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Research Daily

Tuesday, March 28, 2017

Before we discuss today's featured research reports on Nike (NKE), Alibaba (BABA), AT&T (T) and others from our team of analysts, a brief comment on the market as a whole appears in order.

Stocks today are off to a positive start, with all the major indexes holding onto gains in the first few hours of the session. A positive close today would follow persistent weakness in recent days on policy uncertainty, particularly in the wake of the failed healthcare initiative. Through Monday's close, the S&P 500 index has lost -2.2% of its value from the March 1st high, while the small-cap Russell 2000 index has shed -3.9% of its value. Treasury yields have been losing ground lately as well, with the benchmark 10-Year Treasury bond yield down 23 basis points from its March 13 high.

It is perhaps reasonable not to read too much into today's positive markets as the policy uncertainty issue is still with us. On the data front, we got strong readings today on consumer confidence and home prices. The Conference Board's Consumer Confidence index for March came in better than expected today, with the index reading its highest level since 2000.

Today's Featured Reports

Nike shares hares have outperformed the Zacks Consumer Discretionary sector on a year-to-date basis, gaining +10% vs. +8% for the sector. The Zacks analyst believes that much of this credit goes to its solid surprise history and dominant industry position. In the recently reported quarterly report, the company delivered its 19th straight earnings beat driven by sales growth, SG&A leverage, lower tax rate and share count. While sales improved year over year, the metric fell below estimates, mainly due to rising competition for Nike’s basketball shoes in North America and a challenging retail backdrop. Persuaded by these factors, the company provided soft sales growth outlook for fourth-quarter fiscal 2017. It also expects currency headwinds to linger and hurt revenues in the fiscal. However, the company remains confident of driving sustainable and capital efficient growth in the long term. (You can read the full research report on Nike here >>)

Shares of Alibaba have outperformed the broader market as well as the peer e-commerce space over the last one year (it is up more than +38.4%), with the trend expected to remain in place given continued growth in its core e-commerce business and growing cloud computing services. The Zacks analyst likes the company’s dominance in China's mobile commerce market, efforts to develop new products and strong financial position. On the flip side, the need for continued infrastructure investments, growing competition and increasing competition from Tencent Holdings and Baidu remain major overhangs. (You can read the full research report on Alibaba here >>)

AT&T shares have lost -2.7% over the three months, but have still fared better than the Zacks Wireless industry and competitor Verizon, which have declined -4.3% and -8.6% over the same period. While Q4 results were mixed, trends in the wireless business pointed towards stabilization in terms of the subscriber base and the churn rate. Market participants also appear to be satisfied with AT&T's strategic moves like the DirectTV purchase and the Time Warner deal even as Verizon's path seems muddled. That said, there is no shortage of issues facing the company, like a saturated wireless market where spectrum crunch is a big issue, persistent losses in access lines, and stringent regulatory mandates. (You can read the full research report on AT&T here >>)

Other noteworthy reports we are featuring today include eBay (EBAY), United Technologies (UTX) and Sinopec (SNP).

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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 >>>

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