Today's Must Read
Home Depot (HD) Gains from Digital Business Amid Pandemic
Robust Content Aids Netflix (NFLX) Amid Stiff Competition
Friday, December 18, 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 Tesla (TSLA), The Home Depot (HD) and Netflix (NFLX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Tesla shares have vastly outperformed the Zacks Domestic Automotive industry in the year to date period (+683.9% vs. +244.6%). The Zacks analyst believes that the company has a first-mover advantage in the e-mobility 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 build gigafactories in Berlin and Austin, which are likely to strain its near-term prospects. Waning margins for Model S/X and lofty valuation of the firm are other concerns. Thus, investors are recommended to wait for a better entry point.
Shares of Home Depot have gained +24.4% over the past year against the Zacks Retail Building Products industry’s gain of +27.9%. The Zacks analyst believes that it is effectively adapting to the high-demand environment, driven by investments in its business over the years.
The company’s interconnected retail strategy and underlying technology infrastructure have helped boost web traffic in the past six months. During the third-quarter fiscal 2020, the company witnessed continued strong demand for home improvement projects as customers spent more time at home during the coronavirus pandemic.
It also gained from strong growth in its Pro and DIY customer categories. Notably, DIY sales outpaced Pro sales growth in the fiscal third quarter owing to rise in home improvement projects. However, it incurred additional costs related to the coronavirus pandemic. Also, soft margins partly hurt results.
Netflix’s shares have gained +17.4% over the past six months against the Zacks Broadcast Radio and Television industry’s rise of +23%. The Zacks analyst believes that the absence of new season of popular show Stranger Things is likely to affect subscriber growth in the fourth quarter of 2020.
Additionally, rising competition from Apple, Amazon prime video, HBO Max, Disney+, Peacock and TikTok is a headwind. Netflix’s leveraged balance sheet and higher streaming obligation is a concern. However, Netflix 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.
Higher number of originals is expected to aid user base growth in 2021. Moreover, the launch of low-priced mobile plans in India, Indonesia, Malaysia, Philippines and Thailand is expanding Netflix’s subscriber base in Asia Pacific.
Other noteworthy reports we are featuring today include PepsiCo (PEP), McDonald's (MCD) and Bristol-Myers Squibb (BMY).
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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>>>