The Zacks Analyst Blog Highlights: Microsoft, Amazon, Nvidia, Salesforce and Nike
For Immediate Release
Chicago, IL – October 27, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Microsoft Corporation MSFT, Amazon.com, Inc. AMZN, NVIDIA Corporation NVDA, salesforce.com, inc. CRM and NIKE, Inc. NKE.
Here are highlights from Monday’s Analyst Blog:
A Peak Week for S&P 500 Earnings: Global Week Ahead
In the Global Week Ahead, more critical Q3 earnings reports come out.
In fact, more than 1/3 of the S&P 500 components, or 186 companies, are set to report Q3 results.
Undoubtedly, the peak S&P 500 company reporting day will be Thursday. That day will show us AAPL, AMZN, FB, TWTR and GOOGL.
They report first. But “big banks” long ago ceded major share market interest to Big Tech.
Here is what I gathered--
(1) On Monday, 114 companies (including small, mid cap, and large cap names) report.
Focus list: TWLO, NXPI, SAP, BYND and PKG.
(2) On Tuesday, 165 companies report. I see lots of large cap pharma stocks, with important COVID-19 vaccine updates.
Focus list: MSFT, AMD, PFE, CAT, MRK, LLY, MMM, NVS, AKAM, IVZ, SHW and MKSI.
(3) On Wednesday, 270 companies report.
Focus list: GE, BA, V, F, MA, GILD, WDC, BX, AMGN, UPS and CME.
(4) On Thursday, 396 companies report. Let’s call this “mega-cap tech stock day.”
Focus list: AAPL, AMZN, FB, TWTR, GOOGL, SBUY, SHOP and ADM.
(5) On Friday, 58 companies report. This is a “big oil” day for reports.
Focus list: ABBV, XOM, CVX, PSX, SHLX.
Zacks Research Director Sheraz Mian posted key Q3 earnings notes last Friday —
The [share returns] performance variance between the Zacks Tech sector and the broader index (+27% vs. +7.4%) is very clear. Microsoft and Amazon are doing significantly better.
These five companies (FB, AMZN, AAPL, GOOGL, MSFT) combined now account for 17.4% of the total market capitalization of the S&P 500 index. They are over half of the Zacks Tech sector’s weight in the index at 32%, and above the other 15 Zacks sectors, including Zacks Finance at 12.1%.
Take a look at the pandemic-affected numbers for the current year on the group. In 2020, those five companies likely grow EPS +7.5%. Revenue could grow +12.5%. Now, look ahead. In 2021, the five firms could do +23.6% EPS growth and +16.9% revenue growth.
Contrast this with total earnings for the S&P 500 index. Those broad EPS numbers are on track to decline -19.5% on -4.5% lower revenue growth this year.
In other words, the market likes the big five tech group’s highly visible and far less risky growth profile.
Finally, as of Friday Oct. 23rd, we now have Q3 results from 135 S&P 500 members or 27% of the index’s total membership.
· - Total earnings (computed as aggregate net income) for these 135 companies are down -15.5% from the same period last year on -5.2% lower revenues.
· - 85.2% beat EPS estimates and 79.3% beat revenue estimates.
· - Incorporating the Big 5 Tech players, expect total Q3 earnings for the Zacks Tech sector — as a whole — to be down -3.2% from the same period last year, on +4.6% higher revenues.
Those numbers show stock traders significantly better underlying fundamentals too.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Bitcoin Is Rallying
Bitcoin's back in the limelight.
The original crypto had soared around +75% this year as investors bet on its purported inflation-busting qualities and reputation for swift gains.
On Wednesday, it hit its highest since July 2019 on news PayPal will open its network up to cryptocurrencies. That's a big breakthrough for bitcoin, crypto fans say — the embrace of the payments heavyweight may herald wider use.
But it’s moot whether PayPal’s gambit will help long-term. Bitcoin has enjoyed similar boosts in the past, then lost steam. In eight days last year, it rallied over 50% after Facebook disclosed its still-to-be-launched Libra token — before slumping 35% in a month.
Will this time be different?
(2) European Banks Report Earnings: Key Indicator of Europe’s Financial Health (Or Lack Thereof)
Europe’s banks, whose shares have been bouncing round record lows, are on a mission to reinstate dividend payments to attract investors back.
Healthier lenders had been a reliable source of shareholder payments — until the ECB and Bank of England put the kibosh on it. Both are due to review their bans in the coming months.
UBS, which was only forced to stagger its dividends, this week promised $2.5 billion of shareholder returns next year. Santander will ask shareholders next week to approve a 2021 cash dividend.
With HSBC, Credit Suisse, Lloyds, Natwest and BBVA to report results in coming days, investors will look closely at what kind of paybacks are on offer.
(3) U.S. Presidential Election Almost Here
The last week of the 2020 U.S. presidential election race will test the durability of the Biden trade — assets viewed as sensitive to the political fortunes of Democratic challenger Joe Biden, who has widened his lead over President Donald Trump in recent weeks.
Signs that Biden is cruising to a strong finish could benefit alternative energy, cyclical stocks and cannabis firms. The Invesco Solar ETF, for example, is up 10% this month on hopes of a potential Democratic sweep.
But a comeback in the polls by Trump could lift conventional energy companies and tech stocks, which would take an earnings hit from Biden’s proposed tax hikes.
(4) China’s Communist Party Leaders Meet in Beijing
China’s Communist Party leaders meet in Beijing Oct. 26-29 to settle on the next five-year economic plan.
The conclave is a closed-door affair, but it is clear that shifts are afoot.
Sources suspect China is poised to lower its growth targets. Goldman Sachs says there may not be a target at all; China has already done away with one for 2020.
Commodity traders reckon trade tensions might drive plans for stockpiling, especially on materials where China lacks local supply, such as copper.
Yet markets are priced for optimism, as investors bet that whatever China’s policy settings, they are unlikely to be as accommodative as the United States.
That means the yawning U.S.-China yield gap stays wide and the yuan remains strong.
(5) The European Central Bank Meets on Thursday
The European Central Bank meets Thursday and there’s one key question for markets — will the ECB deliver more stimulus in December?
There’s no imminent pressure to act since emergency stimulus was ramped up not long ago. But the case for more action is getting stronger by the day as a second wave of COVID-19 inflicts new restrictions and economic pain.
Many economists expect the ECB to ramp up quantitative easing in December when its latest forecasts are due. Preliminary October euro zone inflation data next week may also guide investors. Any signals from the ECB that the outlook has deteriorated would reinforce the case for a December stimulus package — an early Christmas gift to markets perhaps.
Top Zacks #1 Rank (STRONG BUY) Stocks
Nvidia: This darling semi chip stock is on top of our #1 list this week. The market cap is a stunning $329.7B when the share price is $534. I see a Zacks Value score of F, a Zacks Growth score of C, and a Zacks Momentum score of B. Be wary.
Salesforce: Another tech darling. The market cap is $227.2B when the share price is $250. I see a Zacks Value score of F, a Zacks Growth score of D, and a Zacks Momentum score of F. Again. Be wary.
Nike: Yep. This is the ticker for the athletic shoe company. This is a whopping $204.1B market cap stock when the share price is $130. I see a Zacks Value score of F, a Zacks Growth score of D, and a Zacks Momentum score of C.
Summary: The good news is all priced in -- when the Zacks Value score is F.
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