Today's Must Read
Strong Demand for Networking Products Aids Broadcom (AVGO)
Cost Control Aids Wells Fargo (WFC) Amid Declining Revenues
Tuesday, November 28, 2023
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 Corporation (MSFT), Broadcom Inc. (AVGO) and Wells Fargo & Company (WFC). 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 >>>
Microsoft shares have outperformed the Zacks Tech sector in the year-to-date period (+58.5% vs. +45.6%) on the back of the company perceived leadership in the AI space. The company’s first-quarter results gained from strong Intelligent Cloud and Productivity and Business Processes revenues. Intelligent Cloud revenues were driven by growth in Azure and other cloud services.
Productivity and Business Processes revenues rose due to a strong adoption of Office 365 Commercial solutions. Continued strength in the small and medium businesses, frontline worker offerings and a gain in revenue per user were key growth drivers.
However, Office's declining commercial licensing has been a headwind as customers shift to cloud offerings. Steady growth in Dynamics products and cloud services aided LinkedIn revenues. Higher operating expenses driven by marketing, LinkedIn and cloud engineering amid intense competition in the cloud space remain a concern.
(You can read the full research report on Microsoft here >>>)
Shares of Broadcom have outperformed the Zacks Electronics - Semiconductors industry over the year-to-date period (+73.1% vs. +57.3%). The company is benefiting from the strong deployment of generative AI by hyperscalers, service providers and enterprises.
Broadcom expects generative AI to contribute more than 25% of semiconductor revenues in fiscal 2024 compared with an estimated 15% in fiscal 2023 and roughly 10% in fiscal 2022. Strong demand for Tomahawk 5, Jericho, 10-gigabit PON and DOCSIS 3.1 with embedded Wi-Fi 6 and 6E aids Broadcom’s prospects.
Expanding portfolio with the launch of the second-gen Wi-Fi 7 wireless connectivity chip is a catalyst. Broadcom expects networking revenues to grow nearly 20% year over year in the fiscal third quarter. Server storage connectivity revenues are expected to be up low single digits year over year.
(You can read the full research report on Broadcom here >>>)
Wells Fargo shares have outperformed the Zacks Banks - Major Regional industry over the year-to-date period (+7.4% vs. +1.1%). The company divested around $2 billion of private equity investments in certain funds to a group of leading investors. Further, Wells Fargo and Centerbridge Partners formed a strategic relationship to provide direct lending to non-sponsor middle-market companies in North America.
Progress on efficiency initiatives continue to propel expense control and savings, which will drive its bottom line. A strong deposit balance aids the bank’s liquidity position and thus supports capital deployment moves. Also, a decline in originations will limit mortgage banking income.
However, declining loan balance and volatile fee income will likely affect revenue growth in the near term.
(You can read the full research report on Wells Fargo here >>>)
Other noteworthy reports we are featuring today include Arista Networks, Inc. (ANET), Occidental Petroleum Corporation (OXY) and Aflac Incorporated (AFL).
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>>>