Today's Must Read
Strong Demand for Networking Products Aids Broadcom (AVGO)
Strategic Buyouts and Product Expansion Aid Anthem (ANTM)
Thursday, June 23, 2022
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 Tesla, Inc. (TSLA), Broadcom Inc. (AVGO), and Anthem, Inc. (ANTM). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
You can see all of today’s research reports here >>>
Tesla shares have bee hit hard in the ongoing marekt turmoil, as have most growth stocks given their exposure to rising interest rates. But the stock has held up better than the peer group, handily outperforming the Zacks Automotive - Domestic industry over the past year (+2.2% vs. -25.7%). The company is riding high on the soaring popularity of its Models 3 and Y. The Zacks analyst expects deliveries to see an annualized growth of around 50% over the next three years. High volumes are also aiding Tesla in achieving production efficiencies, thereby strengthening gross margins. Ex-government credits, Tesla’s gross margins reached 30% in Q1. This indicates that the supply-chain issues hitting the company are being passed along to the consumer.
Additionally, Tesla’s energy generation and storage revenues outlook is promising. While low Q2 deliveries from the Shanghai gigafactory could be a short-term headwind, we expect Tesla to deliver outsized returns in the long run on the back of production ramp-up and introduction of new models.
Broadcom shares have outperformed the Zacks Electronics - Semiconductors industry over the past year (+9.2% vs. -5.5%) on the back of strength in networking and server storage segments. Networking is riding on the strong adoption of Broadcom’s next-gen merchant switching and routing solutions by hyperscalers, enterprises and service providers. Aggressive adoption of its next-generation server storage solutions by hyperscalers is expected to drive top-line growth.
Broadcom expects fiscal third-quarter networking and server storage revenues to grow more than 25% and 60% on a year-over-year basis, respectively. An upbeat third-quarter fiscal 2022 guidance is encouraging. Recently announced VMware acquisition will aid prospects over the long term. Shares have outperformed the industry year to date. However, increasing competition, along with high debt levels, are persistent overhangs.
Anthem shares have outperformed the Zacks Medical - HMOs industry over the past year (+26.4% vs. +19.6%). The company’s improving top-line can be attributed to a premium rate increase and higher memberships. Acquisitions and collaborations have enabled the company to boost its Medicare Advantage growth and strengthen its business portfolio. Its well-performing Medicare and Medicaid businesses, coupled with several contract wins, are expected to drive its membership.
A solid earnings guidance for 2022 bodes well. Its shareholders have approved Anthem’s name change to Elevance Health. Anthem's consistent dividend payouts and stock repurchases boost shareholder value. However, escalating costs continue to put pressure on Anthem's bottom line. Its weak balance sheet with massive debts of nearly $20 billion can affect financial flexibility. As such, the stock warrants a cautious stance.
(You can read the full research report on Anthem here >>>)
Other noteworthy reports we are featuring today include Oracle Corporation (ORCL), Danaher Corporation (DHR), and Gilead Sciences, Inc. (GILD).
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>>>