Thursday, June 6, 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 NVIDIA Corporation (NVDA), Tesla, Inc. (TSLA) and Linde plc (LIN), as well as two micro-cap stocks Servotronics, Inc. (SVT) and The Cato Corporation (CATO). 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 >>>

NVIDIA shares have outperformed the Zacks Semiconductor - General industry over the past year (+223.5% vs. +166.9%), making the company overtake Apple to become the second largest company behind Microsoft in terms of market capitalization. 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 >>>)

Shares of Tesla have declined -22.7% over the past year against the Zacks Automotive - Domestic industry’s decline of -23.9%. The company is witnessing shrinking automotive margins and a slowdown in deliveries amid a cooling electric vehicle (EV) market.

Tesla expects its vehicle volume growth rate for 2024 to be noticeably lower than 2023. With competition intensifying in the EV space, Tesla’s focus on autonomous driving and artificial intelligence (AI) is expected to be a game changer. It aims to launch affordable vehicles, transition into an AI company and is banking on its robotaxi venture.

The successful introduction of its Full Self Driving (FSD) software in China amid stiff competition marks a significant win. Additionally, TSLA’s Energy Generation and Storage business is thriving. While near-term challenges persist, long-term prospects appear promising, driven by its big bet on driverless software and AI.

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

Linde’s shares have outperformed the Zacks Chemical - Specialty industry over the past year (+21.2% vs. -9.0%). The company being a global leader in industrial gas manufacturing, supplies a wide range of essential gases to industries such as energy, steel, healthcare, manufacturing and electronics.

The firm secures long-term contracts with key on-site clients featuring minimum purchase agreements, helping to stabilize earnings during economic downturns. With a track record of raising dividends for 31 consecutive years, Linde remains committed to rewarding shareholders, supported by its robust business model.

However, increasing competition for new projects poses challenges to the company's return on investment. Additionally, the volatility of energy prices, particularly for natural gas and diesel fuel, presents a significant concern for profitability. Increasing regulatory burden may negatively impact the industrial gas producer’s overall financial health.

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

Shares of Servotronics have gained +7.4% over the past six months against the Zacks Diversified Operations industry’s gain of +9.9%. This microcap company with market capitalization of $30 million reported strong first-quarter 2024 results, with revenues rising 15.3% to $10.4 million and gross profit soaring 75.6% to $1.7 million year over year.

This growth was driven by higher volumes, a favorable product mix and a 29.3% increase in foreign sales. The company’s focus on cost management and operational efficiencies improved profit margins and reduced operating losses. The divestiture of the unprofitable CPG segment allows it to focus on core servo control components, enhancing profitability.

Also, the company’s expansion into the repair, overhaul, energy and industrial markets is expected to drive revenue growth. Commitment to zero-defect quality standards ensures competitiveness in the aerospace and defense sectors. With a strong foundation, Servotronics is well-positioned for continued performance improvements.

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

Cato’s have underperformed the Zacks Retail - Apparel and Shoes industry over the past year (-22.8% vs. -52.3%). This microcap company with market capitalization of $125.25 million is witnessing declining same-store sales, store closures, inflationary pressures, supply chain disruptions, and low e-commerce sales, which can dampen growth and profitability.

Nevertheless, Cato have witnessed robust earnings, effective cost management, and a strong financial foundation first-quarter 2024. Net income surged 148% to $11 million, driven by operational efficiency and cost control, showcasing resilience. Cost of goods sold and SG&A expenses decreased, boosting margins.

With $477.2 million in total assets and $39.1 million in cash, Cato's financial stability supports growth. Consistent dividends ($0.17 per share) and share repurchases (431,415 shares) underscore shareholder value commitment. Strategic e-commerce expansion and women's apparel focus align with market trends, positioning Cato for sustained revenue growth.

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

Other noteworthy reports we are featuring today include Medtronic plc (MDT), CrowdStrike Holdings, Inc. (CRWD) and Prudential Financial, Inc. (PRU).

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>>>