• September 25, 2023

Weekly Preview: Earnings to Watch This Week (ABNB, AMC, BIDU, DIS)

ON A better-than-expected job report sent stocks up on Friday as both the Dow Jones Industrial Average and S&P 500 index posted record intraday highs. The robust job report from July also caused the unemployment rate to fall from 5.9% to 5.4%.

The Department of Labor reported Friday that the U.S. economy created 943,000 jobs in July. That number not only exceeded analysts’ expectations, it also exceeded the number of jobs created in June, adding overall to more optimism that there is still growth to be seen in the employment recovery. The market seems to be shaking off concerns that the delta variant could disrupt the reopening of the economy. Instead, investors are evaluating which sectors will benefit most from the latest employment data.

On Friday, both the Dow (plus 144.26 points or 0.41%) and the S&P 500 Index (plus 7.42 points or 0.17%) ended on new records. With declines in tech heavyweights Tesla (TSLA), Amazon (AMZN), Apple (AAPL) and Microsoft (MSFT) the tech-heavy Nasdaq Composite Index lost 59.36 points and ended 0.4% lower. Technology stocks and consumer discretionary were penalized as bond yields rose. Despite the Nasdaq’s weaker performance on Friday, the Nasdaq still ended the week up 1.1%, outperforming both the Dow and the S&P 500, which posted gains of 0.8% and 0, respectively , 9% finished.

The market is now looking to the next few months and expects significantly better results from the reopening of the economy. Evidenced by the increase in the Financial Select Sector SPDR ETF by more than 2% (XLF) There has been a rush in stocks like financials, which are more likely to rise in a growing economy. The question still arises, what is good for business is not always good for stocks. The strong labor market report could give the Federal Reserve a reason to curtail its supportive policies sooner rather than later.

In other words, the Fed’s actions to stimulate economic growth and share prices could soon end. This begs the question, can the market rally continue into the next week from Friday? Will the strong sales and earnings growth trend we have been seeing continue into the third quarter, especially in the industries hardest hit by the pandemic? Hence the “growth versus value” trade. With three quarters of the S&P 500 already reporting profits, that answer is still unclear. We may get a confirmation this week. Here are the stocks that I’ll be watching.

AMC entertainment (AMC) – Reports after close of trading on Monday 9 August

Wall Street expects AMC to lose 93 cents per share on sales of $ 375.28 million. Compared to the same quarter last year, the company lost $ 5.36 per share on sales of $ 18.9 million.

What to Watch: Has the hype about sharply trimmed meme stocks with AMC started to wear off? The frenzy with the stock hasn’t entirely gone as it’s still up 1500% since the start of the year, but the stock is down more than 35% in the last month, including a 12% decline in one week. The market has also started to reevaluate AMC’s position as a fresh start. Aside from combining simultaneous streaming releases of blockbuster films, the company’s ability to regain its pre-pandemic presence has been hampered by the proliferation of the Delta variant. This raises several questions. Can the 80-90% pre-pandemic attendance rate be a more realistic target? If so, will this be enough to allow the company to further reduce debt and interest costs? The company successfully issued additional shares to raise cash. It is likely that this necessary dilution will continue to allow the company to survive this new variant. That said, the market will want to see on Monday if the company has staying power, especially as streaming giants start releasing movies straight from their platforms.

Baidu (START) – Reports after close of trading Thursday, August 12

Wall Street expects Baidu to make $ 2.07 per share on sales of $ 4.78 billion. Compared to the same quarter last year, earnings per share were $ 2.18 on sales of $ 3.84 billion.

What to Note: Baidu stocks have been under pressure, falling more than 15% in the past thirty days, after rising 1.76% in the S&P 500 index. Looking back over the past six months, the stock has lost nearly 40% of its value, while the S&P 500 index has gained 14% over that period. As with Alibaba (BABA), JD.com (JD) and Tencent (TCEHY) Baidu has fallen victim to the effects of tightened regulatory scrutiny by the Beijing government. China’s regulatory crackdown has raised concerns among US investors that foreign investors will flee Chinese stocks. Cathie Wood’s ARK funds recently sold Baidu shares, along with other Chinese holdings, for the same reasons. But is now a good buying opportunity for investors who have been on the sidelines? Some analysts believe the stock is now more than 30% undervalued. But even that seems conservative. Baidu is currently trading at around $ 163 and still has a consensus street price target of $ 308, which is an upside of nearly 90%. For this perceived value to matter, the company had to speak positively about its growth potential on Thursday, despite increased regulatory scrutiny in China.

Airbnb (ABNB) – Reports after close of trading, Thursday, August 12th

Wall Street expects Airbnb to lose 48 cents per share on sales of $ 1.23 billion. Compared to the previous quarter, the company lost $ 1.95 per share on revenue of $ 886.94 million.

What to Look For: Can Airbnb Keep Its High Rating? While the company pioneered the home sharing market, the delta variant of the coronavirus could hurt the company’s growth plans. Airbnb stock is down 23% over the past six months, compared to a 14% increase for the S&P 500 index. This suggests the Street is rethinking the value of stocks that stocks like Expedia (EXPE) and TripAdvisor (TRAVEL). However, Airbnb has an attractive business model and competitive strengths that are considered superior to its competitors, prompting BTIG analyst Jake Fuller to recently upgrade the stock from neutral to buy. Citing the company’s ability to better weather pandemic uncertainty as restrictions mount, Fuller assigned the stock a price target of $ 170, slightly above the Street target of $ 168. While it’s considered difficult to rate, Fuller says Airbnb should get a higher score because of its status as the best digital service name. To confirm that, investors will want to hear the reassurances of sales growth and upward forecasts for the current quarter and the rest of the year on Thursday.

Disney (DIS) – Reports after close of trading Thursday, August 12

Wall Street expects Disney to make 56 cents per share on sales of $ 16.8 billion. Compared to the same quarter last year, earnings were 8 cents per share on sales of 11.78 billion US dollars.

What to See: Driven by the success of its Disney + streaming platform, Disney stocks rose 40% over the past year, outperforming the S&P 500 Index’s 33% gain. Disney’s streaming success was driven not only by its branded content, but also by its extensive library of consumer favorites from Pixar, Marvel, Star Wars, and National Geographic, among others. While Disney + is pushing Wall Street’s growth expectations amid stiff competition from established streaming platforms like Netflix (NFLX) and Prime Video from Amazon (AMZN) Among other things, growth fatigue has set in. The market wants to know how much better things can be done? Meanwhile, Disney stock has outperformed the S&P 500 index over the past six months, down 2.5% while the S&P 500 index is up 14%. The company has set a target range for subscriber growth for Disney + of 230 million to 260 million over the next three years. While this subscriber goal would be impressive, if it is achieved it will require significant investments that can have an impact on profits. Investors will want more details on this long-term growth strategy on Thursday.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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