Tuesday, November 28, 2023
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 Microsoft Corporation (MSFT), Broadcom Inc. (AVGO) and Wells Fargo & Company (WFC). 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 >>>
Microsoft shares have outperformed the Zacks Tech sector in the year-to-date period (+58.5% vs. +45.6%) on the back of the company perceived leadership in the AI space. The company’s first-quarter results gained from strong Intelligent Cloud and Productivity and Business Processes revenues. Intelligent Cloud revenues were driven by growth in Azure and other cloud services.
Productivity and Business Processes revenues rose due to a strong adoption of Office 365 Commercial solutions. Continued strength in the small and medium businesses, frontline worker offerings and a gain in revenue per user were key growth drivers.
However, Office's declining commercial licensing has been a headwind as customers shift to cloud offerings. Steady growth in Dynamics products and cloud services aided LinkedIn revenues. Higher operating expenses driven by marketing, LinkedIn and cloud engineering amid intense competition in the cloud space remain a concern.
(You can read the full research report on Microsoft here >>>)
Shares of Broadcom have outperformed the Zacks Electronics - Semiconductors industry over the year-to-date period (+73.1% vs. +57.3%). The company is benefiting from the strong deployment of generative AI by hyperscalers, service providers and enterprises.
Broadcom expects generative AI to contribute more than 25% of semiconductor revenues in fiscal 2024 compared with an estimated 15% in fiscal 2023 and roughly 10% in fiscal 2022. Strong demand for Tomahawk 5, Jericho, 10-gigabit PON and DOCSIS 3.1 with embedded Wi-Fi 6 and 6E aids Broadcom’s prospects.
Expanding portfolio with the launch of the second-gen Wi-Fi 7 wireless connectivity chip is a catalyst. Broadcom expects networking revenues to grow nearly 20% year over year in the fiscal third quarter. Server storage connectivity revenues are expected to be up low single digits year over year.
(You can read the full research report on Broadcom here >>>)
Wells Fargo shares have outperformed the Zacks Banks - Major Regional industry over the year-to-date period (+7.4% vs. +1.1%). The company divested around $2 billion of private equity investments in certain funds to a group of leading investors. Further, Wells Fargo and Centerbridge Partners formed a strategic relationship to provide direct lending to non-sponsor middle-market companies in North America.
Progress on efficiency initiatives continue to propel expense control and savings, which will drive its bottom line. A strong deposit balance aids the bank’s liquidity position and thus supports capital deployment moves. Also, a decline in originations will limit mortgage banking income.
However, declining loan balance and volatile fee income will likely affect revenue growth in the near term.
(You can read the full research report on Wells Fargo here >>>)
Other noteworthy reports we are featuring today include Arista Networks, Inc. (ANET), Occidental Petroleum Corporation (OXY) and Aflac Incorporated (AFL).
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
Adoption of Cloud & Office 365 Strength Aid Microsoft (MSFT)
Strong Demand for Networking Products Aids Broadcom (AVGO)
Cost Control Aids Wells Fargo (WFC) Amid Declining Revenues
Planned Investments, Permian Basin Focus Aid Occidental (OXY)
Per the Zacks analyst Occidental's investments to strengthen infrastructure and expansion of Permian Basin operation through acquisition will drive its performance over the long run.
Solid Sales in U.S. Segment Aid Revenues at Aflac (AFL)
Per the Zacks analyst, Aflac's U.S. segment, backed by increased growth investments and productivity gains, will fuel growth. A strong solvency position enables business investments.
Moderna's (MRNA) New Launches to Reduce COVID Sales Dependency
With COVID vaccine sales declining, Moderna (MRNA) is accelerating development of its non-COVID pipeline. The Zacks Analyst is encouraged by the potential product launches over the next three years.
Diamondback (FANG) to Benefit from Low Breakeven Costs
The Zacks analyst likes Diamondback Energy's extremely low oil price breakeven costs, wherein the company needs the commodity to be at just $50 a barrel to be profitable.
AXON Benefits from Strength in TASER Segment Amid High Costs
Per the Zacks analyst, AXON's TASER Segment is driven by robust demand for TASER devices and higher cartridge revenue. However, high operating costs remain a concern for the company.
Cologuard Sales Aid Exact Sciences (EXAS), Stiff Rivalry Ail
Per Zacks analyst Exact Sciences continues to witness broad-based momentum in Cologuard's adoption as over 331,000 healthcare professionals order it since its launch. Stiff rivalry remains a concern.
Columbia Sportswear's (COLM) DTC Sales Aid, SG&A Costs Hurt
Per the Zacks analyst, Columbia Sportswear's direct-to-consumer business is an upside, with DTC sales up 4% in third quarter. However, SG&A costs have been high due demand creation costs and others.
Arista (ANET) Rides on Healthy Demand for Cloud Solutions
Per the Zacks analyst, Arista will likely benefit from the rising demands of AI/ML-driven network architectures. Optimization of manufacturing output and easing of supply chain woes are tailwinds.
Science Applications (SAIC) Rides on Contract Wins, Buyouts
Per the Zacks analyst, Science Applications is benefiting from new contracts supporting IT modernization. Moreover, strategic buyouts like Koverse and Halfaker and Associates bode well for growth.
Product Innovation, Cost-Saving Move Aid Acuity Brands (AYI)
Per the Zacks analyst, Acuity Brands' (AYI) focus on innovation through product vitality and increasing service levels, and cost-saving initiatives bode well.
Gol Linhas (GOL) Grapples With Debt-Laden Balance Sheet
The Zacks Analyst is worried about the fact that high debt does not bode well for Gol Linhas' bottom line.
CommScope (COMM) Plagued by Falling Order Rates, Lower Sales
Per the Zacks analyst, CommScope is likely to be plagued by low order rates stemming from high inventory levels and low capex spending by service providers amid a challenging macroeconomic environment
High Costs, Low Dividend Sustainability Hurt Blackstone (BX)
Per the Zacks analyst, rising expenses due to investments in franchise are likely to hurt Blackstone's bottom-line growth. Lower sustainability of the company's dividend payouts is a headwind.
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