Today's Must Read
Alphabet (GOOGL) Rides on Diversification; Risks Remain
Branch Expansion to Support BofA (BAC), Mortgage Fees a Woe
Monday, August 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 Microsoft (MSFT), Alphabet (GOOGL) and Bank of America (BAC). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-rated Microsoft shares have outperformed theComputer Software industryin the year to date period, gaining +26.8% vs. +24%. Microsoft has a dominant position in the desktop PC market, with its operating systems being used in the majority of PCs worldwide. The company is benefiting from growing user base of its different applications like Office 365 commercial, Dynamics, Outlook mobile and Teams. Moreover, Azure’s expanding customer base is a key catalyst. Microsoft’s gaming segment is performing well, primarily driven by a combination of Xbox Live, Game Pass subscriptions and Mixer, which are driving user engagement. Further, acquisitions like PlayFab and GitHub expand Microsoft’s total addressable market (TAM) and penetration. Additionally, the company’s expanding partner base is a key catalyst. However, projections of a moderating growth rate in commercial cloud gross margin, and OEM Pro and Windows commercial businesses is a headwind.
Alphabet’s shares have outperformed the Zacks Internet Services industry in the last year (the stock is up +33.2% vs. a +3.7% increase for the industry). The company results are driven by robust mobile growth, strong network advertising revenues, cloud, hardware and Play revenues. Alphabet's focus on innovation, AI, cloud, home automation space, strategic acquisitions and Android OS should continue to aid its top-line growth. Further, its partnership with PayPal remains positive. Also, the company has shown good execution to date, more or less maintaining its dominant share in a competitive, fast-growing search market. However, Alphabet suffers from litigation issues which might hurt its profitability. Moreover, it's increased spending on its consumer gadgets, YouTube video app and cloud computing services remain concerns. In addition, rising competition in the online advertisement market poses serious risk to the company's position.
Bank of America’s shares have outperformed the Zacks Major Regional Banks industry year-to-date, gaining +4.7% vs. +1.3%. Also, the company possesses an impressive earnings surprise history, beating the Zacks Consensus Estimate in each of the trailing four quarters. Rise in loan and deposit balances, interest rates and efforts to manage expenses as well as expand into new markets are likely to support profitability. Also, lower tax rates, strong balance sheet position and easing of banking regulations will aid growth. However, fall in mortgage banking income due to lower volumes and a decline in refinancing activity along with uncertainty related to performance of capital markets remain major concerns. These are expected to hurt the bank's revenues to some extent.
Other noteworthy reports we are featuring today include 3M (MMM), AT&T (T) and Suncor Energy (SU).
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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>>>