Today's Must Read
Expanding User Base, Instagram Strength Aids Facebook (FB)
Branch Expansion, Loans to Aid BofA (BAC) Amid Trading Slump
Wednesday, June 12, 2019
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), Facebook (FB) and Bank of America (BAC).These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Microsoft’s shares have gained +31% in the past year, outperforming the S&P 500’s’ gain of +2.7% during the same period. The Zacks analyst thinks Microsoft 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. Acquisitions like PlayFab and GitHub expand Microsoft’s total addressable market (TAM) and penetration.
Additionally, its expanding partner base is notable. However, projections of a moderating growth rate in commercial cloud gross margin, and OEM Pro and Windows commercial businesses is a headwind. Moreover, stiff competition from the likes of Google, Apple, Sony and Nintendo remains a headwind.
Shares of Facebook have gained +35.9% year to date, outperforming the S&P 500’s increase of +14% during the same period. The Zacks analyst thinks Facebook is benefiting from solid mobile ad revenues, driven by impressive growth in both Instagram Stories and Feed, and Facebook News Feed.
Although the company’s focus on security is expected to affect some advertisers’ ability to run legitimate ads on the platform, Stories are increasingly becoming an important growth opportunity for advertisers. Interactive Stories Ads on Instagram are likely to improve interaction among people, businesses and advertisers.
The Checkout feature on Instagram is part of Facebook’s e-commerce endeavors. However, a persistent mix shift toward Stories is anticipated to hurt ARPU. Rising regulatory headwinds are also a cause for concern.
Bank of America’s shares have outperformed the Zacks Major Regional Banks in the past six months, gaining +15.7% vs. +9.1%. The company's earnings have surpassed expectations in each of the trailing four quarters. The Zacks analyst thinks efforts to expand into new markets and digital offerings will likely enhance cross selling opportunities.
Also, a rise in loan balances, higher interest rates and efforts to control expenses will likely support profits. The bank's steady capital deployment actions reflect strong balance sheet position and will enhance shareholder value.
However, dismal performance of capital markets amid tough operation backdrop has been hurting the bank’s investment banking and trading operations, which in turn will hurt revenue growth. Litigation issues related to its business misconduct in the pre-crisis period will likely result in higher legal costs.
Other noteworthy reports we are featuring today include American Express (AXP), Southern Company (SO) and Deere (DE).
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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>>>