• CPI inflation, producer prices and the latest earnings batch will be in focus this week.
• Oracle’s accelerating cloud business and bullish market sentiment make it a top pick to buy this week.
• AutoZone faces near-term challenges that warrant caution, making it a stock to sell this week.
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US stocks closed higher on Friday after the S&P 500 and Nasdaq Composite both ended at new records after the monthly jobs report left the door open for another Federal Reserve rate cut later this month.
This week, the Nasdaq rose 3.3% and the S&P 500 rose 1%, posting their third positive week in a row. The Dow Jones Industrial Average fell 0.6% despite hitting a new record high on Wednesday.
Source: Investing.com
The coming week is expected to be another eventful one as investors continue to gauge the outlook for the economy and interest rates. As of Sunday morning, investors see an 89% chance that the Fed will cut rates by 25 basis points at its December 18 meeting.
On the economic calendar, the US consumer price inflation report for November will be the most important on Wednesday. The annual CPI is expected to rise 2.7% year-over-year, up from October’s 2.6% increase. The CPI data will be accompanied by the release of the latest producer price figures, which will help complete the inflation picture.
Source: Investing.com
Elsewhere on the earnings list, only a handful of company results are expected, including Broadcom (NASDAQ:AVGO), Oracle (NYSE:ORCL), Adobe (NASDAQ:ADBE), MongoDB (NASDAQ:MDB), Costco (NASDAQ:COST), GameStop (NYSE:GME) and Macy’s (NYSE:M) as Wall Street’s reporting season comes to a close.
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, December 9 through Friday, December 13.
Oracle stands out as the top buy this week, with its highly anticipated earnings report set to be a major catalyst for the stock. The cloud and software leader is likely to deliver another quarter of positive top- and bottom-line growth and provide solid guidance thanks to the broad strength of its cloud infrastructure business.
Oracle is scheduled to release its fiscal second quarter update after the closing bell on Monday at 4:05 PM EST. A call with CEO Safra Catz and Chairman and Chief Technology Officer Larry Ellison is scheduled for 5:00 PM ET.
Market participants expect a significant swing in ORCL stock after the price falls, according to the options market, with a possible implied move of +/-8.7% in either direction.
Analyst sentiment is bullish, with ten upward revisions to Oracle’s earnings estimates in the past 90 days, further boosting confidence.
Source: InvestingPro
On Wall Street, the Austin, Texas-based database giant expects to earn $1.48 per share for the quarter ending in November, up 10.4% from the same period a year ago. Meanwhile, sales are expected to rise 9.3% annually to $14.1 billion.
The results would mark the second consecutive quarter of accelerating revenue growth, supported by increasing AI-driven demand for Oracle’s database solutions and cloud infrastructure services.
Oracle’s profits have historically led to notable swings in share prices, with shares rising 10% after its last earnings release in September. Data from InvestingPro indicates a favorable trend, with the cloud company experiencing a price increase following its last three earnings reports.
ORCL shares ended Friday’s session at $191.69, just below the Nov. 21 record high of $196.04. With a market capitalization of $531.2 billion, Oracle is one of the most valuable database software and cloud computing companies in the world.
Source: Investing.com
The stock is up more than 80% this year, its best annual performance since 1999.
It’s worth noting that Oracle has an above-average InvestingPro Financial Health Score of 2.8/5.0, which underlines its solid earnings outlook and robust profitability outlook. Additionally, it should be noted that the tech company has increased its annual dividend payout for eleven years in a row.
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AutoZone (NYSE:AZO), on the other hand, is facing increasing challenges. The auto parts retailer will release its first-quarter earnings report Tuesday morning at 6:55 a.m. ET, and analysts expect muted results.
According to the options market, traders are pricing in a +/-5.7% swing in either direction for AZO stock after the IPO.
Underscoring the various challenges facing AutoZone, all fourteen analysts surveyed by InvestingPro lowered their earnings estimates ahead of the report, to reflect a 7% decline from their initial expectations.
Source: InvestingPro
Wall Street expects earnings of $33.72 per share, a modest increase of 3.6% from $32.55 a year earlier. If confirmed, it would mark the second consecutive quarter of low single-digit earnings growth. Meanwhile, sales are expected to grow marginally by 2.4% to $4.3 billion, indicating cautious consumer spending and increasing competition.
Additionally, looming headwinds that threaten to squeeze AutoZone’s margins are dampening sentiment amid concerns that the new Trump administration will impose high tariffs as the company imports goods and parts from China.
As such, AutoZone’s prospects are likely to disappoint investors due to the current macroeconomic environment.
AZO stock closed at a new all-time high of $3,309.44 on Friday, surpassing the previous high of $3,256 set on March 22. At current valuations, AutoZone has a market capitalization of $56 billion, making it the second-largest auto parts retailer in the world. the country, behind O’Reilly Automotive.
It should be noted that its valuation is still high compared to peers, and short-term pressures may limit its upside potential. The average fair value for AZO is $2,973.63, a potential downside of -10.1% from current levels.
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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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