Today's Must Read
Visa (V) Rides On Solid Balance Sheet, Increasing Revenues
Branch Openings, Loan Growth Aid BofA (BAC) amid Low Rates
Wednesday, May 27, 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 Alphabet (GOOGL), Visa (V) and Bank of America (BAC). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Alphabet’s shares have outperformed the Zacks Internet Services industry over the past year (+24.8% vs. +6.4%). The Zacks analyst believes that the company’s strong focus on innovation of AI techniques and the home automation space should aid business growth in the long term.
Alphabet reported mixed first-quarter earnings. The cloud and YouTube businesses remained strong, while digital advertising growth slowed down in the quarter due to the pandemic.
The company’s strong initiatives toward elimination of bad ads and introducing useful major search updates are tailwinds. Notably, it has agreed to acquire Fitbit for roughly $2.1 billion. This deal will likely help the company to accelerate innovation in the wearables category. However, the company’s growing expenses, litigation issues and competition might hurt profitability.
Shares of Visa have gained 4.8% over the past six months against the Zacks Financial Transaction Services industry’s rise of +0.3%. The Zacks analyst believes that the company is likely to see a slowdown in its cross-border business due to coronavirus outbreak.
Numerous acquisitions and alliances plus technology upgrades and effective marketing paved the way for long-term growth and consistently drove revenues. Shift in payments to new methods such as mobile, cards, online and via wearables paves way for long term growth and have led to an increase in payments volume, cross-border volume and processed transactions.
The acquisition of Visa Europe is a growth strategy for the long haul. Its strong capital position is another positive. However, high client incentives and expenses weigh on its operating margins.
Bank of America’s shares have lost -14.8% over the past three months against the Zacks Major Regional Banks industry’s fall of -20.5%. The Zacks analyst believes that opening new branches, improved digital offerings and efforts to manage costs will likely aid profitability.
Additionally, strong balance sheet and liquidity position are expected to continue supporting the company's financials amid economic slowdown. However, near-zero interest rates are expected to hurt the bank’s margins and interest income.
Also, coronavirus-induced concerns will likely continue to hamper business activities and thus, loan growth is expected to be muted. Further, dependence on capital markets performance makes us apprehensive, given its cyclical nature. This is likely to hurt fee income growth to some extent.
Other noteworthy reports we are featuring today include Roche (RHHBY), JPMorgan Chase (JPM) and NVIDIA (NVDA).
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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>>>