Today's Must Read
Rising Model 3/Y Demand Buoy Tesla (TSLA), High Capex Ail
AT&T (T) Rides on Healthy Subscriber Growth, 5G Momentum
Tuesday, October 27, 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 Microsoft (MSFT), Tesla (TSLA) and AT&T (T). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Microsoft shares have outperformed the S&P 500 in the year-to-date period (+33.7% vs. +5.8%) on the back of continued momentum in Azure, impressive Teams user growth triggered by coronavirus crisis led work-from-home, the online learning wave and tele healthcare trends.
Solid uptake of Surface devices and Xbox Game Pass aided growth. The company is gaining from growing user base of its different applications including Office 365 commercial, and Dynamics. Also, it is well poised to expand the total addressable market through acquisitions of GitHub and ZeniMax Media.
The company has positive record of earnings surprises in recent quarters. However, macroeconomic weakness in job market and lower spend on advertising due to coronavirus pandemic are likely to weigh on LinkedIn and Search revenues. Also, delays in consulting business are anticipated to limit growth.
Shares of Tesla have literally been on fire lately, up +551.4% over the past year against the Zacks Domestic Automotive industry’s rise of +162.9%. 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, Shanghai Gigafactory prospects, amazing line-up of upcoming products and aggressive expansion efforts bode well for the firm. However, high R&D, SG&A costs and massive capex may clip the margins.
Tesla is investing heavily to boost production capacity and sales as well as build gigafactories in Berlin and Austin, 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.
AT&T shares have lost -11.7% over the past six months against the Zacks Wireless National industry’s rise of +4.1%. The Zacks analyst believes that AT&T is well placed to benefit from the streaming services of its newly launched HBO Max and nationwide 5G deployment.
AT&T reported relatively healthy third-quarter 2020 results with solid subscriber growth backed by a resilient business model and robust cash flow position driven by a diligent execution of operational plans. While adjusted earnings marginally missed the Zacks Consensus Estimate, revenues beat the same despite coronavirus hitting top-line growth.
However, AT&T is witnessing a steady decline in linear TV subscribers, legacy services and wireline division. Continued cord-cutting remains a challenge as consumers cancel pay TV packages for cheaper streaming options. As it tries to woo customers with discounts, freebies and cash credits, margins tend to fall. Spectrum crunch in a saturated wireless market is another concern.
Other noteworthy reports we are featuring today include Apple (AAPL), Abbott Laboratories (ABT) and Oracle (ORCL).
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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>>>