I see 2 big volatility events ahead of us in July that are powerful enough to move stocks. Get on the right side of these and there’s money to be made. Here’s how I handicap these two events.
As of June 3, FactSet reports, analysts had cut their earnings estimates during the first two months of the quarter for second quarter earnings by companies in the Standard & Poor’s 500 by 1.3% to $55.36 from $56.06. How significant is that? And what does it tell investors about the second quarter?
Neither company crushed Wall Street earnings expectations, but both reported good enough news in a very tough environment. I own PepsiCo in my long-term 50 Stocks Portfolio, where it was up 220.4% from my initial December 30, 2008 pick as of the close on April 26. I will add the stock to my 12-18 month Jubak Picks Portfolio tomorrow, April 27, with a target price of $190 a share. The stock pays a 2.47% dividend I own shares of Coca-Cola in my Jubak Picks Portfolio, where it was up 29.8% from my February 19, 2021 pick, and in my Dividend Portfolio, where it was up 41.75% from my May 1, 2020 pick. Tomorrow, April 27, I will add shares of Coca-Cola to my long-term 50 Stocks Portfolio. In addition I will raise the target price on Coca-Cola in my Jubak Picks Portfolio to $78 from the current $56 a share.
Going into this earnings season, the hope was that strong, surprisingly strong perhaps, earnings from the big growth stocks would put a stop to the selling. Earnings would be strong enough to convince investors that the market wasn’t over-valued since at these growth rates stocks would be seen to be quick growing into current extended valuations That hasn’t exactly worked so far. But this week the earnings story from growth stocks hits its stride. If the companies reporting this week can’t make the case for growth stock earnings, there probably isn’t a growth stock story to be made in the light of Federal Reserve interest rate increases, supply chain disruptions, and fears of a recession.
Shares of Netflix (NFLX), fell 25.73% today, April 19, in after-hours trading after the company announced first quarter earnings. (In regular trading the shares had gained 3.23%.) The stock was already down 42% for 2022 before today’s after-hours plunge. The bad news: In the first quarter of 2022 Netflix (NFLX) lost 200,000 subscribers. That was a bit short of the company’s guidance for the addition of 2.5 million subscribers for the quarter. And to put a cherry on top of the bad news in the company’s earnings report, Netflix forecast that it would lose another 2 million subscribers in the second quarter of 2022.
Just want to make sure that no one missed the sell recommendations in yesterday’s Saturday Night Quarterback post. Big banks will kick off another earnings season beginning with JPMorgan Chase (JPM) on Wednesday, April 13. Citigroup (C) and Wells Fargo (WFC) follow on April 14. Bank of America (BAC) reports on April 18. Bank earnings forecasts present a complicated picture for the quarter–which is only appropriate since that’s true of Standard & Poor’s 500 earnings forecasts as a whole.
Big banks will kick off another earnings season beginning with JPMorgan Chase (JPM) on Wednesday, April 13. Citigroup (C) and Wells Fargo (WFC) follow on April 14. Bank of America (BAC) reports on April 18. Bank earnings forecasts present a complicated picture for the quarter–which is only appropriate since that’s true of Standard & Poor’s 500 earnings forecasts as a whole.
The big excitement for earnings season is over. Lots of companies will report this coming week but no reports that will move markets like Amazon, Alphabet, Apple, Microsoft, and Facebook.In the absence off earnings excitement, financial markets will have plenty of time to fret about the March 16 Federal Reserve meeting and the likelihood that the central bank will raise niters rates.
I’m looking for a mixed bag of BIG TECH earnings from Alphabet (GOOG), Meta Platforms (FB), and Amazon (AMZN). Unless Meta Platforms and Amazon can deliver big earnings surprises, I don’t think these reports will lift the market appreciably. And the week will end with the January jobs report.
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My ninetieth YouTube video “3 Picks on Tech Stock Guidance” went up today.
As I noted in my latest YouTube video, selling has been concentrated in the highest PE stocks in the market. The top 10% of the stocks in the Russell 1000 index when ranked by Price to Earnings Ratio were down 7.8% for 2022 as of January 6, according to Goldman Sachs. Not that the rest of the stock market has been sending rose petals our way so far in 2022, but the Standard & Poor’s 500 Index was down just 1.8% for 2022 as of January 7. The NASDAQ 100 is down 4.8% for 2022 as of January 7–which speaks to the same point.So far, the selling is really a blip for most of the market. But it is serious for technology shares and especially high PE technology shares. So now the question is “Will the selling spread?”
This earnings season looks so tricky that I’m going to sit it out rather than attempt to leverage moves in the shares of reporting companies by purchasing either Call (a bet that the stock will go up) or Put (a bet that the stock will go down) options.
