Tuesday, August 20, 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 Apple Inc. (AAPL), NVIDIA Corporation (NVDA) and The Coca-Cola Company (KO), as well as two micro-cap stocks Star Group, L.P. (SGU) and Aware, Inc. (AWRE). 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 >>>

Apple shares have lagged the the Zacks Tech sector past year ( +28.8% vs. +38.6%), but performed roughly in-line with the broader market (+28.8% vs. +27.5% for the S&P 500 index). Weighing on the stock's muted momentum is the macro overhang from China whose economic outlook continues to remain uncertian. The company reported decline in iPhone sales in third-quarter fiscal 2024 partially offset by strong growth in Services revenues. 

Apple now has more than 1 billion paid subscribers across its Services portfolio, more than double what it had four years ago. The expanding content portfolio of Apple TV+ and Apple Arcade helped in driving subscriber growth. Apple expects the September quarter’s (fourth-quarter fiscal 2024) revenues to grow at the same rate as of June quarter on a year-over-year basis. 

Unfavorable forex is expected to hurt revenues. For the Services segment, Apple expects a double-digit growth rate similar to the first three quarters of fiscal 2024. Introduction of Apple Intelligence, an advanced personal intelligence system seamlessly integrated into iOS 18, iPadOS 18 and macOS Sequoia will help Apple shares to push higher.

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

Shares of NVIDIA have outperformed the Zacks Semiconductor - General industry over the year-to-date period (+160.7% vs. +114.9%). The company is benefiting from the strong growth of artificial intelligence (AI), high-performance and accelerated computing. The data center end-market business is benefiting from the growing demand for generative AI and large language models using graphic processing units (GPUs) based on NVIDIA Hopper and Ampere architectures. 

A surge in hyperscale demand and higher sell-ins to partners across the Gaming and ProViz end markets following the normalization of channel inventory are acting as tailwinds. 

Collaborations with Mercedes-Benz and Audi are likely to advance its presence in the autonomous vehicles and other automotive electronics space. However, its near-term prospects are likely to be hurt by softening IT spending amid macroeconomic headwinds.

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

Coca-Cola shares have outperformed the Zacks Beverages - Soft drinks industry over the year-to-date period (+18.9% vs. +11.3%). The company experiences positive business trends, as evidenced by its strong track record of beating expectations. In second-quarter 2024, the company exceeded sales and earnings estimates for the sixth consecutive quarter, with both metrics showing year-over-year improvement. 

Strong revenue growth across most operating segments, supported by improved price/mix and unit volume growth aided results. KO is well-poised to benefit from innovations and growing digital investments. It has provided an optimistic view for 2024. 

However, Coca-Cola faces inflationary cost pressures due to higher commodity and material costs, as well as increased marketing investments.

(You can read the full research report on Coca-Cola here >>>)

Shares of Star have gained +6.6% over the year-to-date period against the Zacks Electronics - Miscellaneous Products industry’s gain of +11.1%. This microcap company with market capitalization of $409.70 million witnessed strong revenue growth, driven by a 25.3% increase in heating oil and propane volumes, and improved margins despite warmer weather. 

Strategic acquisitions are bolstering market position, adding significant volume and operational synergies. The company has enhanced profitability by reducing its adjusted EBITDA loss by $18.9 million and maintaining strong cost control, leading to improved margins. Star Group's leadership in home heating, diversification into related services and a robust balance sheet with solid cash flow management further strengthen its investment case. 

However, challenges include declining heating oil volumes, weather sensitivity, customer attrition and rising operating expenses. Additionally, the company faces competitive pressures from alternative energy sources, which could impact market share and profitability.

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

Aware’s shares have outperformed the Zacks Internet - Software and Services industry over the year-to-date period (+48.8% vs. +5.0%). This microcap company with market capitalization of $53.17 million witnessed 17% revenue growth in the first half of 2024, driven by new customer acquisitions and a 14% rise in recurring revenue, reflects a shift toward a subscription model and underscores its market expansion and improved financial predictability. 

Strategic cost management reduced operating expenses by 7%, narrowing net losses and enhancing adjusted EBITDA. The shift to a recurring revenue model, with a 31% second-quarter 2024 revenue uptick, and securing large contracts, including a $1.2 million automated biometric identification system (ABIS) deal, highlight Aware's growing global footprint. 

Yet, declining cash reserves, continued net losses, reliance on government contracts and limited market diversification pose significant risks. Increasing competition and execution risks in strategic initiatives could pressure revenue growth and profitability.

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

Other noteworthy reports we are featuring today include Thermo Fisher Scientific Inc. (TMO), GE Aerospace (GE) and Pfizer Inc. (PFE).

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>>>