Thursday, October 22, 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, Inc. (FB), Verizon Communications Inc. (VZ) and Snap Inc. (SNAP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Facebook shares have outperformed the Zacks Internet - Services industry in the year-to-date period (+35.8% vs. +23.1%) on the back of steady user growth across all regions, particularly Asia Pacific. The coronavirus-led lockdowns and shelter-in-place guidelines have increased engagement of its products like Instagram, WhatsApp, Messenger and Facebook Watch. Next week's Q3 earnings report (after the market's close on Thursday, October 29th) will give us updates on all of these trends.
However, Facebook expects user-base growth to be flat or slightly down in most of its regions in the third quarter of 2020, sequentially. 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 Verizon have lost -6.8% over the past one-year period against the Zacks Wireless National industry’s fall of -7.4%. The Zacks analyst believes that Verizon is facing challenges within the media business due to sluggish advertising trends. It operates in a fiercely competitive U.S. wireless market that strains margins. The company is spending heavily on promotion and lucrative discounts to attract customers, which erodes profitability.
Among the positives, Verizon launched 35th 5G Ultra-Wideband city in San Diego and intends to make 60 5G mobility cities this year. It is building the 5G home solution and mobile edge computing on the same network.
Snap shares jumped on strong Q3 results, pushing the stock's one-year performance to +176.9% vs. the Zacks Internet - Software industry’s rise of +104.7%. The Zacks analyst believes that Snap is benefiting from improving user engagement particularly in the 13-34-year-old demography, which is expanding its advertiser base. Additionally, expanding Snap original show content, as well as new features like Camera Kit, Snap Minis and Bitmoji for Games is expected to boost user engagement in the near term.
However, increasing investments in areas such as content, AR-lenses and marketing may hurt profitability in the near term. Moreover, uncertainties related to the coronavirus pandemic, lack of revenue diversification and stiff competition from Facebook are major headwinds.
Other noteworthy reports we are featuring today include United Airlines Holdings, Inc. (UAL), Whirlpool Corporation (WHR) and NVR, Inc. (NVR).
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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>>>