Nike shares are a buy with upbeat earnings on deck.
Micron stock is set to struggle amid shrinking profit and revenue growth.
Stocks on Wall Street declined on Friday, with the major indices suffering their second straight week of losses as hopes for a year-end rally fizzled amid mounting concerns about further Federal Reserve and a possible recession.
For the week, the blue-chip dropped 1.7%, while the benchmark and technology-heavy fell 2.1% and 2.7% respectively.
Source: Investing.com
The coming week – which will be the last full trading week of 2022 – is expected to be another eventful one as markets continue to weigh the rate hike plans for the months ahead.
Meanwhile, on the economic calendar, most important could be Friday’s personal consumption expenditures data, which includes the price index, the Fed’s preferred inflation measure.
There will also be important third-quarter , which will provide more clues as to whether the economy is heading for a recession.
Elsewhere, on the earnings docket, there are just a handful of corporate results due as Q3 earning season winds down, including Nike (NYSE:), Micron (NASDAQ:), FedEx (NYSE:), General Mills (NYSE:), and Carnival (NYSE:).
Regardless of which direction the market goes, below we highlight one stock likely to be in demand and another that could see further downside.
Remember though, our time frame is just for the upcoming week.
Stock To Buy: Nike
I expect Nike shares to rally in the week ahead as the sports apparel and footwear giant is forecast to report upbeat financial results and strong guidance when it delivers its latest earnings after the closing bell on Tuesday, Dec. 20.
As per moves in the options market, traders are pricing in a significant swing of 9.3% in either direction for NKE stock following the earnings update.
Consensus expectations call for the Beaverton, Ore.-based sneaker company – which has topped Wall Street’s profit estimates for nine consecutive quarters – to post earnings per share of $0.65 for its fiscal second quarter, according to analysts polled by InvestingPro+. That would be 21.7% lower than EPS of $0.83 in the year-ago period.
Nike Earnings Data
Source: Investing.com
Revenue growth is expected to accelerate for the second straight quarter, with an anticipated 10.7% year-over-year rise to $12.58 billion, as it benefits from favorable consumer trends for sports and recreation clothing and equipment.
In my opinion, Nike’s sales growth in North America will surprise to the upside, as demand remained strong heading into the holiday shopping season despite a difficult backdrop of rampant and recession fears.
Perhaps of greater importance, sales figures from China are expected to reveal that revenue growth rebounded sharply in fiscal Q2 thanks to receding COVID-19 restrictions after falling 16% in the preceding quarter.
As a result, I anticipate Nike’s management will provide an upbeat outlook for the months ahead amid easing worries over the impact of excess inventory and gross margins in spite of a challenging environment for retailers.
NKE stock closed at $105.95 on Friday, earning the athletic apparel and footwear giant a valuation of roughly $165.8 billion.
Source: Investing.com
Shares, which have bounced off their recent lows along with the major stock indexes, are down 36.7% year to date and are approximately 38.1% below their all-time high of $179.10 reached in December 2021.
Stock To Dump: Micron Technology
I reckon Micron’s stock will suffer a challenging week ahead, with a potential breakdown to new multi-month lows on the horizon, as the struggling memory-and-storage chipmaker’s latest earnings results are likely to reveal a sharp slowdown in profit and sales growth due to the challenging operating environment.
Micron is scheduled to deliver fiscal Q1 numbers on Wednesday after the bell.
Market players expect a large swing in MU shares following the results, according to the options market, with a possible implied move of 9.8% in either direction.
According to Investing.com, Micron is forecast to deliver a loss of $0.01 a share, plunging from a profit of $2.16 per share in the same quarter last year. If confirmed, that would mark Micron’s first quarterly loss on record due to the negative impact of rising operating expenses and weakening enterprise demand for its DRAM and NAND chips.
Source: Investing.com
Unsurprisingly, an InvestingPro+ survey of analyst earnings revisions points to mounting pessimism ahead of the report, with analysts cutting their EPS estimates 25 times in the past 90 days to reflect a drop of -100.4% from their initial expectations.
Meanwhile, revenue is forecast to tumble 46% year over year to $4.15 billion – which would be the lowest level since Q1 2016 – amid numerous headwinds, including ongoing inventory and supply-chain issues.
Taking that into account, I believe there is a growing downside risk that Micron’s management could once again cut its full-year profit and sales guidance as data centers cut back spending on memory and storage chips.
MU stock ended Friday’s session at $52.07, reapproaching its mid-September two-year low of $48.45. At current levels, the Boise, Idaho-based company has a market cap of $56.6 billion.
Source: Investing.com
Micron has seen its valuation collapse throughout 2022, with the stock falling 44.1% year to date. Even more worrying, shares are approximately 47% below their record peak of $98.45 reached on January 5.
Disclosure: At the time of writing,Jesse is short on the S&P 500 and via the ProShares Short S&P 500 ETF (NYSE:) and ProShares Short QQQ ETF (NYSE:).
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
