Today's Must Read
Applied Materials (AMAT) Rides on Logic Spending, Risk Remain
Expansion Strategy Aids Equinix (EQIX) Amid Stiff Competition
Friday, February 14, 2020
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 VMware (VMW), Applied Materials (AMAT) and Equinix (EQIX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
VMware’s shares have underperformed the Zacks Software industry over the past year (-5.8% vs. +45.7%). The Zacks analyst believes that VMware is benefiting from robust demand for NSX, VeloCloud and vSAN product lines.
The company’s dominance in software-defined data center (SDDC) and an expanding customer base in cloud, driven by partnerships with the likes of IBM, AWS and Microsoft Azure, are positives. The Pivotal and Carbon Black acquisitions along with the recently launched Tanzu portfolio are expected to drive recurring hybrid cloud subscription and SaaS revenues in the long haul.
Nevertheless, sluggish server shipment is a headwind. Apart from an unfavorable revenue mix, which is expected to hurt license revenues, margins are anticipated to remain under pressure due to heavy spending on hybrid cloud and SaaS portfolio. The Carbon Black acquisition is also expected to hurt operating margin in fiscal 2021.
Shares of Applied Materials have gained +42.7% in the past six months against the Zacks Semiconductor Equipment - Wafer Fabrication industry's rise of +52.6%. The Zacks analyst believes that strong momentum in conductor etches is benefiting the company’s position in DRAM and NAND.
Applied Materials reported strong fiscal first-quarter results due to an uptick in demand for semiconductor equipment and solid execution. Further, increased customer spending in foundry and logic on the back of rising need for specialty nodes in IoT, communications, automotive and sensor solutions remained a positive.
It remains positive about price elasticity of NAND, which is expected to bolster NAND customer spending. However, market uncertainties continue to persist. Softness in semiconductor and display markets on account of slowdown in memory and display customers’ spending is a concern.
Equinix’s shares have gained +17.3% over the past three months against the Zacks REIT and Equity Trust – Retail industry's fall of -1.5%. The Zacks analyst believes that the company’s better-than-expected fourth-quarter 2019 adjusted funds from operations (AFFO) per share reflect healthy top-line growth.
In January, it completed the buyout of three data centers from Axtel S.A.B. de C.V., making it one of the largest network-neutral data-center operators in Mexico. Amid higher demand from cloud users, it remains committed to expand its International Business Exchange (IBX) platform.
A global footprint and solid interconnected ecosystems have helped the company deliver its 17th year of consecutive quarterly revenue growth, though rising debt burden might affect its operating results as interest expenses flare up. Also, consolidation in the telecommunications industry might mar demand for co-location space, hurting its growth.
Other noteworthy reports we are featuring today include Shopify (SHOP), Exelon (EXC) and Johnson Controls International (JCI).
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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>>>