Today's Must Read
Walmart's (WMT) Sales to Gain on Robust Ecommerce Business
Buyouts, Loan Demand Aid Morgan Stanley (MS) Amid Low Rates
Friday, August 21, 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), Walmart (WMT) and Morgan Stanley (MS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Facebook shares have outperformed the S&P 500 in the year-to-date period (+31.1% vs. +5.1%), with worries about ad boycots and regulatory uncertainty more than offset by the company's dominant position in the space. The Zacks analyst sees the company continuing to benefit from increasing mobile ad revenues, growing adoption of Stories by advertisers across Instagram, core Facebook app and Messenger, and initiatives to improve security.
However, Facebook expects user-base growth to be flat or slightly down in most of its regions in the third quarter of 2020, sequentially. The company expects ad-revenue growth on a year-over-year basis to be roughly 10%.
Facebook expects some of the recent surge in community engagement to normalize as regions reopen. 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.
Shares of Walmart have gained +13.6% over the past six months against the Zacks Supermarkets industry’s rise of +12.6%. The Zacks analyst believes that the company has been benefiting from rising demand for grocery as well as general merchandise items amid coronavirus-led stay-at-home trends.
Stay-at-home trends are also boosting e-commerce sales, which soared 97% in the second quarter of fiscal 2021. During the quarter, the top and bottom lines beat the consensus mark and grew year over year, with U.S. comps rising for the 24th straight time.
In the U.S. segment, both store and online sales remained strong, supported by government stimulus. Clearly, Walmart’s efforts to enhance deliveries are yielding results. However, the company is seeing high COVID-19-related costs, especially related to special bonuses. Also, price investments are hurting gross margin to an extent.
Morgan Stanley shares have gained +27% over the past three months against the Zacks Investment Banking industry’s rise of +16.9%. The Zacks analyst believes that company’s plan to acquire E*Trade Financial will likely support its Wealth Management segment. Focus on corporate lending operations and strength in Investment Management operations is expected to aid the top line.
Although the company is aiming to change the revenue mix and focus more on less capital-market driven sources, the financial impact from the same will be seen after some time. Thus, significant dependence on capital markets to generate trading and investment banking revenues remains a concern. Near-zero interest rates and higher costs are other concerns.
Other noteworthy reports we are featuring today include Intuit (INTU), Estée Lauder (EL) and Equinor (EQNR).
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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>>>