• January 28, 2023

Weekly Preview: Earnings to Watch This Week (BB, MU, LULU, WBA)

IIs the tech sell-off finally over? The bulls are eagerly awaiting an answer to that question after watching the painful impact of rising bond yields on the Nasdaq. While there are encouraging signs that tech stocks have hit rock bottom, it’s too early to send the all-clear. That is, when you can’t stand the volatility. However, for those who can, buying cheaper tech stocks today could soon turn out to be a wise decision.

On Friday, the Dow rose 453.40 points, or 1.4%, to close at 33,072.88. Strong performance at IBM (IBM), Microsoft (MSFT) and Intel (INTC) has helped offset Boeing’s weakness (BA), Disney (DIS) and Salesforce (CRM) that ended lower. The S&P 500 Index SPX rose 65.02 points, or 1.7%, to end the session at 3,974.54 while the Nasdaq rose 1.24% and added 161.05 points to end at 13,138.72 . The reversal of the Nasdaq was notable as it hit an intraday low at 12,878.72, which was pressured by declines in Tesla (TSLA) and Roku (YEAR).

The three major averages showed a startling reversal, closing significantly higher on Friday despite ongoing concerns about not only rising bond yields but also fears of a weakened global economic recovery. The prospect of higher inflation from the Biden government’s $ 1.9 trillion stimulus package is another pressure point on the market. It does, although some analysts continue to believe the outcome will ultimately lead to a stronger recovery in the US economy.

More importantly, Friday’s reversal was enough to prevent both the Dow Jones Industrial Average and the S&P 500 index from posting their second straight week of declines. During the week, both the Dow and S&P 500 posted solid gains of 1.4% and 1.6%, respectively. However, the Nasdaq fell 0.6%. While the Nasdaq wasn’t as lucky, the tech-heavy index remains in a stronger position to outperform over the course of the year. When looking at the overall picture, however, a trend becomes apparent.

The market reaction on Friday was similar to Thursday, when stocks recovering from a two-day losing streak erased previous losses and rose in volatile trading. Aside from bond yield concerns, it appears that investors are trying to gauge the risk and reward potential in terms of the pace of reopening. Previously unloved sectors like commodity cycles have been popular today, while soaring segments like technology have come under pressure. Hence, there are opportunities for stocks like Netflix (NFLX), which is down 6.8% this month, while pandemic winner Zoom (ZM) has fallen by 16%.

As for earnings, I’ll be watching these stocks when they report this week.

BlackBerry (BB) – Reports before the opening, Tuesday March 30th

Wall Street expects BlackBerry to make 3 cents per share on revenue of $ 245.11 million. This compares to the same quarter last year when earnings were 9 cents per share on sales of $ 291 million.

What to Remember: BlackBerry stocks are up 145% from their March 2020 lows of $ 2.70. Profits were further driven by the Reddit-induced short squeeze mania that sparked interest in other high short stocks like GameStop (GME) and AMC Entertainment (AMC). With BlackBerry stock up 45% since the start of the year, the market will want to know if its fundamentals are justifying the price. The Canadian software and services company still has a lot to prove, namely whether it can finally grow sales, which are projected to decline more than 14% this quarter. Most of the decline is likely to be attributable to revenues in the Licenses and Other segment. Investors will want to see improved trends in their enterprise software services segment (its biggest business), which has been struggling for several consecutive quarters.

Lululemon (LULU) – Reports after the end, Tuesday March 30th

Wall Street expects Lululemon to make $ 2.49 per share on sales of $ 1.66 billion. This compares to the same quarter last year when earnings were $ 2.28 per share on revenue of $ 1.48 billion.

What to Remember: After rallying 56% last year, Lululemon stock is down 10% year-to-date, followed by the S&P 500 index rising 6%. There have been concerns that the yoga apparel giant’s stocks may have overstretched, especially given increased competition from Nike (OF) and Under Armor (UA), among other. The company currently trades at 69 times the forward P / E ratio and 9.5 times the forward price-to-sales ratio, which is well above the S&P 500 index. However, it’s not the first time Lululemon, capable of dominating a $ 3 trillion global wellness market, has heard the valuation argument. This seems like a good buying opportunity for investors with a longer-term horizon. Lululemon continues to dominate retail, positioning itself as a leader in the secular health and wellness trend. In the meantime, the company is expanding internationally while expanding its online direct-to-consumer business. Expect the company to provide updates on these initiatives as well as a planned profit margin increase.

Walgreens (WBA) – Reports before the opening, Wednesday March 31st

Wall Street expects Walgreens to make $ 1.12 per share on sales of $ 35.47 billion. This compares to the same quarter last year when earnings were $ 1.52 per share on revenue of $ 35.82 billion.

What to Look For: Walgreens operates more than 9,000 retail locations in the Americas, Puerto Rico, and the U.S. Virgin Islands and has played an important role in the country’s Covid vaccination efforts. The Federal Retail Pharmacy Program supported vaccination in 43 states and jurisdictions. The pharmacy retail giant recently reported receiving around 1 million doses of vaccine from Johnson & Johnson (1).JNJ), Modern (MRNA) and Pfizer (PFE). With the expansion effort ongoing, Walgreens believes testing capacity can be increased to 3 million per month, more than a three-fold increase since last April. The company’s vaccine execution reflects its operational metrics, which have resulted in two direct wins thanks to strong cost management. This is true even when concerns about higher drug costs have impacted the sector. On Wednesday, investors will be looking to Walgreens to provide more cans for strong execution.

Micron (MU) – Reports after close of trading on Wednesday March 31

Wall Street expects Micron to make 94 cents per share on sales of $ 6.2 billion. This compares to the same quarter last year when earnings were 45 cents per share on sales of $ 4.8 billion.

What to Remember: Micron stock is still one of the top performers in the chip sector. It has increased by 17% since the beginning of the year and significantly outperformed not only the technology sector, but also the iShares PHLX Semiconductor ETF ((iShares PHLX Semiconductor ETF)).SOXX), which has increased by 11%. Given the 80% returns Micron has made over the past six months, investors now seem confident that the pandemic-induced disruptions in demand, namely Micron’s NAND and DRAM (used in various mobile devices such as smartphones ), have improved dramatically. The market also appears to be optimistic about the demand for memory chips for cloud computing, AI and 5G. At the same time, however, there are conflicting reports from Korea pointing to some weakness in Apple’s sales (AAPL) Products That May Affect Micron’s Sales. Therefore, Micron has to issue guidelines on Tuesday that demonstrate the confidence in the business with memory chips.

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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