Today's Must Read
Robust Content Aids Netflix (NFLX) Amid Stiff Competition
Loan Growth Supports U.S. Bancorp (USB), Higher Costs a Woe
Wednesday, August 12, 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 PayPal Holdings (PYPL), Netflix (NFLX) and U.S. Bancorp (USB). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
PayPal shares have outperformed the Zacks Internet Software industry year to date (+74.7% vs. +51.6%) on the back of accelerating transaction revenues that appear to sustainable. However, increasing credit loss reserves owing to macroeconomic projections on account of coronavirus is a risk.
PayPal reported impressive second quarter results wherein both earnings and revenues surpassed the estimates and improved year over year. Robust growth in total payments volume (TPV) owing to increasing net new active accounts drove the top line.
Moreover, strengthening customer engagement on the company’s platform and Honey buyout benefits were positive. Further, strong performance by Venmo and merchant services contributed well to the TPV growth. Additionally, growing momentum of the company’s core peer to peer and PayPal Checkout experiences was a tailwind.
Shares of Netflix have gained +22.4% over the past six months against the Zacks Broadcast Radio and Television industry’s rise of +1.4%. The Zacks analyst believes that the company is dominating the streaming space, courtesy of its diversified content portfolio, which is attributable to heavy investments in the production and distribution of localized, foreign-language content and an expanding international footprint.
Notably, shares have outperformed the industry on a year-to-date basis. However, Netflix expects subscriber growth to decline in the second half of 2020 due to less demand. Moreover, absence of new seasons of popular shows like Money Heist and Stranger Things is expected to affect subscriber growth.
Additionally, rising competition from Apple TV+, Amazon prime video, HBO Max, Disney+, TikTok is a major headwind. Netflix’s leveraged balance sheet and higher streaming obligation is a concern.
U.S. Bancorp shares have gained +31.5% over the past three months against the Zacks Major Banks industry’s rise of +25.1%. The Zacks analyst believes that diversified product mix and rise in revenues will support U.S. Bancorp’s growth opportunities. Also, rising loan and deposit balances are slated to benefit from the economic recovery.
Second-quarter results reflect higher fee income, rise in provisions and strong capital position. Solid business model, core franchise and diverse revenue streams are likely to support its performance. Also, rising loans and deposit balance keep the bank well-poised to undertake strategic initiatives.
Further, following the 2020 stress test results, U.S. Bancorp decided to maintain the dividend amount. Yet, consistently rising expenses due to the ongoing investments in technology remains concerning. Also, pressure on net interest margin due to a decline in interest rates might deter top-line expansion.
Other noteworthy reports we are featuring today include Citigroup (C), American Express (AXP) and Mitsubishi UFJ Financial Group (MUFG).
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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>>>