Today's Must Read
Strong GPU Adoption in Gaming, Datacenter Aids NVIDIA (NVDA)
Focus on Electric Cars Aids Toyota (TM), High Debt Ails
Tuesday, August 18, 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 JPMorgan Chase (JPM), NVIDIA (NVDA) and Toyota Motor (TM). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
JPMorgan shares have outperformed the Zacks Major Regional Banks industry in the year-to-date period (-28.5% vs. -33.5%), but have otherwise struggled given the unfavorable interest rate environment. The Zacks analyst believes that while the macro backdrop remains unhelpful, JPMorgan remains well positioned given branch openings in new regions, acquisition of InstaMed, the recent reversal in mortgage banking business and focus on credit card operation.
Also, the company will be keeping the dividend level unchanged in the third quarter, following the clearance of annual stress test results. Also, the company has an impressive earnings surprise history. It has outpaced the Zacks Consensus Estimate in three of the trailing four quarters.
However, the Fed’s accommodative policy and near-zero rates are expected to hurt the bank’s interest income and margins. Further, coronavirus-induced economic downturn will likely continue to hamper business activities. Thus, loan growth will likely be muted in the near term.
NVIDIA has long been viewed as play on the video gaming space given the company's leadership position in the GPU space. But the company has establised itself in all key areas such cloud, AI and analytics. No doubt it has been such a stock market overachiever, with the momentum expected to continue after its quarterly report on Wednesday that is expected to show datacenter revenues exceeding gaming receipts for the first time.
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.
Toyota Motor shares have gained +14.6% over the past three months against the Zacks Foreign Automotive industry’s rise of +20.1%. The Zacks analyst believes that an expanding portfolio of product lines is driving Toyota’s prospects.
In order to capitalize on the accelerated global shift to electric cars, the Japanese auto giant is focusing on developing electric and autonomous vehicles. The company is working on hydrogen fuel stations in collaboration with various partners. The firm aims to achieve half its global sales from electric vehicles by 2025.
However, Toyota expects consolidated vehicle sales of 7.2 million units, indicating a decline from roughly 9 million units recorded in fiscal 2020 amid the coronavirus pandemic crisis. High research and development expenses on advanced technologies for the development of EVs and driverless cars are also likely to dent near-term margins. Its high debt levels also remain a concern.
Other noteworthy reports we are featuring today include Sanofi (SNY), Fidelity National Information Services (FIS) and American Express (AXP).
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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>>>