Today's Must Read
Robust Adoption of FPGAs & Product Launches Aid Intel (INTC)
New Drugs to Drive Merck's (MRK) Sales as Competition Soars
Wednesday, September 26, 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 Merck (MRK). 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 +68.9% vs. the +9.2% gain for the S&P 500 as a whole). The Zacks analyst thinks Amazon continues to ride on its robust performance in the retail space on the back of its vast e-commerce platform, fast delivery services, Prime program, increasing engagement of Prime customers and solid third-party selection.
Moreover, Amazon’s expanding distribution footprint bodes well for Prime. Further, Amazon Web Services (AWS) also continues to perform well, owing to its expanding enterprise customer base. Notably, AWS generates much higher margins than retail, positively impacting Amazon’s profitability. Additionally, the company’s advertising business is also gaining traction.
However, an anticipated increase in fulfillment cost prior to the holiday season can put margins under pressure. Moreover, intensifying competition in the cloud computing market from the likes of Microsoft Azure and Google cloud is a significant headwind.
Shares of Buy-ranked Intel have underperformed the Zacks General Semiconductor industry over the past year, gaining +22.3% vs. +29.7%. 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. Further, expanding customer base in the PSG segment drove top-line growth. Moreover, 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. Intensifying competition remains a headwind.
Buy-ranked Merck’s shares have outperformed the Zacks Large Cap Pharmaceuticals industry year to date, gaining +25.5% versus +6.7%. The Zacks analyst thinks Merck’s new products like Keytruda, Lynparza, and Bridion should continue to contribute meaningfully to the top line.
Keytruda sales are gaining strong momentum with approval for additional indications especially in the first-line lung cancer setting as it is the only anti-PD-1 approved in this setting. Animal Health unit is also strong and remains a core growth driver for Merck. Meanwhile, Merck will continue to focus on cost-cutting initiatives to drive the bottom line.
However, generic competition for several drugs and pricing pressure will continue to be overhangs on the top line. Rising competitive pressure on the diabetes franchise and on products like Isentress (HIV), Zepatier (HCV) and Zostavax (vaccine) will remain headwinds in 2018.
Other noteworthy reports we are featuring today include Micron (MU), Celgene (CELG) and S&P Global (SPGI).
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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>>>