Wednesday, August 5, 2020
The Zacks Research Daily presents the best research output of our analyst team. Today’s Research Daily features new research reports on 16 major stocks, including Alphabet (GOOGL), NVIDIA (NVDA) and Costco Wholesale (COST). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
You can see all of today’s research reports here >>>
Alphabet shares have modestly lagged the Zacks Internet Services industry over the past year (+25.8% vs. +27.2%), reflecting the company’s cyclical exposure to digital ad spending. That said, the Zacks analyst believes that expanding data centers will continue to bolster the company’s presence in the cloud space.
Alphabet reported strong second-quarter earnings. The cloud and YouTube businesses remained strong, while digital advertising growth slowed down in the quarter due to the pandemic. The company’s strengthening cloud unit aided substantial revenue growth. Further, major updates in the search segment are enhancing the search results, which is a major positive.
Moreover, Google’s robust mobile search is gaining solid momentum. Additionally, strong focus on innovation of AI techniques and the home automation space should aid business growth in the long term. However, the company’s growing litigation issues and increasing expenses might hurt profitability.
(You can read the full research report on Alphabet here >>>)
Shares of NVIDIA have gained +76.4% over the past six months against the Zacks General Semiconductor industry’s rise of +7.2%. The Zacks analyst believes that NVIDIA is benefiting from the coronavirus-induced work from home and learn-at-home wave.
The company is also benefiting from strong growth in GeForce desktop and notebook GPUs, which is boosting gaming revenues. Moreover, a surge in Hyperscale demand remains a tailwind for the company’s Data Center business. The company expanded NVIDIA GeForce NOW in the last quarter, which is expected to drive user base. Further, the solid uptake of AI-based smart cockpit infotainment solutions is a boon.
Additionally, its latest collaboration with Mercedes-Benz is expected to further strengthen NVIDIA’s presence in the autonomous vehicles and other automotive electronics space. However, in the near term, management expects a $100-million negative impact of the coronavirus menace on revenues. Moreover, the U.S.-China trade war remains a key concern.
(You can read the full research report on NVIDIA here >>>)
Costco shares have gained +10.3% over the past three months against the Zacks Discount Retail industry’s rise of +11.2%. The Zacks analyst believes that Costco’s strategy to sell products at heavily discounted prices has helped it remain on a growth track as cash-strapped customers continue to reckon Costco as a viable option for low-cost necessities.
Notably, top line grew year over year and the company logged a decent comparable sales growth during third-quarter fiscal 2020. The company’s e-commerce sales surged during the quarter. Yet we note that Costco’s bottom line came under pressure. Management highlighted that incremental wage and sanitation costs owing to the coronavirus outbreak hurt the company’s quarterly earnings.
The company anticipates incremental expenses related to this catastrophe to exceed $100 million in the fourth quarter. Also, any higher investments or aggressive pricing strategy may hurt margins. Again, rising SG&A expenses and stiff competition pose concerns.
(You can read the full research report on Costco here >>>)
Other noteworthy reports we are featuring today include Chevron (CVX), Gilead Sciences (GILD) and Morgan Stanley (MS).
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Sheraz Mian
Director of Research
Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>
Today’s Must Read
Featured Reports
Chevron (CVX) to Boost Permian Position with Noble Buy
The Zacks analyst believes Chevron’s Noble buyout will expand its position in the Permian Basin along with cash-generating offshore assets in Israel.
HIV, Coronavirus Drug Fuel Gilead (GILD) Amid Competition
Per the Zacks analyst, Gilead’s HIV franchise maintains momentum on new drug approvals with better safety profiles as HCV business dwindles.
Buyouts, Loan Demand Aid Morgan Stanley (MS) Amid Low Rates
Per the Zacks analyst, inorganic growth strategy, focus on less capital-market dependent businesses and decent loan demand will support Morgan Stanley amid lower rates and economic slowdown.
Essential Items Lift Target’s (TGT) Sales, Margin a Concern
Per the Zacks analyst, higher sales in Essentials and Food & Beverage categories with solid contribution from digital channel have been fueling Target’s top line. However, margins remain a concern.
Low Fuel Costs Aid Norfolk Southern (NSC), Volume Woes Ail
The Zacks analyst is upset about the coronavirus-induced stressed volumes (down 19% in first-half 2020). However, low fuel costs (down 46% in first-half 2020) lend a cushion to the bottom line.
Customer Growth, Cost Reduction Efforts Aid Xcel Energy (XEL)
Per Zacks analyst, Xcel Energy’s improving customer base is driving demand for natural gas and electricity. Also, its efficient cost management efforts will boost margins.
FLEETCOR (FLT) Rides on Buyouts Amid Higher Interest Expense
The Zacks Analyst likes FLEETCOR’s buyout strategy to expand customer base and diversify its service offerings across industries.
New Upgrades
PayPal (PYPL) Benefits From Increasing Total Payment Volume
Per the Zacks analyst, PayPal’s total payment volume is rising owing to solid adoption of Venmo and merchant services. Further, growing momentum across PayPal Checkout experiences is positive.
Sony (SNE) Buoyed by G&NS and Financial Services Segment
Per the Zacks Analyst, Sony’s Game & Network Services (G&NS) segment is benefiting from game software sales along with PlayStation Plus. Also, the Financial Services unit is making good progress.
Solid Product Offerings, Buyouts Aid Berry Global (BERY)
Per the Zacks analyst, Berry Global’s solid product offerings and its buyout of RPC Group will continue to lend it momentum. Its balanced capital allocation strategy adds to its strength.
New Downgrades
Soft Fundamentals, Occupancy & Rent Decline Affect Aimco (AIV)
Per the Zacks Analyst, fundamentals of Apartment Investment & Management Co. worsened with a decline in rental rates and average occupancy amid the challenging apartment environment.
Insipid Industrial Segment Mar Woodward’s (WWD) Prospects
Per the Zacks Analyst, Woodward’s Industrial segment is facing headwinds stemming from weakness in oil and gas markets as well as the impact of the COVID-19 pandemic on China’s natural gas trucks.
Rising Expenses Continue to Hurt Integer Holdings (ITGR)
Per the Zacks analyst, escalating expenses, mainly due to higher selling, general and administrative plus research and development costs, continue to restrict Integer Holdings’ margin expansion.
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