• December 10, 2023

Weekly Preview: Earnings to Watch This Week (COST, CRM, NVDA, ZS)

W.In assessing recent moves and tumultuous fluctuations in the equity markets, there appears to be an ongoing back-and-forth between price and value. The consecutive sale days that occurred earlier in the week, fueled by Federal Reserve policy concerns over rising inflationary pressures, seemed to give way to positive economic news. Will this trend continue?

Although the session ended mixed, stocks regained some ground on Friday, bouncing back from previous declines. The Dow Jones Industrial Average rose 123.69 points, or 0.36%, to close at 34,207.84. The S&P 500 index closed 3.26 points, or 0.1%, to close at 4,155.86 while the tech-heavy Nasdaq Composite lost half of 1% to end the session at 13,470.99. This is especially true despite strong earnings reports from well-known S&P 500 companies from all sectors.

On the upside, the Nasdaq, which suffered immensely from the tech route, has had a four-week losing streak, gaining less than 1% for the week, while both the S&P 500 and Dow are less than 1%. lost. Given Thursday’s strong rebound, with the Dow closing 188 points higher, it looks like surrender, or the feeling that the market has fallen too far and too quickly, has already occurred. I say this knowing that these “head forgeries” have occurred before. But this time it seems different. And it’s not just my innate optimism.

Fears of rising inflation will of course not go away – not immediately. And reading last week’s minutes of the Fed’s minutes, which suggested (for some) that accommodative asset purchases are imminent, sparked concerns about how long the Fed can keep rates low. At the same time, these concerns (as an example) should be offset by the better-than-expected reading of the weekly initial jobless claims, which shows that the number of new registrations has fallen to its lowest level since the pandemic started.

The unemployment claims data, somewhat overlooked due to fears of rising inflation, support optimism that there will be a lot of upside potential in the next two quarters as society normalizes. With that in mind, it seems that cyclical stocks like energy, finance, and materials – the sectors that will benefit from the reopening of the economy – have finally rallied on their better-than-expected earnings results. These are the names we’ve been talking about since the start of the winning season.

Not only have these sectors outperformed analysts’ top and bottom line estimates, but in many cases their outlook for the second quarter and beyond is better than expected, suggesting that the strong sales and earnings growth trend is going far Opening up into the economy will continue. And here the patience and discipline of investors for high-quality stocks – despite the back and forth between price and value – must shift into high gear.

In terms of earnings, here are the companies I’ll be watching next week.

WITHScaler (ZS) – Reports after close of trading Tuesday, May 25

Wall Street expects Zscaler to make 7 cents per share on sales of $ 163.71 million. This compares to the same quarter last year when earnings were 7 cents per share on sales of $ 110.52 million.

What to Remember: cybersecurity stocks like Zscaler weren’t immune to the latest tech router despite their status as the largest cloud-based web security gateway provider in the marketplace. Zscaler has lost nearly 15% of its value since the start of the year, while the S&P 500 index is up nearly 11%. Given the better than expected results just released by Palo Alto Networks (PANW), Could Zscaler be prepared for a rebound. Aside from its strong product portfolio, the company’s strength is evident in its exceptional gross margins and ability to generate cash. With the company’s cloud platform, customers can route traffic to external data centers where Zscaler houses its software tools. The demand for better security continues to grow as organizations adopt a work-from-home mindset to support a hybrid environment. This shift has led to an increase in virtual private networks that allow employees to remotely connect to the office. But can Zscaler’s earnings on Tuesday drive the stock higher?

Nvidia (NVDA) – Reports after close of trading Wednesday May 26th

Wall Street expects Nvidia to make $ 3.27 per share on sales of $ 5.39 billion. This compares to the same quarter last year when earnings were $ 1.80 per share on sales of $ 3 billion.

What to Note: Nvidia shares rose more than 4% on Friday after the chip giant announced that its board approved a 4: 1 stock split. The company says the division will make stock ownership more accessible to investors and employees. The approval of the shareholders is still required. A vote will take place at the company’s 2021 annual meeting on June 3. If approved, trading is expected to begin on July 20 on a stock split-adjusted basis, the company said. Rumors are already suggesting that the split, which is purely financial cosmetics, could be a prelude to Nvidia’s inclusion in the Dow Jones Industrial Average, which is a price-weighted index. But even with Friday’s rally, the stock, which was penalized during the tech sell-off, is down 4% over the past month. Now it might be time to buy the dip as the company has taken the lead in chip manufacturing for high-growth areas such as network data center, autonomous driving and artificial intelligence. Still, Wednesday’s forecast from Nvidia will be the key factor in whether the stock will continue its uptrend or succumb to profit-taking.

Costco (COSTS) – Reports after the end, Thursday May 27th

Wall Street expects Costco to make $ 2.32 per share on sales of $ 43.63 billion. This compares to the same quarter last year when earnings were $ 1.89 per share on revenue of $ 37.13 billion.

What to Note: Costco stock has been flat for the past six months, while it underperformed the S&P 500 index over the past year, rising 26% to 40% of the S&P. This is especially true if the company has outperformed consensus sales estimates over the past five quarters. However, according to Christopher Graja, an analyst at Argus, the stocks could offer double-digit return potential. “We believe Costco’s financial strength and ability to deliver exceptional value to consumers is a key differentiator for the stock in the current marketplace,” said Graja and Renewal of Membership. “The company ended the 2020 fiscal year with 105 million members, an increase of around 12% compared to 2018. This corresponds to an annual growth of around 6%. With a constant renewal rate of over / around 90%, Costco’s stock will not stagnate for long. The company’s profit margin Thursday’s guidelines must reflect that confidence.

Foreclosure (CRM) – Reports after close of trading Thursday May 27

Wall Street expects Salesforce to make 88 cents per share on sales of $ 5.89 billion. This compares to last year’s quarterly earnings of 70 cents per share on sales of 4.85 billion US dollars.

What To Look For: The Salesforce SaaS business model and customer relationship management services have been key to Salesforce’s growth over the past five years, but there have been talks of market saturation. Additionally, Salesforce stock has pulled back lately since the company announced the $ 27.7 billion purchase of Slack. But the company is poised to get its “mojo” back, and stocks, which are down 13% in six months, are poised to deliver more than 20%. Citing increasing demand for digital transformation, Morgan Stanley analyst Keith Weiss recently upgraded Equal-Weight to Overweight with a target price of $ 270. Among the various catalysts to achieving his price target, Weiss noted the company’s billing and booking metrics, which reflect improving demand trends with the economic reopening, and he believes Salesforce will generate stronger profit margins. On Thursday, Salesforce will have to convince the market how to run in the direction suggested by the analyst.

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

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