Today's Must Read
Expanding User Base, Instagram Strength Aid Facebook (FB)
Digital Transformation Efforts to Boost NIKE (NKE) Top Line
Monday, July 8, 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 Alphabet (GOOGL), Facebook (FB) and Nike (NKE). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Alphabet’s shares have lost -2.9% in the past one year, outperforming the Zacks Internet Services industry's decline of -22.7%. The Zacks analyst thinks Alphabet’s strong initiatives toward elimination of bad ads and introducing useful major search updates are tailwinds.
Further, Google’s robust mobile search is also a positive. Its strong focus toward bolstering presence in the cloud market on the back of expanding data centers and robust cloud offerings continues to aid growth. Further, Google’s strong focus on innovation of its AI techniques and home automation space is aiding its business growth.
However, the company’s growing litigation issues and increased spending on YouTube and consumer gadgets might hurt profitability. Also, increasing competition in the advertising business and currency fluctuations are concerns.
Shares of Facebook have gained +49.8% year to date, outperforming the S&P 500’s increase of +17.7% during the same period. The Zacks analyst thinks Facebook is benefiting from solid mobile ad revenues, driven by impressive growth in Instagram Stories and Feed, and Facebook News Feed. Interactive Stories ads on Instagram are likely to lead to better interaction among people, businesses and advertisers.
Moreover, the upcoming cryptocurrency, Libra, is expected to expand the company’s footprint into the lucrative online payments space. Meanwhile, estimates have been stable ahead of the company’s second-quarter earnings release.
The company has mixed record of earnings surprises in recent quarters. However, a persistent mix shift toward Stories is anticipated to hurt ARPU. Rising regulatory headwinds are also a concern.
Nike’s shares have outperformed the Zacks Shoes and Retail Apparel industry in the past year, gaining +12.4% vs. +9.8%. The Zacks analyst thinks the outperformance is attributable to a robust sales trend stemming from the execution of Consumer Direct Offense as well as strength in Wholesale and Nike Direct businesses.
Fourth-quarter fiscal 2019 marked the ninth straight quarter of top-line beat for the company. Further, it expects strong sales results for fiscal 2020, driven by brand recognition, robust innovation pipeline, and a positive response from Nike Direct and wholesale partners. However, Nike’s earnings missed estimates in the fiscal fourth quarter, marking a negative surprise after 28 straight beats.
For fiscal 2020, it anticipates headwinds from higher SG&A expenses, tax rate and adverse currency to mar results. Further, the company expects gross margin gains to be partly offset by supply-chain investments and expansion of Air manufacturing innovation.
Other noteworthy reports we are featuring today include United Airlines (UAL), Total System (TSS) and Edison International (EIX).
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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>>>