Key Stock Insights: NVIDIA, Meta, and Johnson & Johnson Leads the Pack

Tuesday, January 7, 2025

The Zacks Research Daily features valuable insights from our analyst team. Today’s coverage includes new research reports on 16 significant stocks such as NVIDIA Corporation (NVDA), Meta Platforms, Inc. (META), and Johnson & Johnson (JNJ), along with two micro-cap stocks: Rave Restaurant Group, Inc. (RAVE) and EVI Industries, Inc. (EVI). Our microcap research stands out as it is the only comprehensive analysis of these small, often overlooked companies in the country.

These highlighted research reports were carefully selected from around 70 reports released by our analysts today.

NVIDIA’s Dominance Amid AI Growth

NVIDIA shares have soared, outperforming the Zacks Semiconductor – General industry over the past year (+195.9% vs. +135%). The company’s success is largely driven by the booming artificial intelligence (AI) sector, particularly within high-performance and accelerated computing. Their data center business is thriving, fueled by an increased demand for generative AI and large language models that utilize NVIDIA’s GPUs based on Hopper and Ampere architectures.

Additionally, a spike in hyperscale demand and improved sales to partners in the Gaming and ProViz markets following the normalization of channel inventory are supporting this growth. Furthermore, partnerships with automotive giants like Mercedes-Benz and Audi are expected to strengthen NVIDIA’s role in autonomous vehicles and automotive electronics.

Analysts project a 50.5% compound annual growth rate (CAGR) for NVIDIA’s revenues through fiscal 2025-2027. However, risks such as weakening IT spending due to macroeconomic factors and tensions in U.S.-China technology relations remain significant concerns.

Meta Platforms: Strong Growth and Future Ambitions

Shares of Meta Platforms have also outperformed, gaining 83.9% compared to the Zacks Internet – Software industry’s 40.6% rise over the past year. The company is experiencing solid user growth globally, particularly in the Asia Pacific region. Increased usage across platforms like Instagram, WhatsApp, Messenger, and Facebook has significantly contributed to this success.

Moreover, META is leveraging AI to enhance its platform, reaching over 3.2 billion users daily. Its strengthening presence among younger audiences, along with improved content recommendations, solidifies its competitive position.

While AI advancements attract advertisers and promise to bolster revenue, monetizing these AI services may take considerable time, posing a potential challenge.

Johnson & Johnson: Mixed Performance Despite Strength in Innovation

Johnson & Johnson shares have seen a slight decline of -0.1% in the past six months, compared to a more significant drop of -15.3% in the Zacks Large Cap Pharmaceuticals industry. The company’s innovative Medicine unit is performing well, driven by longstanding products such as Darzalex, Tremfya, and Erleada, along with new launches like Spravato and Carvykti.

However, weak sales in the MedTech segment, particularly in Asia-Pacific due to challenges in China, have impacted overall performance. J&J also faces a key patent expiration for its top-selling drug Stelara in January 2025, which could negatively affect sales. Legal expenses from ongoing lawsuits related to its talc products are another burden.

Despite these hurdles, recent estimates show slight optimism ahead of Q4 results, with J&J having a favorable record of earnings surprises in recent quarters.

Rave Restaurant Group: Solid Performance with Growth Challenges

Shares of Rave Restaurant’s have reported a 25.1% gain, significantly outpacing the Zacks Retail – Restaurants industry’s 8.8% increase over the past year. With a market cap of $40.01 million, this microcap company has achieved 18 consecutive quarters of profitability, with a notable 36.3% year-over-year increase in net income for the first quarter of fiscal 2025.

Rave holds $8.4 million in liquid assets, further backing strategic initiatives and shareholder returns. A new four-unit development agreement enhances its 25-site pipeline, reflecting alignment with industry growth trends. Menu innovations and a shift towards digital engagement have led to double-digit growth in online sales.

Challenges remain, including declining same-store sales, rising costs, and diminishing cash reserves. While the franchise model allows for scalable growth, it is also sensitive to franchisee performance and competitive pressures.

EVI Industries: Challenges Amid Strategic Growth

EVI Industries shares lag behind the Zacks Industrial Services industry, showing a decline of -12.4% in contrast to the industry’s +10.0% gain. This microcap company has a market cap of $244.93 million and currently faces challenges such as decreasing gross margins and exposure to fluctuating chemical costs. Regulatory pressures and intense competition are further complicating their position.

Nonetheless, EVI Industries continues to employ a buy-and-build strategy, having completed 28 acquisitions, including O’Dell Equipment in 2024, which aims to strengthen its foothold in the commercial laundry industry. This strategy enhances EVI’s service portfolio and market reach. Strong cash flow has been crucial for supporting acquisitions and driving shareholder returns, as evidenced by a 10% dividend increase in 2024.

As demand for laundry services rises, EVI is strategically positioned to benefit, emphasizing energy-efficient and eco-friendly solutions to meet customer demands and regulatory standards.

Other Notable Reports

Today’s reports also include insights on Apollo Global Management, Inc. (APO), EOG Resources, Inc. (EOG), and AutoZone, Inc. (AZO).

Director of Research

Sheraz Mian

Note: Sheraz Mian leads the Zacks Equity Research department and is widely recognized for his expertise in earnings analysis. He regularly shares insights through his weekly Earnings Trends and Earnings Preview reports. To receive updates on his articles, please click here>>>

Today’s Must Read:

NVIDIA (NVDA) Rides on Strong Adoption of GPUs, Partnerships

User Growth, Instagram Strength Aids Meta Platforms (META)

J&J’s (JNJ) Innovative Medicine Strong, MedTech Slows Down

Featured Reports:

Diversified AUM Base Aid Apollo (APO) Amid Rising Expenses: According to Zacks analysts, Apollo’s diverse assets under management across various classes and geographies provide essential support, despite rising expenses being a concern.

EOG Resources’ (EOG) Untapped Shale Drilling Potential Aids: EOG excels in shale drilling and free cash flow conversion, positioning it favorably for future growth.