Weekly Preview: Earnings to Watch This Week 8-21-22 (CRM, NVDA, PTON, ZM)


Five instances wouldn’t the attraction for the S&P 500 Index and the Nasdaq Composite, each of which snapped a four-week profitable streak, ending decrease on a weekly foundation for the primary time in virtually a month. The market responded not solely to an increase in Treasury yields, but additionally the chance that the hawkish stance the Federal Reserve has adopted to fight rising inflation may be right here to keep.

While the prospect of “peak inflation” stays a chance, there was no indication — at the very least from Fed coverage makers — of any plans to take away the foot off the speed hike fuel pedal. And this sentiment despatched a blow to market on Friday because the Dow Jones Industrial Average fell 292.30 factors, or 0.86%, to finish Friday’s session at 33,706.74. The S&P 500 gave up 55.26 factors, or 1.29%, to end at 4,228.48. Of the eleven S&P sectors, solely six closed greater for the week, lead by Consumer Staples as the highest gainer, whereas the Communication Services was the worst performer.

The tech heavy Nasdaq Composite, which has been a robust out-performer throughout the restoration, declined 260.13 factors, or 2%, to finish at 12,705.22. For the week, the Nasdaq took extra of the punishment, falling 2.6%, whereas the S&P 500 fell 1.2%. The Dow slipped simply 0.2%. This marks the biggest weekly decline for every of the main benchmarks in virtually six weeks. Some analysts have been questioning the size of the rally from the May lows, questioning when will the inevitable would pullback happen.

While the earnings from the S&P 500 firms have been higher than anticipated, and injecting optimism into the market, valuations have gotten considerably stretched within the course of. While shares are nonetheless off their peaks, anticipated earnings have additionally been slashed. As such, some pundits have argued that the “risk-reward” had gotten much less favorable, particularly after the S&P 500 index had damaged above a resistance stage of 4,231, which has been intently watched as a metric that affirms the underside was reached.

Now the eye has turned to the Federal Reserve, which meets in September, and traders are questioning what actions they plan to take. I warned final week that it was untimely to increase the “all clear” flag. The market’s penchant for knee-jerk reactions was the premise for that warning. It wouldn’t be a shock to see shares, specifically the S&P 500, trade in a good vary of 100 to 150 factors within the subsequent two months till there’s clearer course of the influence of Fed choices. Until then, listed here are the earnings I’ll be watching this week.

Zoom Video (ZM) – Reports after the shut, Monday, Aug. 22

Wall Street expects Zoom to earn 93 cents per share on income of $1.12 billion. This compares to the year-ago quarter when earnings got here to $1.36 per share on income of $1.02 million.

What to watch: Shares of Zoom may need moved impressively, rising virtually 45% greater from its 52-week low in mid-May. But at present buying and selling at round $100, the video conferencing specialist nonetheless has methods to go to regain its all-time excessive stage of just about $600. And due to elevated competitors from Microsoft (MSFT), Zoom may not ever attain that stage. Last week analyst Tyler Radke from Citigroup downgraded the stock to Sell from Neutral, citing “new hurdles to sustaining growth.” Radke noted that Zoom’s growth has always been more challenging. Adding, “though new SKUs resembling Phone are promising, we consider rising churn in [small and medium business]/on-line, and rising competitors in enterprise will greater than offset new product power and drive estimates beneath consensus.” That stated, Zoom’s valuation stays interesting on condition that the corporate continues to generate robust free money stream. MKM Partners analyst Catharine Trebnick initiated protection of the corporate with a Buy ranking due to a number of “key catalysts” within the months forward. Trebnick who has a $135 value goal on the stock, famous that the slower progress outlook has “created more attractive entry points for investors.” To reverse the stock’s bearish development, as well as to progress re-acceleration, Zoom on Monday may have to difficulty robust income and earnings forecast.

Salesforce (CRM) – Reports after the shut, Wednesday, Aug. 24

Wall Street expects Salesforce to earn $1.03 per share on income of $7.7 billion. This compares to the year-ago quarter earnings of $1.48 per share on income of $6.34 billion.

What to watch: Wall Street analysts have reversed the pessimism that has damage Salesforce stock heading into its earnings report. Down practically 26% yr to date, and practically 40% from highs above $300 final November, Salesforce has been impacted by the re-pricing of tech shares amid the latest correction. This is despite the fact that the corporate hasn’t proven it felt any hostile influence from the macro circumstances. Not solely has its quarterly income progress maintained a progress tempo within the mid-20s, Salesforce has grown its CRM market share throughout the downtrend. The the primary quarter, the corporate income grew 24% yr over yr, simply surpassing the 19% progress price analysts anticipated. Heading into this quarter, traders ought to count on one other robust beat. Analyst Brian White of Monness, Crespi, Hardt has a Buy ranking and a $225 value goal on Salesforce, anticipating 20% upside. Salesforce is “uniquely positioned” to capitalize on the digital transformation development that so many firms are present process,” White famous. The analyst highlighted that, though anticipated income progress might gradual within the quarter to $7.69 billion, it could nonetheless replicate a 4% sequentially enhance. The firm’s SaaS enterprise mannequin and its buyer relationship administration continues to be trade normal. But on Wednesday traders will concentrate on Salesforce’s billings and reserving metrics to assess whether or not the power of the enterprise within the quarters forward.

Nvidia (NVDA) – Reports after the shut, Wednesday, Aug. 24

Wall Street expects Nvidia to earn 49 cents per share on income of $6.7 billion. This compares to the year-ago quarter when earnings got here to $1.04 per share on income of $6.51 billion.

What to watch: Driven by extended provide chain headwinds, semiconductor shares have struggled for many of the yr. Although Nvidia has been broadly thought-about one of the best of the bunch, the corporate’s weak outlook has put a damper on its progress expectations, inflicting a ten% plunge within the stock after it warned of disappointing Q2 gaming income. Surprisingly, the corporate’s income projection weren’t solely beneath avenue expectations, nevertheless it suggests little-to-no progress in any respect. While this would possibly symbolize a strong shopping for alternative for the stock, there’s nonetheless the query of when will it backside out. Analyst Tristan Gerra of Baird who charges the stock as Neutral with a $150 value goal, doesn’t count on a right away restoration. “While the sharp and below-expectation slowdown in data center revenue in the quarter was due to supply chain disruptions, according to Nvidia, we model slowing [year-over-year] and [quarter-over-quarter] comps ahead,” Gerra wrote in a word to purchasers. The complete chip trade has additionally suffered a decline in common promoting costs, which analysts consider will influence the corporate’s gaming income and datacenter income. To reverse the stock’s decline the corporate on Wednesday will want to discuss positively about its progress prospects for the subsequent quarter and past.

Peloton (PTON) – Reports earlier than the open, Thursday, Aug. 25

Wall Street expects Peloton to lose 77 cents per share on income of $682.94 million. This compares to the year-ago quarter when the loss was 56 cents per share on income of $936.9 million.

What to watch: Peloton stock has spun uncontrolled for a while. The train machine specialist has been damage from a mix of things. Aside from waning client demand, the model has additionally been damage from some unfavourable headlines. But the corporate is taking steps to agency up its enterprise, together with experimenting with “Fitness as a Service,” which it hopes can get extra individuals excited concerning the product, in addition to value will increase on choose gadgets such because the Bike+ and Tread merchandise to increase its revenue margins. Analyst Ronald Josey at Citigroup has applauded these strikes, saying “While it stays early in Peloton’s turnaround, given continued robust engagement ranges and its evolving go-to-market method, we consider the service can construct out its subscriber base.” Josey reiterated a Buy ranking on Peloton’s with a value goal of $28, anticipating Peloton’s new technique can lead to increasing gross margins and free money stream. With reset expectations, on Thursday traders will need to hear how the corporate plans to ship income and revenue progress within the quarters forward.

The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.

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