Today's Must Read
Intel (INTC) Rides on AI-based Alliances & Product Rollouts
Lilly's (LLY) New Drugs Drive Sales amid Rising Competition
Wednesday, June 27, 2018
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 Amazon (AMZN), Intel (INTC) and Eli Lilly (LLY). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Amazon’s shares have outperformed the broader market year to date by a wide margin. (the stock is up +44.6% vs. the +2.1% gain for the S&P 500 as a whole). The Zacks analyst thinks Amazon is benefiting from an expanding AWS enterprise customer base, benefits from Whole Foods acquisition and increasing number of paid Prime members.
In the first-quarter, AWS was selected by enterprise customers like GoDaddy, Cox Automotive, Shutterfly, NextGen Healthcare, Amway and LG Electronics. Collaboration with VMware is expected to boost AWS product offerings in the long haul. Notably, AWS generates much higher margins than retail, positively impacting Amazon’s profitability.
Additionally, Amazon’s expanding distribution footprint bodes well for Prime. However, the company's increased operating expenses to support expansion of its business into new markets and territories, localize the availability of products and grow its content will keep margins under pressure.
Shares of Buy-ranked Intel have underperformed the Zacks General Semiconductor industry over the past one year, gaining +45.2% vs. +49.5%. However, the Zacks analyst thinks Intel is benefiting from robust performance of the Data Center Group, Internet-of-Things Group, Non-Volatile Memory Solutions and Programmable Solutions Group. These segments form the crux of Intel’s data-centric business model.
The company’s strategy of expanding TAM beyond CPU to adjacent product lines like silicon photonics, fabric, network ASICs, and 3D XPoint memory is bearing fruit. Its expanding customer base in the PSG segment drove top-line growth. A stable PC market is also positive for the company.
Additionally, lower spending helped in expanding operating margins. Intel raised 2018 guidance based on these solid growth trends. However, delay in transition to 10-nm process is a concern. Moreover, intensifying competition remains a headwind.
Eli Lilly’s shares have outperformed the Zacks Large-Cap Pharmaceuticals industry in the last year (+2.4% vs. -3%). The Zacks analyst thinks Lilly’s presence across a wide range of therapeutic areas provides support in the face of generic competition. Lilly’s new products like Trulicity, Taltz, Basaglar, Cyramza, Jardiance and Lartruvo have been driving revenues and the trend is expected to continue in 2018.
Lilly expects to launch 20 new products by 2023, including at least two new indications/line extensions on an average every year. The decision to sell or spin-off the Animal Health segment, which has underperformed lately, is a prudent decision in our view. However, competitive pressure on Lilly’s drugs is expected to rise this year.
Challenges remain for the company in the form of upcoming loss of patent exclusivity for products like Cialis and the impact of generic competition for Strattera, Effient and Axiron. U.S. pricing access pressure will also remain a headwind in 2018.
Other noteworthy reports we are featuring today include Raytheon (RTN), Illinois Tool Works (ITW) and Southern Company (SO).
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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>>>