys and Wayfair stock spiked over +20% on Tuesday, with both hitting new 52-week highs of over $100 a share.

The excitement for Agilysys stock comes as the provider of innovative IT solutions is seeing strong demand for its cloud-native hospitality software and services, which are used by hotels, resorts, and casinos.

Meanwhile, Wayfair has started to turn the corner in navigating a tough operating environment as a leading e-commerce provider of home goods products, including furniture and décor.

Subscription Growth Fuels Agilysys’ Record Quarterly Results

Agilysys' subscription services revenue captivated investors, leading to record quarterly results for its core business operations. It’s also noteworthy that Agilysys’ AI-driven features have played a significant role in accelerating growth, improving customer personalization, and boosting upselling efficiency. 

Reporting results for its fiscal second quarter after-market hours on Monday, Agilisys’ Q2 sales were up 16% year over year to $79.3 million, and topped estimates of $76.74 million by 3%. This also marked Agilisys' highest quarterly revenue mark since divesting its technology solutions group and other discontinued divisions in 2010.

Subscription revenue spiked 33% YoY to a peak of $51 million, accounting for more than 60% of Agilysys’ total sales. Agilysys also hit quarterly peaks in adjusted EBITDA at $18.5 million (23.5% margins) and operating margins at 17.8%. On the bottom line, Agilysys hit a Q2 EPS peak of $0.40, which was up from $0.34 a share in the comparative quarter and topped expectations of $0.39.

Wayfair’s Strong Q3 Results Trigger a Short Squeeze

Much stronger-than-expected Q3 results caused a short squeeze in Wayfair’s stock, with 20% of its shares being sold short as of mid-October.

Forcing short sellers to buy and reigniting investors' confidence in the process, Wayfair’s Q3 sales rose 5% YoY to $3.27 billion and comfortably topped estimates of $3.13 billion by 4%. Even better, Q3 EPS soared 87% to $0.87 versus $0.47 a share in the prior year quarter. Plus, this crushed EPS expectations of $0.36 by 141%.

Agilysys & Wayfair’s Positive Guidance

Raising its full-year subscription revenue growth rate from 25% to 29%, Agilysys also raised its full-year revenue forecast from a range of $305-$310 million to $315-$318 million. Furthermore, Agilysys now expects its adjusted EBITDA margin to be further above 20% and emphasized continued investment in cloud-native solutions and international expansion.

After previously declining to provide formal numerical guidance and emphasizing a cautious outlook, Wayfair shifted to a more confident stance, offering explicit guidance for the fourth quarter. Notably, Wayfair expects Q4 revenue to increase by mid-single digits, with the Zacks Consensus currently at $3.01 billion or 4% growth. Additionally, Wayfair anticipates an adjusted EBITDA margin of 5.5%-6.5%.

Bottom Line

Ironically, to what may have served as a warning to short sellers, Wayfair stock is currently sporting a Zacks Rank #2 (Buy) as the company was already benefiting from a positive trend of earnings estimate revisions (EPS) ahead of its Q3 report. As for Agilysys, AGYS currently lands a Zacks Rank #3 (Hold), but a buy rating could be on the way, considering EPS estimates are likely to rise after record quarterly results.

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This article originally published on Zacks Investment Research (zacks.com).

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