Monday, August 19, 2024

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 Broadcom Inc. (AVGO), Bank of America Corporation (BAC) and Netflix, Inc. (NFLX), as well as two micro-cap stocks BK Technologies Corporation (BKTI) and Optex Systems Holdings, Inc (OPXS). The Zacks microcap research is unique as our research content on these small and under-the-radar companies is the only research of its type in the country.

These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Broadcom shares have outperformed the Zacks Electronics - Semiconductors industry over the year-to-date period (+49.6% vs. +25.4%). The company’s fiscal second quarter benefited from strong deployment of AI by hyperscalers, service providers and enterprises. Networking remained strong as the company witnessed strong growth.

Sales of the PAM-5 and Jericho 3, which Broadcom deployed successfully in close collaboration with partners like Arista Networks, Dell, Juniper, and Supermicro, doubled year over year. It also doubled shipments of PCI Express switches and NICs in the AI backend fabric.

AI sales surged an astounding 280% year over year and is now expected to be more than $11 billion for fiscal 2024. Broadcom expects networking revenues to be strong. Server storage connectivity revenues are expected to recover modestly in the second half of 2024.

(You can read the full research report on Broadcom here >>>)

Shares of Bank of America have outperformed the Zacks Banks - Major Regional industry over the past six months (+17.4% vs. +17.2%). The company’s second-quarter 2024 results were aided by marginally higher revenues. While high funding costs are a concern, the company’s net interest income (NII) will be positively impacted by the current high-rate regime. The Zacks analyst project NII to witness a CAGR of 0.8% by 2026.

Bank of America’s plans to open financial centers in new and existing markets and improve digital capabilities will aid the top line. While the capital markets activity is showing signs of improvement, the challenging macroeconomic environment might weigh on the investment banking (IB) business.

Thus, fee income growth will likely be muted. We project fee income to rise in 2024 and decline in 2025. Due to continued investments in franchise, operating costs will remain high. We expect expenses to rise 0.5% in 2024.

(You can read the full research report on Bank of America here >>>)

Netflix shares have outperformed the Zacks Broadcast Radio and Television industry over the year-to-date period (+38.4% vs. +18.2%). The company is benefiting from its growing subscriber base, thanks to a robust portfolio, paid subscription-sharing offering (part of its password-sharing crackdown), recent price changes and the strength of its business in general.

Netflix added 8.05 million paid subscribers globally in second-quarter 2024, with a rise of 1% in average revenue per subscription. Netflix is expected to continue dominating the streaming space, courtesy of its diversified content portfolio, which is attributable to heavy investments in the production and distribution of localized and foreign-language content.

However, stiff competition in the streaming space from the likes of Apple, Amazon Prime Video and Disney+ is a headwind. NFLX’s leveraged balance sheet and a higher streaming obligation are concerns.

(You can read the full research report on Netflix here >>>)

Shares of BK Technologies have outperformed the Zacks Wireless Equipment industry over the year-to-date period (+44.5% vs. +25.6%). This microcap company with market capitalization of $62.50 million has achieved a significant turnaround in profitability, with second-quarter 2024 GAAP earnings per share (EPS) reaching $0.47, driven by cost reductions and a robust gross margin of 37.3%.

Growing demand for BKR 9000 and BKR 5000 radios, evidenced by orders from the California Department of Forestry and Fire Protection (CAL FIRE) and the Mississippi Forestry Commission, supports revenue growth. A $27 million order backlog enhances revenue visibility while transitioning to outsourced manufacturing reduces costs. A focus on innovation, such as the patented InteropONE solution, strengthens BK's market position.

Yet, reliance on government contracts, supply-chain risks and limited product diversification pose potential challenges. The strong balance sheet, with $2.9 million in cash and no long-term debt, provides financial stability.

(You can read the full research report on BK Technologies here >>>)

Optex Systems’ shares have outperformed the Zacks Aerospace - Defense Equipment industry over the year-to-date period (+23.3% vs. +18.3%). This microcap company with market capitalization of $55.54 million has demonstrated strong growth with a notable revenue increase from $17.6 million to $24.6 million for the first nine months of 2024.

Optex Systems’ expanding order backlog, rising from $43.5 million to over $47 million, underscores robust market demand and solid contract acquisition. Strategic contract wins, including multi-million dollar deals in military applications, bolster its positioning in the defense sector, where it aligns well with the growing demand for optical sighting systems and assemblies.

Financially, it has seen a significant rise in net income, jumping from $0.8 million to $2.8 million, reflecting operational efficiencies and effective management. The company's focus on innovation further strengthens its market position. However, risks include margin compression due to inflationary pressures, contract concentration and competition from larger defense contractors.

(You can read the full research report on Optec Systems here >>>)

Other noteworthy reports we are featuring today include Alibaba Group Holding Limited (BABA), Citizens Financial Group, Inc. (CFG) and Tetra Tech, Inc. (TTEK).

Director of Research

Sheraz Mian

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>>>