Today's Must Read
Revenue Growth Aids Wells Fargo (WFC), Legal Issues Linger
Chinese Dominance, Cloud Strength Powering Alibaba (BABA)
Thursday June 15 2017
Today's Research Daily features new research reports on 16 major stocks, including Verizon (VZ), Alibaba (BABA), and Wells Fargo (WFC). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Verizon shares have been laggards over the past year -- the stock is down -12.7% over the past 12 months vs. AT&T's -4.4% decline and the +17.3% gain for the S&P 500 index. Verizon's underperformance reflects the market's concerns about the company's muddled strategy in the digital media domain and rising competitive pressures in its core U.S. wireless business. On the digital media front, the company recently completed its Yahoo purchase, which it plans to run as part of its previously acquired digital properties like AOL, Huffington Post and others. The long-term expectation is that these assets will give it a sizable enough platform to capture digital marketing dollars. The jury is still out on the long-term viability of these efforts, but the company is also trying to be a player in the online TV streaming space and defend its leadership position in the wireless market through 5G wireless network trials. The company's dividend appears safe (currently yields almost 5%), but the inherent capital intensity of its core business and the need for purchases on the digital side ends up eating up more than it generates in its operations. In the updated research report issued today, the Zacks analyst discusses the pros and cons of investing in Verizon shares at present.
Shares of Strong Buy rated Alibaba shares have outperformed the broader market as well as the peer e-commerce space over the last one year (it is up more than +74.6%), with the trend expected to remain in place given continued growth in its core e-commerce business and growing cloud computing services. The Zacks analyst likes the company’s dominance in China's mobile commerce market, efforts to develop new products, international growth opportunities, strong financial position and growing cloud computing services. On the flip side, the need for continued infrastructure investments, growing competition and increasing competition from Tencent Holdings and Baidu remain major overhangs.
Wells Fargo shares continue to struggle, reflecting lingering issues pertaining to the customer accounts issue. The stock is down -1% in the year-to-date period, underperforming the Zacks Major Banks industry, which is up +3.3% in the same time period. Wells Fargo lacks investment banking and capital markets assets that have been a source of strength for many of its peers lately. But the bigger issue for the bank has been the customer accounts issue. Troubles have intensified following the bank’s $190-million settlement last year to resolve regulators’ claims of illegally opening millions of illegal accounts. While the current crisis at the company will take some time to alleviate, the Zacks analyst thinks continued growth in loans and deposits, coupled with cost cuts (the bank plans $4 billion in cost cuts by 2019) should help support results. Regulatory reform remains another potential macro tailwind, though the timing of any legislative enactments on this front remain uncertain.
Other noteworthy reports we are featuring today include Caterpillar (CAT), U.S. Bancorp (USB) 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>>>