Weekly Preview: Earnings To Watch This Week (AVGO, CRWD, DOCU, ZM)

D.Despite inflation at its highest annual rate in nearly thirteen years, stocks ended higher on Friday, with all three major averages ending near all-time highs and posting weekly gains, thanks to what economists think is encouraging data that the economy is now firmly rebounding .

On Friday, consumer price data as measured by the Federal Reserve’s (PCE) personal consumption expenditure showed the rate of inflation hit 3.6%, higher than economists’ target of 2.9%, its highest level since 2008. The 0.7% surge in April, beating analysts’ estimate of 0.6% and rising more than 0.4% in March, excludes volatile components like food and energy.

However, investors have eased fears of inflation and rising price pressures and instead focused on pent-up consumer demand. The data also suggests it should continue as the economy reopens, boosting both the Dow Jones Industrial Average (64.81 points up to close at 34,529.45) and S&P 500 Index ( plus 3.23 points, or 0.1%, on 4,204.11) to record their first weekly gain in the past three weeks. The tech-heavy Nasdaq Composite Index gained 12.46 points, or 0.1%, to end the week at 13,748.74.

During the week, the Dow was up 0.9% and up 2% in May. This is the fourth consecutive monthly win. The S&P 500 also posted its fourth straight monthly gain, up 1.2% for the week while up 0.6% for the month. After a difficult start to the month, the Nasdaq fell 1.5% in May, marking its first monthly decline in seven months. However, it rebounded strongly this week, posting a weekly gain of 2.1%. Inflation concerns that many analysts have debated temporarilycould sneak back next week force the Fed to act.

What action, if any, the Fed will take, including rolling back its massive stimulus measures, remains to be seen. On the upside, sentiment regarding the recovery from COVID will continue to improve over the next several months due to the reopening of the economy as vaccine eligibility accelerates coupled with loose activity restrictions. This, along with the Biden administration’s $ 6 trillion budget unveiled Friday for infrastructure and education spending, suggests that there are numerous catalysts in place to stimulate the market.

Accordingly, as I have been saying for several weeks, investors should continue to focus on cyclical stocks like energy, finance and materials – the sectors that can benefit from the reopening of the economy. While these sectors have performed well over the past few weeks, I see no reason why they will stop working, especially given the strong sales and earnings growth trend that is expected to continue well into the second quarter.

In the meantime, here are the stocks reporting gains that I’ll be watching this week.

Zoom video (ZM) – Reports after the end, Tuesday June 1st

Wall Street expects Zoom to make 99 cents per share on sales of $ 906.03 million. This compares to the same quarter last year when earnings were 20 cents per share on sales of $ 327.17 million.

What to Remember: Zoom stocks have been penalized significantly over the past six months. Shares have fallen as much as 52% to a current low of $ 273 since the stock hit its all-time high of $ 588.84 on October 19. Over the same period, the S&P 500 has risen by around 15%. With the proliferation of coronavirus vaccines, the market has become increasingly concerned about Zoom’s ability to maintain its impressive growth rate as schools, universities, and businesses reopen to personal work and study. However, the company is reportedly looking for it Diversification of its sources of income by entering the Contact center room. Additionally, Zoom launched its event platform for virtual and hybrid events last week. The platform enables event organizers to create live events with tickets for audiences of all sizes and to charge entry fees. To reverse the trend in the stock price, Zoom needs to make a strong forecast, especially given the positive news surrounding vaccines.

Broadcom (AVGO) – Reports after close of trading Thursday June 3

Wall Street expects the company to make $ 6.42 per share on sales of $ 6.51 billion. This compares to the same quarter last year when earnings were $ 5.14 per share on revenue of $ 5.69 billion.

What to Note: After taking a massive blow from the pandemic earlier this year, Broadcom stock has been one of the biggest beneficiaries of the chip sector’s rebound over the past six months. Stocks are up nearly 20% during that time, outperforming the S&P 500 index by 15%. On a mission to become the global leader in infrastructure technology, the company has gone on a buying spree and diversified its business away from its semiconductor segments. Broadcom is also focused on data center growth, which accounts for 35% of total revenue, and has a strong portfolio of services, especially due to its 5G capabilities. For the stock to maintain its bullish trend, it will require optimistic semiconductor sales and data center results that will excite the market.

CrowdStrike (CRWD) – Reports after close of trading Thursday June 3

Wall Street expects CrowdStrike to make 6 cents per share on sales of $ 291.4 million. This compares to the same quarter last year when earnings were 2 cents per share on sales of $ 178.08 million.

What to Remember: Software stocks have been under pressure in recent weeks during massive rotation in value names. Among the biggest declines were beneficiaries, which rose sharply in 2020 during the pandemic. However, as vaccines become more prevalent, the market has become increasingly concerned about these names, including cybersecurity stocks like CrowdStrike, which are up nearly 200% over the past year. Valuation concerns have been raised, but it’s hard to imagine that cybersecurity won’t be a critical part of corporate spending in a post-pandemic world. There will continue to be a need for better security as organizations continue to embrace digitization while making cybersecurity a top operational priority. The market is currently valued at $ 200 billion and is expected to grow to an average annual growth rate of about 10% over the decade. Hence, it would be a mistake to disconnect from CrowdStrike during this pullback.

DocuSign (DOCUMENTARY) – Reports after close of trading Thursday June 3

Wall Street expects DocuSign to make 28 cents per share on sales of $ 436.27 million. This compares to the same quarter last year when earnings were 12 cents per share on sales of $ 297.02 million.

What to Remember: DocuSign’s stock has been under heavy selling pressure for the past few weeks, down roughly 13.5% during the tech sell-off last month. Not only is the stock down 10.3% year-to-date as the S&P 500 index climbed 12%, but it’s also down more than 30% since its 52-week high of $ 290. The ability for individuals and companies to digitize a contract process was a key factor in DocuSign’s rise during the pandemic when companies switched to remote working. However, as vaccines become more prevalent, the marketplace has become increasingly concerned about DocuSign’s ability to sustain its growth rate. Hence, on Thursday, the market will want to see how the company can diversify its revenue streams with other products like the Contract Lifecycle Management platform, which is seen as a strong growth candidate for years to come. Investors will also hear how the company plans to outline its path toward profitability.

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

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Jack

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