Today's Must Read
Verizon (VZ) Rides on 5G Mobility Amid Headwinds in Media Unit
Ibrance & Other Key Drugs to Drive Pfizer's (PFE) Sales
Monday, July 27, 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 Facebook (FB), Verizon Communications (VZ) and Pfizer (PFE). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Facebook shares have been essentially flat over the last few weeks, likely reflecting unfavorable headlines related to advertizer boycotts. But the stock has outperformed the S&P 500 over the past year (+18.9% vs. +6.9%) and the Zacks analyst expects the stock to move higher following strong numbers in its quarterly release after the market's close on Wednesday, July 29th.
Driving this optimism is the view that the company should continue to benefit from growth in Instagram Stories and Feed, and an expanding user base in Asia Pacific.
The company helped people connect during the coronavirus pandemic. Notably, voice and video calling more than doubled on Messenger and WhatsApp. The launch of Messenger Rooms for video call, which can accommodate 50 people, and WhatsApp video support for up to eight users are noteworthy in this regard.
However, Facebook expects ad-sales to be hurt by weakness in travel and automotive industries. Further, a number of companies have announced plans to freeze ad spending on Facebook due to its failure to eradicate hate speech and misinformation. This is expected to hurt top-line growth, at least in the near term. Higher operating expense is also expected to dent the operating margin in 2020.
Shares of Verizon have modestly lagged the Zacks Wireless industry this year (-6.9% vs. -5.7%), but the Zacks analyst is optimistic about this wireless operator on the back of a disciplined network strategy, including accelerated 5G deployment despite economic uncertainties stemming from the COVID-19 crisis.
It launched 35th 5G Ultra Wideband city in San Diego and intends to make 60 5G mobility cities this year. It is building the 5G home solution and mobile edge computing on the same network. Verizon expects to see strong momentum heading into the second half of 2020.
However, it is facing headwinds in the media business due to sluggish advertising trends. The company operates in a fiercely-competitive U.S. wireless market. Also, Verizon is spending heavily on promotion and lucrative discounts to attract customers, which erodes profitability.
Pfizer shares have lost -1.2% over the past six months against the Zacks Large-Cap Pharmaceuticals industry’s rise of +0.5%. The Zacks analyst believes that the Consumer Healthcare joint venture with Glaxo, the Array acquisition and the pending merger of Upjohn unit with Mylan, if successful, will make Pfizer a smaller company with a diversified portfolio of innovative drugs and vaccines.
The smaller Pfizer should see better revenue growth as the Lyrica LOE cliff will go away. Pfizer expects continued strong growth of key brands like Ibrance, Inlyta and Eliquis to drive sales in 2020. However, Pfizer expects a significant impact from coronavirus-related business disruption in Q2, which it expects to ease in the second half.
Meanwhile, currency headwinds and pricing pressure are other top-line headwinds. Estimates have gone up ahead of Q2 earnings. Pfizer has a mixed record of earnings surprises in the recent quarters.
Other noteworthy reports we are featuring today include Novartis (NVS), NextEra Energy (NEE) and Philip Morris International (PM).
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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>>>