Today's Must Read
Robust Content Aids Netflix (NFLX) Amid Stiff Competition
Digitalization Aids Starbucks (SBUX), Traffic Woes Linger
Monday, November 9, 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 NVIDIA (NVDA), Netflix (NFLX) and Starbucks (SBUX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
NVIDIA shares have outperformed the Zacks General Semiconductor industry in the year-to-date period (+147.6% vs. +36.5%), with the trend expected to continue in the post-pandemic period following the Pfizer (PFE) vaccine announcement. In fact, any weakness in the stock on the perceived reduced attractiveness of NVIDIA shares given their status as a work-from-home stock should be used as an opportunity to buy into a quality name.
It is also benefiting from strong growth in GeForce desktop and notebook GPUs, which is boosting gaming revenues. Moreover, a surge in Hyperscale demand remains a tailwind for the company’s Data Center business. Expansion of NVIDIA GeForce NOW is expected to drive user base. Further, solid uptake of AI-based smart cockpit infotainment solutions is a boon.
Additionally, collaboration with Daimler-owned Mercedes-Benz is expected to further strengthen NVIDIA’s presence in the autonomous vehicles and other automotive electronics space. However, management expects COVID-19 pandemic to negatively impact near-term revenues by $100 million. Moreover, the U.S.-China trade war remains a key concern.
Shares of Netflix have gained +75% over the past year against the Zacks Broadcast Radio and Television industry’s rise of +26.2%. The Zacks analyst believes that the company is dominating the streaming space, courtesy of its diversified content portfolio, which is attributable to heavy investments in the production and distribution of localized, foreign-language content and an expanding international footprint.
Netflix, in third-quarter 2020, witnessed decline in paid-user addition rate, reflecting lower demand for content. Additionally, rising competition from Apple, Amazon, HBO Max, Disney+, Peacock and TikTok is a major headwind. Netflix’s leveraged balance sheet and higher streaming obligation is also a concern.
Meanwhile, third-quarter results reflected that Netflix’s low-priced mobile plans in India, Indonesia, Malaysia, Philippines and Thailand is helping it win users in Asia-Pacific, which is a positive for its prospects.
Starbucks shares have gained +19.4% over the past six months against the Zacks Food & Restaurants industry’s rise of +19.9%. The Zacks analyst believes that the company has been benefiting from operating fundamentals such as solid global footprint, successful innovations and digital offerings.
The company anticipates global comparable sales to increase between 18% and 23% in fiscal 2021. Moreover, it anticipates Americas and U.S. comparable store sales to increase in the range of 17% to 22% in fiscal 2021. However, high debt and dismal margin remain concerns.
The company reported fourth-quarter fiscal 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. However, both the metrics declined sharply year over year. The company had lost nearly $1.2 billion in sales due to the coronavirus pandemic. Although comps declined in the quarter, it improved sequentially in fourth-quarter.
Other noteworthy reports we are featuring today include Advanced Micro Devices (AMD), Estee Lauder Companies (EL) and Stryker (SYK).
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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>>>