Today's Must Read
Chevron (CVX) Buoyed by Improving Permian Well Economics
Product Rollouts & Growing Merchant Base Aid Shopify (SHOP)
Tuesday, May 26, 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 Alibaba Group (BABA), Chevron (CVX) and Shopify (SHOP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Alibaba shares have lagged Amazon (AMZN) only modestly over the past year (+31.5% vs. +33.5%), but the underperformance is far more pronounced in the year-to-date period (-3.9% vs. +31.7%), likely reflecting a 'China discount'. Overall, the company remains a standout performer.
Alibaba’s strengthening cloud business with its expanding customer base continues to drive its performance. Its New Retail strategy is also gaining momentum. This is aiding growth in Tmall Import, Hema fresh food grocery business and Intime Department Stores.
However, higher costs associated with new initiatives remain a major concern. Also, COVID-19 related economic uncertainties and macro headwinds in China are major concerns. In addition, rising competition from e-commerce players poses a risk.
Chevron's -20.6% decline in the year-to-date period (vs. -7.4% decline for the S&P 500 index) reflects the tough oil-price environment. But the stock has handily outperformed Exxon (XOM) and the broader super majors group.
The company's worldwide production averaged a record 3,058 MBOE/d in 2019, reflecting an increase of 4.4% thanks to expansion in the lucrative Permian Basin. Chevron’s well economics in the play also continues to improve as the company has been able to achieve a 40% reduction in its development and production costs since 2015.
However, Chevron is not immune to this historic oil price crash, forcing it to cut capex and suspend buybacks. The company’s high oil price sensitivity is a concern too.
Shopify’s shares have gained +88.2% over the past three months against the Zacks Internet Services industry’s rise of +11.6%. The Zacks analyst believes that increasing investments on product development and platform are likely to limit margin expansion in the near term. Moreover, the company suspended its guidance for 2020 due to COVID-19 induced uncertainties prevailing in the market.
Shopify delivered stellar first-quarter results. The top line benefited from growth in the number of merchants and increased buying of essentials due to COVID-19 induced lockdowns. Moreover, robust performance of Shopify Shipping, Shopify Payments and Shopify Capital are key catalysts.
The company continues to launch merchant-friendly applications to cater to the demands of a dynamic retail environment, thereby bolstering merchant base. Initiatives aimed at international expansion also remain noteworthy.
Other noteworthy reports we are featuring today include Duke Energy (DUK), Biogen (BIIB) and Walgreens Boots Alliance (WBA).
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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>>>