-
Retail sales, Fed speakers, Q3 earnings will be the focus this week.
-
Netflix is a buy with positive earnings and subscriber growth expected.
-
Walgreens Boots Alliance is a sales with earnings shortfalls, guidance on deck.
-
Looking for more actionable trading ideas to navigate today’s market volatility? Unlock access to InvestingPro for less than $8 per month!
U.S. stocks closed higher on Friday, capping off their fifth straight winning week, as investors digested the first set of third-quarter earnings results and continued to assess the Federal Reserve’s interest rate plans for the coming months.
For the week, the benchmark S&P 500 and blue chip Dow Jones Industrial Average rose 1.1% and 1.2%, respectively. Both averages reached new all-time highs and closed at records. The technology-heavy Nasdaq Composite recorded a plus of 1.1%.
Source: Investing.com
The upcoming holiday-shortened week – in which the U.S. stock market will be closed on Monday in honor of Columbus Day – is expected to be another busy one as investors assess the outlook for the economy, interest rates and corporate earnings.
The biggest item on the economic calendar will be Thursday’s US retail sales report for September, with economists estimating an overall increase of 0.3% after sales rose 0.1% the month before.
Source: Investing.com
That will be accompanied by a large list of Fed speakers, including district governors Neel Kashkari, Christopher Waller, Mary Daly and Adriana Kugler all set to make public appearances.
According to Investing.com’s Fed Monitor Tool, as of Sunday morning, investors see an 86% chance that the Fed will cut rates by 25 basis points at its Nov. 7 policy meeting, and a 14% chance that no action will be taken.
Meanwhile, third-quarter earnings season is kicking into high gear, with Netflix (NASDAQ:NFLX) leading the way. Other high-profile companies reporting include Bank of America (NYSE:BAC), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), American Express (NYSE:AXP), Johnson & Johnson ( NYSE:JNJ), UnitedHealth (NYSE:UNH), Procter & Gamble (NYSE:PG), Walgreens Boots Alliance (NASDAQ:WBA), United Airlines (NASDAQ:UAL), ASML (AS:ASML) and Taiwan Semiconductor (NYSE: TSM).
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. However, remember that is my time frame just now for the coming week, Monday October 14 to Friday October 18.
Stocks to buy: Netflix
I foresee another strong performance for Netflix stock this week, as the streaming giant’s third-quarter earnings report will easily beat estimates thanks to favorable consumer demand trends and improving fundamental prospects.
The Los Gatos, California-based internet television network is expected to release its Q3 update after the US market closes at 4pm ET on Thursday. A call with co-CEOs Ted Sarandos and Greg Peters is scheduled for 5:00 PM ET.
Market participants expect a significant swing in NFLX stock after the price drops, with a possible implied move of 7.9% in either direction, according to the options market.
Earnings estimates have been revised upwards 29 times in the past 90 days, reflecting growing confidence among analysts. Only two downward revisions were noted, underscoring Wall Street’s bullish sentiment toward Netflix.
The company’s recent cost-cutting measures, along with its ability to drive subscriber growth, have positioned the company as a dominant player in the streaming space.
Source: InvestingPro
Netflix is expected to earn $4.53 per share, up 37% from earnings per share of $3.11 in the same period a year ago. Meanwhile, revenue is expected to rise 14.3% year-over-year to $9.76 billion.
If confirmed, it would represent the highest quarterly revenue in Netflix’s 27-year history, driven by strong demand for the cheaper, ad-supported tier and the company’s continued crackdown on password sharing, a move that prompted more users to sign up. for their own accounts.
As such, I think Netflix will maintain its solid pace of new Internet streaming subscriber additions and easily surpass Wall Street estimates of approximately 4.2 million new global subscribers in the third quarter.
NFLX stock hit a new all-time high of $736 on Friday before closing at $722.79. At current levels, Netflix has a market cap of $310.2 billion.
Source: Investing.com
Shares are up 48.4% so far this year.
InvestingPro highlights Netflix’s promising prospects and highlights its favorable positioning in the streaming industry, which has allowed the company to leverage a resilient business model and strong earnings growth.
Make sure you visit InvestingPro to stay informed about the market trend and what it means for your trading. Register now with one excluding 10% discount and position your portfolio one step ahead of everyone else!
Stocks to sell: Walgreens Boots Alliance
By contrast, Walgreens Boots Alliance will deliver a disappointing earnings report when it updates investors on its fiscal fourth quarter before the market opens at 7 a.m. ET on Tuesday.
The pharmacy giant is struggling to cope with a challenging macroeconomic environment, and the outlook for the stock remains bleak.
According to the options market, traders are pricing in a swing of about 7.5% in either direction for Walgreens stock after the IPO.
According to data from InvestingPro, earnings have been the catalyst for outsized swings in share prices this year, with WBA falling as much as 22.7% when the company last reported quarterly earnings in late June.
Analysts expect a sharp decline in earnings, with forecasts calling for a decline of around 53% compared to initial estimates from 90 days ago. This significant downgrade reflects the numerous challenges Walgreens faces, including weaker consumer demand, rising labor costs and persistent inflationary pressures.
Source: InvestingPro
Wall Street expects Walgreens to earn $0.36 per share, compared with earnings per share of $0.67 in the same period last year, amid higher cost pressures and declining operating margins.
Meanwhile, sales are expected to rise 0.4% year-on-year to $35.55 billion as sales face low consumer spending due to the challenging retail environment.
Adding to the problems, Walgreens is expected to provide soft guidance for the coming fiscal year as it struggles to adapt to the rising popularity of online pharmacies and direct-to-consumer platforms, both of which are seen as threats to its business from Walgreens.
WBA shares closed Friday at $9.21, not far from a recent low of $8.22, which was the weakest level since September 1996. At its current valuation, the Deerfield, Illinois-based retail drugstore chain and pharmacy services provider has a market cap of $ 7.9 billion.
Source: Investing.com
The shares – which were dropped from the Dow Jones Industrial Average earlier this year – are down 64.7% in 2024.
Not surprisingly, Walgreens has a below-average InvestingPro ‘Financial Health’ score of 1.8 out of 5.0 due to concerns about its weak profitability prospects and significant debt burden.
Whether you are a novice investor or a seasoned trader, using InvestingPro can unlock a world of investment opportunities while minimizing risk in the challenging market environment.
Register now and receive an additional 10% off the final price and unlock instant access to several market-beating features, including:
-
AI ProPicks: AI-selected stock winners with proven track record.
-
InvestingPro fair value: Discover immediately whether a share is too expensive or overvalued.
-
Advanced stock screener: Search for the best stocks based on hundreds of selected filters and criteria.
-
Top ideas: See what stocks billionaire investors like Warren Buffett, Michael Burry and George Soros are buying.
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.
Related articles
1 share to buy, 1 share to sell this week: Netflix, Walgreens
Prophets of doom are like broken clocks: sometimes correct, but usually useless
Domino’s Pizza Stock Delivers Results: A Good Buy for Growth Investors
