• January 31, 2023

Weekly Preview: Earnings to Watch This Week (FCEL, ORCL)

As As I mentioned in previous posts, the market seems to be trying to correct after record gains over the past six months. The first half of the year saw massive outflows to all-time highs of the major averages. Investors have been looking for an excuse to take profits. And it seems the time has come when the Dow Jones Industrial Average and S&P 500 fell for the fifth straight year on Friday thanks to economic uncertainty.

The question is if (or when) the correction will come, how long will it take? It is also worth asking how pronounced the pullback is. It’s been more than seven months since the S&P 500 posted a 5% decline. During this time it has increased by more than 30%. In some contexts, the S&P 500 has more than doubled from its March 2020 pandemic low. Meanwhile, despite the five-day decline, it has given up just 1% from a record close on September 3rd. While I remain optimistic about the market over the long term, equity valuations are at historically high levels in almost every respect.

This has understandably made investors a little nervous as stocks continue to climb to all-time highs. Is this five-day decline a warning sign? On Friday, despite rebounding more than 200 points shortly after the market opened, the Dow Jones Industrial Average ended the session down 271.66 points, or 0.78%, to close at 34,607.72. Although the blue chip index is due to declines at Apple (AAPL). The iPhone maker was the Dow’s biggest straggler, losing more than 3%.

Other notable down-rejecters were Microsoft (MSFT), Foreclosure (CRM) and IBM (IBM), which also put pressure on the S&P 500 Index to fall 34.70 points, or 0.77%, to close at 4,458.58. The Nasdaq Composite lost 132.76 points, or 0.87%, to close at 15,115.49. The tech-heavy index had to be from Tesla (TSLA), Coin base (COIN), CrowdStrike (CRWD) and DocuSign (DOCUMENTARY). Those falls followed the reversal on Thursday when the Dow fell 151.69 points, or 0.4%. The S&P 500 closed 20.79 points while the Nasdaq Composite lost 38.38 points.

For the holiday-shortened week, the Dow was down 1.5%, posting its second straight week decline, while both the S&P 500 and Nasdaq Composite lost 1%. And as I mentioned last week, given the Fed’s temporary inflation message, there are many reasons to maintain confidence in the market, especially given the positive employment data we’ve seen. However, the Covid risk cannot be neglected. The US is only seeing an average of about 150,000 new cases per day. And with only 53% of the population fully vaccinated, this will remain a problem.

With all the positive counter-factors, however, the economic recovery is sustainable. And until there are clearer signs of a market decline, I continue to believe that the best way to counter inflation is to stay invested in the market.

As for earnings, here are the stocks I’ll be watching this week.

Oracle (ORCL) – Reports after close of trading, Monday, Sept. 13th

Wall Street expects Oracle to make 97 cents per share on sales of $ 9.78 billion. Compared to the same quarter last year, earnings were 93 cents per share on sales of 9.37 billion US dollars.

What to Watch for: Oracle stock is up 35% in the past six months, more than doubling both the S&P 500 index’s 17% gain and the Technology Select Sector SPDR ETF’s 15% gain (XLK) during this period. Oracle stock is trading a premium over its historical valuation, up 30% year-to-date and trading near its 52-week high. Viewed as a transformation game based on its business transition to a cloud subscription-based model, Oracle must continue to demonstrate that its fundamentals can sustain its recent growth rate – similar to Microsoft (MSFT) developed a decade ago. As such, Oracle’s growth strategy, which is heavily focused on customer retention and migrating existing on-premises customers to the cloud, remains a key factor in evaluating the stock’s ability to maintain its current levels. In other words, the market will want to see if Oracle works with incumbents like Salesforce (CRM), Working day (WDAY) and Amazon (AMZN) and are gaining a larger share of the cloud market.

Fuel cell energy (FCEL) – Reports after close of trading on Tuesday, Sept. 14th

Wall Street expects FuelCell to lose 5 cents per share on sales of $ 20.69 million. Compared to the same quarter last year, the loss was 8 cents per share on sales of 18.73 million US dollars.

What to Watch Out for: Can FuelCell Energy, a leading manufacturer of hydrogen fuel cells, play a significant role in the anticipated spending frenzy under the trillion dollar infrastructure bill? Renewable energy momentum isn’t quite as high as it was six months ago, but there are some signs that the market is becoming more optimistic about the industry’s outlook. The trillion-dollar infrastructure bill will be put to a vote in the House of Representatives on September 27th. The package includes $ 8 billion for hydrogen projects. FuelCell Energy, which continues to advance new technologies such as carbon capture and hydrogen generation, is one of several companies that will benefit from the spending. FuelCell’s generation portfolio, a key segment, continues to perform well, with record sales in the last quarter. The generation segment that is expected to make a significant contribution to the company’s profitability goals in FY2022. With competitors like Plug Power (PLUG) and Ballard-Power (BLDP) are also fighting for position, the market wants to know on Tuesday how realistic the growth targets of FuelCell remain.

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

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Jack

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