Today's Must Read
Decent Comps to Fuel Costco's (COST) Sales, Cost a Concern
Strategic Buyouts Support Morgan Stanley (MS) Amid Low Rates
Tuesday, January 12, 2021
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 Verizon Communications (VZ), Costco Wholesale (COST) and Morgan Stanley (MS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Verizon shares have underperformed the Zacks Wireless National industry over the past year (-3.8% vs. -0.1%), but the Zacks analyst believes that the company is well positioned to gain from a disciplined network strategy, including accelerated 5G deployment, despite uncertainties stemming from the COVID-19 crisis.
The company has been building its 5G Ultra-Wideband network to enable innovations that will support the evolving customer behavior. It expects to witness solid 5G momentum as it heads into the fourth quarter of 2020 backed by customer-centric business model and diligent execution of operational plans.
However, Verizon is facing significant headwinds within the media business due to weak advertising trends. It operates in an intensely competitive U.S. wireless market that strains margins. Adoption of unlimited data plans has resulted in reduction of wireless service revenues.
Shares of Costco have gained +12.5% in the last six months against the Zacks Discount Retail industry’s gain of +29.2%. The Zacks analyst believes that the company’s growth strategies, better price management, decent membership trend and increasing penetration of e-commerce business reinforce its position.
Cumulatively, these factors have been aiding in registering impressive sales and earnings numbers. Costco put up a stellar performance in first-quarter fiscal 2021, wherein both the top and the bottom line surpassed the Zacks Consensus Estimate and grew year over year.
It has been also maintaining impressive comparable sales performance. However, margins still remain an area to watch. Any deleverage in SG&A rate as well incremental wages and sanitation costs owing to the ongoing pandemic cannot be ignored.
Morgan Stanley shares have gained +51.3% over the past three months against the Zacks Investment Banking industry’s rise of +45.7%. The Zacks analyst believes that focus on corporate lending and a strong balance sheet will likely aid the company’s growth.
Besides, the planned acquisition of Eaton Vance and the buyout of E*Trade Financial are in sync with the company’s efforts to change revenue mix and focus more on less capital markets driven sources.
However, the financial impact from the same will be seen after some time and thus, the company's current significant dependence on capital-markets driven revenues makes us apprehensive. Further, steadily increasing expenses remain a major near-term concern. Also, lower rates are likely to hamper interest income growth.
Other noteworthy reports we are featuring today include Anheuser-Busch InBev (BUD), Starbucks (SBUX) and Advanced Micro Devices (AMD).
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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>>>