Today's Must Read
SAP Rides on Cloud Initiatives & Growth in S/4HANA Platform
Solid HIV Franchise Fuel Gilead (GILD) Amid Weak HCV Segment
Monday, October 14, 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 Cisco Systems (CSCO), SAP (SAP) and Gilead Sciences (GILD). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Cisco’s shares have outperformed the Zacks Computer Networking industry year to date (7.4% vs. 6.4%). The Zacks analyst believes that Cisco is benefiting from solid security business. Strong contribution from Infrastructure Platforms and applications is a positive.
Moreover, order strength and improving traction of the subscription-based business model are tailwinds. Further, a strengthening collaboration portfolio, which includes Webex Teams, bodes well. Additionally, acquisitions of Voicea and CloudCherry hold promise.
However, weakness in service provider business in China remains a concern. Further, stiff competition from Arista and Juniper in switching and routing verticals is likely to create pricing pressure and impact profitability. Also, increasing investments on product enhancements are likely to limit margin expansion at least in the near term.
Shares of SAP have gained 11.8% in the past six months against the Zacks Computer Software industry’s rise of 7.9%. The Zacks analyst believes that SAP is benefiting from strong growth in cloud and software revenues, and an expanding customer base.
Robust adoption of S/4HANA, C/4HANA and SuccessFactors Employee Central favors the company’s prospects. Notably, despite the exit of CEO Bill McDermott, estimates have been moving north ahead of the company’s Q3 earnings release primarily on robust preliminary results courtesy of an upbeat cloud business. Further, Qualtrics’ acquisition is enabling SAP to bolster Customer Experience segment revenues.
Moreover, strong demand for SAP's Intelligent Spend offerings holds promise. However, increasing investments to enhance cloud-based offerings are likely to weigh on the bottom line. Currency fluctuations and trade war between the United States and China remains an overhang on software licenses revenue growth particularly across Asia.
Gilead’s shares have lost 6% over the past three months compared with the Zacks Biotech industry’s fall of 7%. The Zacks analyst believes Gilead’s HIV franchise maintains momentum on the continued uptake of Genvoya and Odefsey, and the strong uptake of Biktarvy.
The company has shifted focus to the HIV franchise and newer avenues like CAR-T therapy and NASH, due to a decline in sales of the HCV franchise. The FDA recently approved a label expansion of HIV treatment, Descovy. The company is signing deals with other companies to strengthen its pipeline for the inflammation market. Gilead’s collaboration with Novo Nordisk for NASH treatments is a step in the right direction, given its recent debacles.
The company suffered a setback with the failure of a late-stage study on selonsertib in patients with compensated cirrhosis due to NASH. Additionally, the HIV franchise is expected to face stiff competition.
Other noteworthy reports we are featuring today include Bank of America (BAC), Altria Group (MO) and Caterpillar (CAT).
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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>>>