• The US presidential election, the Fed FOMC meeting and more earnings data will take center stage this week.
• Arista Networks is a buy with a strong beat-and-raise quarter expected.
• CVS Health is a sales strategy with declining profitability and weak guidance on deck.
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Wall Street’s major indexes closed higher on Friday after strong earnings from Amazon (NASDAQ:AMZN) sparked a rally in mega-cap tech stocks and the market looked past a disappointing jobs report.
However, all three benchmarks declined this week, with the S&P 500 down 1.4%, the tech-heavy Nasdaq Composite down 1.1% and the blue-chip Dow Jones Industrial Average down 0.2%.
Source: Investing.com
The upcoming important week is expected to be volatile given the extensive market-moving events taking place.
First, Tuesday is Election Day, with the presidential race between Kamala Harris and Donald Trump too close to call. Voters will also decide hundreds of congressional and state elections.
The November Fed meeting begins the next day. An announcement will follow on Thursday. With a 25 basis point rate cut seen as almost certain, investors will scrutinize Fed Chairman Jerome Powell’s comments amid speculation of a December pause.
Source: Investing.com
Elsewhere, earnings season continues, with a list of notable tech-related names expected to debut including Arm Holdings (NASDAQ:ARM), Qualcomm (NASDAQ:QCOM), Palantir (NYSE:PLTR), Arista Networks (NYSE:ANET) , Datadog (NASDAQ:DDOG), Fortinet (NASDAQ:FTNT) and Block (NYSE:SQ).
Some of the other high-profile reporters include Novo Nordisk (NYSE:NVO), Moderna (NASDAQ:MRNA), CVS Health (NYSE:CVS), Ferrari (NYSE:RACE), Toyota (NYSE:TM), Rivian (NASDAQ: RIVN), Lucid (NASDAQ:LCID), Airbnb (NASDAQ:ABNB) and DraftKings (NASDAQ:DKNG).
Regardless of which direction the market moves, below I highlight one stock that is likely to be in high demand and another that could see new downside. Please note, however, that my time frame is only for the upcoming week, Monday, November 4 through Friday, November 8.
Arista Networks stands out as a top buy this week, as the network infrastructure company is likely to deliver another quarter of strong revenue growth and provide optimistic guidance.
The tech company has benefited immensely from booming demand for data centers as cloud providers and AI-driven companies invest heavily in infrastructure upgrades.
Arista is expected to announce its third-quarter earnings update after the US market closes at 4:05 PM ET on Thursday.
According to the options market, market participants expect a significant swing in ANET stock after the price falls, with a possible implied move of 6.2% in either direction. Shares rose 8.1% after its last earnings report in late July.
Source: InvestingPro
With 19 upward earnings forecast revisions in the past 90 days, Arista is expected to continue its growth trajectory and provide optimistic guidance for the coming quarters.
Analysts expect strong earnings and revenue growth, driven by its high-profile customer base, including Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META), Google (NASDAQ:GOOGL) and Oracle (NYSE:ORCL), as they continue to expand their capabilities for data storage.
Arista Networks posted earnings of $2.08 per share, a 13.6% improvement over earnings per share of $1.83 in the same period last year. Revenue is expected to rise 15.9% year-over-year to $1.75 billion, amid robust demand for cloud infrastructure from large corporations, small businesses, government agencies and educational institutions.
But as is usually the case, it’s more about forward guidance than results. Taking that into account, I think Arista CEO Jayshree Ullal will provide solid guidance for the current quarter as the company continues to benefit from growing demand for its suite of cloud-based networking products and data center solutions.
The company has been successful in leveraging AI to improve its networking offering, with a particular emphasis on automation and optimization.
Source: Investing.com
ANET stock ended Friday at $394.17, not far from its recent high of $422.73 on Oct. 14. Shares are up 64.7% this year. At current levels, the Santa Clara, California-based tech company has a market capitalization of $123.8 billion.
As InvestingPro notes, Arista Networks scores a near-perfect Financial Health score thanks to its compelling earnings and revenue growth trajectory, robust cash flow, and impeccable balance sheet.
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CVS Health, on the other hand, faces significant hurdles. Challenges in the retail and healthcare segments, coupled with rising operating costs, have hampered CVS’s profitability, raising concerns about its future prospects.
The retail and healthcare giant, which will report its third-quarter earnings results before the market opens at 6:30 a.m. ET on Wednesday, has recently seen analyst sentiment turn bearish.
All fourteen analysts surveyed by InvestingPro have lowered their earnings expectations, predicting a 30% decline from initial estimates.
According to the options market, traders are pricing in a swing of about 7% in either direction for CVS stock after the IPO.
Source: InvestingPro
Wall Street expects the drugstore chain and pharmacy services provider to earn $1.53 per share, down 30.8% from per-share earnings of $2.21 in the same period last year, amid higher cost pressures and declining operating margins . Meanwhile, revenue is expected to rise 3.1% year-on-year to $92.7 billion.
Adding to the problems, CVS is expected to provide soft guidance as it struggles to adapt to the rising popularity of online pharmacies and direct-to-consumer platforms.
Given the challenges it faces in a competitive market and the sharp downward revisions to earnings estimates, CVS could be a stock to approach cautiously this week.
Source: Investing.com
Shares closed Friday’s session at $55.81, their lowest closing price since May 29. CVS is down -29.3% in 2024. At its current valuation, the Woonsocket, Rhode Island-based healthcare specialist has a market capitalization of $70.2 billion.
It’s worth noting that CVS shares are overvalued in the earnings report according to the AI-assisted valuation models in InvestingPro, and could see a potential downside of -8.3% at a ‘Fair Value’ price of $51.19 per share.
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Revelation:As of this writing, I am long the S&P 500 and the Nasdaq 100 through the SPDR® S&P 500 ETF and the Invesco QQQ Trust ETF. I am also long the Technology Select Sector SPDR ETF (NYSE:XLK).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessments of both the macroeconomic environment and companies’ financial condition.
The views expressed in this article are solely the opinions of the author and should not be construed as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.
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