Today's Must Read
Work-From-Home & Online Learning Wave Aids Zoom Video (ZM)
Cost Control to Buoy Caterpillar (CAT) Amid Weak Demand
Thursday, September 17, 2020
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 12 major stocks, including Novartis (NVS), Zoom Video Communications (ZM) and Caterpillar (CAT). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Novartis shares have underperformed the Zacks Large-Cap Pharmaceuticals industry in the year to date period (-4% vs. +1.1%). But the Zacks analyst is optimistic about the company's outlook given solid performance of key drugs like Cosentyx and Entresto and new launches like Piqray, Mayzent and Beovu that should boost Novartis’ sales amid a slowdown due to the ongoing pandemic.
The biosimilar portfolio has also gained traction with new key approvals and is expected to drive growth. Novartis’ efforts to develop and diversify its pipeline are also impressive. However, price erosion in the United States has adversely impacted the generics business.
Moreover, pipeline setbacks and generic competition for key drugs are concerning. Shares have underperformed the industry in the past year. The company has tightened its outlook for 2020 due to the pandemic woes.
Zoom Video has emerged as one of the biggest beneficiaries of the pandmeic and the associated work-from-home environment. The company's execution has been flawless, as evident from its market share gains relative to bigger and better-capitalized competitors like Microsoft (MSFT), Cisco (CSCO) and others.
The market has rewarded the stock accordingly, up +382.4% over the past year against the Zacks Internet Software industry’s rise of +57.7%. The Zacks analyst believes that Zoom Video should continue to gain traction from the coronavirus-induced remote-working and online-learning wave in second-quarter fiscal 2021.
The company added record number of subscribers. Enterprise customer base also grew rapidly. Easy to deploy, use, manage and solid scalability make Zoom Video’s software more popular among its customers. Moreover, the company’s expanding international presence is a key catalyst.
Its efforts to eliminate the security and privacy loopholes as well as new hardware and Zoom From Home solution’s launch are expected to help in expanding clientele. The company’s strong free cash-flow generating ability is noteworthy. However, acute competition from the likes of Microsoft and Cisco in the video-communication space does not bode well.
Caterpillar shares have gained +50% over the past six months against the Zacks Construction and Mining industry’s rise of +48.2%. The Zacks analyst believes that the company’s results this year are likely to be impacted by a weak backlog and weakness in non-residential construction.
Caterpillar’s global retail sales fell 20% in August 2020, marking the ninth consecutive month of decline on weak demand amid the COVID-19 pandemic. Estimates for Caterpillar’s third quarter and current year have undergone negative revisions lately. However, the manufacturing sector seems to be coming out of the pandemic-induced crisis on gradual resumption of the global economic activities and reopening of businesses.
This will be a positive for Caterpillar. Further, the company’s focus on cost reduction will help boost margins. Strong liquidity position, investments in expanded offerings and services, and digital initiatives including e-commerce will fuel growth.
Other noteworthy reports we are featuring today include Stryker (SYK), Clorox (CLX) and LHC Group (LHCG).
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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>>>