Today's Must Read
Rising Demand for Model 3 Drives Tesla (TSLA) Amid Cost Woes
Robust Demand Aids Lockheed (LMT), F-35 program's Cost Hurts
Tuesday, October 6, 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), Tesla (TSLA) and Lockheed Martin (LMT). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Facebook shares have lost some ground over the past month or so, but the stock has nevertheless been a strong performer this year (up +28.1% in the year-to-date period vs. +5.8% gain for the S&P 500 index). The Zacks analyst expects the stock's outperformance to continue on the back of steady user growth across all regions, particularly Asia Pacific.
The coronavirus-led lockdowns and shelter-at-place guidelines have increased engagement of its products like Instagram, WhatsApp, Messenger and Facebook Watch. 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 assumes some of the recent surge in community engagement to normalize as regions reopens. 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 Tesla have gained +783.9% over the past year against the Zacks Domestic Automotive industry’s rise of +197%. The Zacks analyst believes that Tesla has a first-mover advantage in the EV space with high range vehicles, superior technology, and software edge.
Robust Model 3 demand, ramp up of Model Y production, significant Shanghai Gigafactory progress, amazing line-up of upcoming products and aggressive expansion efforts bode well for the firm. The red hot EV maker smashed forecasts and posted the fourth consecutive quarterly profit in the last quarter.
However, high R&D, SG&A costs and massive capex may clip the margins. Tesla is investing heavily to increase production capacity, boost sales and construct Gigafactories, which are likely to strain its near-term prospects. Waning margins for Model S/X is another concern. Thus, investors are recommended to wait for a better entry point.
Lockheed Martin shares have gained +8.3% over the past six months against the Zacks Aerospace Defense industry’s rise of +6.5%. The Zacks analyst believes that expansionary budgetary provisions made by the U.S. administration will immensely boost this defense primes business. It continues to be a strong cash generator.
Lockheed Martin enjoys strong demand for its high-end military equipment in domestic and international markets, being the world's largest defense contractor. Lockheed Martin is further witnessing increased demand for its THAAD missiles from the Kingdom of Saudi Arabia (KSA). In a three months time, Lockheed Martin outperformed the industry.
However, forced cost reduction initiatives for F-35 program might hamper its operating results. America and Turkey's tiff about the latter accepting Russian products may hurt Lockheed's component supply from Turkey. It is facing performance issues in relation to some of its products, which in turn may hurt it results.
Other noteworthy reports we are featuring today include Alphabet (GOOGL), Starbucks (SBUX) 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>>>