Friday, January 10, 2025
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), Alphabet Inc. (GOOGL) and Cisco Systems, Inc. (CSCO), as well as two micro-cap stocks Hovnanian Enterprises, Inc. (HOV) and Perma-Pipe International Holdings, Inc. (PPIH). 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’s shares have outperformed the Zacks Computer - Micro Computers industry over the past six months (+6.6% vs. +6.2%). The company is benefiting from strong growth in Services revenues. It 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 December quarter’s (first-quarter fiscal 2025) revenues to grow low to mid-single digits on a year-over-year basis. For the Services segment, Apple expects a double-digit growth rate similar to 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. However, weakness in iPhone sales, particularly in China, is a concern. Increasing regulatory headwinds is a concern for investors.
(You can read the full research report on Apple here >>>)
Shares of Alphabet have outperformed the Zacks Internet - Services industry over the past year (+38.6% vs. +33%). The company is riding on strong cloud and search growth. Google Cloud is benefiting from accelerated growth across AI infrastructure, enterprise AI platform Vertex, generative AI solutions and core Google Cloud Platform products.
GOOGL’s strong AI portfolio is helping it attract new customers, win larger deals, and deepen product adoption among existing customers. Alphabet’s expanding GenAI capabilities present a potential catalyst for future growth. Its dominant position in the search engine market is a strong growth driver.
Major search updates and removal of bad ads to enhance search results continue to boost traffic on Google’s search engine. GOOGL outperformed its industry in the trailing 12 months. However, increasing litigation issues and expenses remain concerns. Rising competition from Microsoft and Amazon is a headwind.
(You can read the full research report on Alphabet here >>>)
Cisco shares have narrowly outperformed the Zacks Computer - Networking industry over the past year (+21% vs. +20.2%). The company’s business model has evolved with subscription revenues accounting for more than half of its total revenues. Its Splunk acquisition enhances its recurring revenue base.
The buyout significantly expands Cisco’s portfolio of software-based solutions, contributing more than $4 billion in ARR and makes it one of the largest software companies in the world. The launch of AI-powered Hypershield, which combines security and networking, strengthened Cisco’s security portfolio.
However, the company has been suffering from sluggish networking sales, primarily due to lackluster demand from telecommunication and cable services providers, as well as stiff competition. Cisco’s prospects are further challenged in the AI-driven networking space due to stiffening competition aggravated by Hewlett Packard’s deal to acquire Juniper.
(You can read the full research report on Cisco here >>>)
Shares of Hovnanian have underperformed the Zacks Building Products - Home Builders industry over the past year (-27.6% vs. -4%). This microcap company with market capitalization of $749 million is facing profitability issues due to declining margins and heavy reliance on incentives to drive affordability. Elevated land investments and regional concentration increase vulnerability to market fluctuations.
Reliance on incentives heightens financial risks, while competition and external disruptions threaten growth and market position. Nevertheless, Hovnanian has demonstrated strong revenue growth and operational efficiency, capitalizing on resilient housing demand and effective sales strategies.
The company’s focus on expanding its community footprint and quick move-in homes positions it for sustained growth. Strategic land investments boost growth, while cost discipline sustains profitability. With a commitment to aligning growth initiatives with market trends, Hovnanian is well-positioned to deliver strong returns and shareholder value.
(You can read the full research report on Hovnanian here >>>)
Perma-Pipe International’s shares have outperformed the Zacks Steel - Pipe and Tube industry over the past year (+49.3% vs. +26.8%). This microcap company with market capitalization of $106.85 million has a backlog which grew 33% to over $100 million by November, reflecting strong demand in key markets like oil and gas and district energy. Geographic diversification, including $61 million in recent contracts across MENA and the Americas, reduces regional risks while positioning the company for growth in energy and infrastructure.
Its focus on high-growth markets aligns with robust infrastructure development, supported by proprietary technologies like the XTRU-THERM insulation system, bolstering market leadership. The company’s tailored solutions cater to high-margin sectors, ensuring operational resilience.
Long-term demand is underpinned by global steel pipe market growth, fueled by investments in infrastructure and urbanization. However, exposure to cyclical markets, intense competition, geopolitical risks and regulatory compliance costs present challenges.
(You can read the full research report on Perma-Pipe International here >>>)
Other noteworthy reports we are featuring today include HSBC Holdings plc (HSBC), The Charles Schwab Corp. (SCHW) and Cintas Corp. (CTAS).
Mark Vickery
Senior Editor
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>>>
Today's Must Read
Robust Portfolio, Services Strength to Benefit Apple (AAPL)
Alphabet (GOOGL) Benefits From Cloud & Search Initiatives
Cisco (CSCO) Benefits From Strong Security Products Adoption
Featured Reports
Uniform Rental Unit to Aid Cintas (CTAS) amid Rising Costs
Per the Zacks analyst, Cintas' Uniform Rental and Facility Services unit is driven by the penetration of additional products and services into existing customers. High costs remain a concern.
Motorola (MSI) Rides on Healthy Demand, Portfolio Strength
Per the Zacks analyst, growing demand for video security, command center software and land mobile radio services is likely to drive Motorola's top line. A strong emphasis on innovation is a tailwind.
TC Energy (TRP) to Capitalize on Growing Natural Gas Demand
The Zacks analyst believes TC Energy is uniquely positioned to capitalize on the growing North American natural gas demand, but high debt and project risks could affect financial stability.
Sun Life (SLF) Gains on Solid Asia Business Amid High Costs
Per the Zacks analyst, Sun Life is set for grow on solid Asia business that are expected to provide higher return and expanding global asset management business. However, high costs remain a concern.
Equifax (EFX) Benefits From Acquisitions Amid Low Liquidity
Per the Zacks analyst, acquisitions have enabled Equifax to provide a broad insight into consumer performance and explore market opportunities over time. Low liquidity is concerning.
Jakafi Sales Drives Incyte (INCY) Amid Pipeline Setbacks
Per the Zacks analyst, Incyte's lead drug, Jakafi, maintains momentum on strong underlying demand amid competition. However, the recent pipeline setbacks dent its efforts to expand its portfolio.
Solid Air Traffic Aids AAR Corp (AIR), Supply Chain Woes
Per the Zacks analyst, steadily growing air passenger traffic is boosting AAR Corp.'s Parts Supply business. Yet persistent supply chain challenges plaguing the aerospace sector remains a concern.
New Upgrades
Restructuring, Asia Focus & Relatively Higher Rates Aid HSBC
Per the Zacks analyst, relatively higher rates, strategic efforts to boost its presence in Asia, business reorganization, and a solid capital position will likely support HSBC's financials.
Buyouts, Debt Repayments & Rate Cuts to Aid Schwab (SCHW)
Per the Zacks analyst, interest rate cuts, strategic acquisitions to boost client assets, repayment of high-cost debt, and a solid balance sheet will likely support Schwab's financials.
Strategic Initiatives With Comps Growth Benefit Brinker (EAT)
Per the Zacks analyst, Brinker's performance is benefiting from effective marketing strategies, improved menu pricing, higher traffic and a favorable menu item mix, reflecting increasing comps trend.
New Downgrades
Declining Backlog & Rising Operating Expenses Ail Thor (THO)
Per the Zacks analyst, soft consumer confidence has led to a decline in Thor's backlog, which doesn't bode well for its sales. Rising SG&A expenses as a percentage of sales is also concerning.
Weak International Demand Hurts Ciena's (CIEN) Performance
Per the Zacks analyst, soft demand trends in the EMEA and Asia-Pacific regions are affecting Ciena's performance. Fierce competition and customer concentration risk pose added concerns.
Kohl's (KSS) Remains Troubled by Tough Consumer Environment
Per the Zacks analyst, Kohl's faces pressure from a challenging consumer environment. In Q3, results fell short of expectations, with sales remaining weak in the apparel and footwear sectors.
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The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
Cintas Corporation (CTAS) : Free Stock Analysis Report
Hovnanian Enterprises Inc (HOV) : Free Stock Analysis Report
HSBC Holdings plc (HSBC) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
Perma-Pipe International Holdings, Inc. (PPIH): Free Stock Analysis Report
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