Today's Must Read
Azure Adoption, Office 365 Strength Aids Microsoft (MSFT)
Pfizer (PFE) Boasts Solid Pipeline of Potential Blockbusters
Monday, October 8, 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 Apple (AAPL), Microsoft (MSFT) and Pfizer (PFE). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-ranked Apple’s shares have gained +32.6% year to date and have outperformed the broader market with the S&P 500 gaining +7.9% over the same period. The company is expected to benefit from an expanded portfolio with the launch of new iPhones. The Zacks analyst thinks higher average selling price (ASP) and a loyal customer base are key catalysts. Moreover, robust demand for wearables is expected to drive results.
As customers increase the usage of Apple Music and Apple Pay, Services revenues are expected to increase manifold. Further, the acquisition of Akonia Holographics, a manufacturer of lenses for AR glasses, strengthens the belief that Apple can foray into the wearable AR glasses space. Moreover, the company is testing self-driving vehicles and has 66 autonomous vehicles approved for testing in California.
Meanwhile, estimates have been going up ahead of the company’s fiscal Q4 earnings release. The company has positive record of earnings surprises in recent quarters.
Shares of Buy-ranked Microsoft have outperformed the Zacks Technology sector on a year-to-date basis (up +31.1% versus +7.5%). Microsoft has a dominant position in the desktop PC market, with its operating systems being used in the majority of PCs worldwide.
The Zacks analyst thinks 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.
Buy-ranked Pfizer’s shares have outperformed its peer group year-to-date (the stock is up +23.9% over this period vs. a +7% increase for the Zacks Large-Cap Pharmaceuticals industry). Pfizer is facing top-line headwinds in the form of genericization of key drugs, supply challenges in the legacy Hospira portfolio, pricing pressure and rising competition.
Nevertheless, the Zacks analyst thinks new products like Ibrance, contribution from acquisitions, cost-cutting efforts, a lower tax rate and share buybacks should help the company achieve its guidance. Pfizer also boasts a strong pipeline and expects approximately 25 to 30 drug approvals through 2022, including around 15 products that have blockbuster potential.
Pfizer’s growing immuno-oncology portfolio has strong potential. Bavencio is being considered a key long-term growth driver for Pfizer. In oncology, Pfizer has three potential medicines under FDA’s priority review. Though, estimates have gone down slightly ahead of its Q3 earnings release, Pfizer has a positive record of earnings surprises in recent quarters.
Other noteworthy reports we are featuring today include Abbott (ABT), Caterpillar (CAT) and ConocoPhillips (COP).
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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>>>