Weekly Preview: Earnings to Watch This Week 10-30-22 (AMD, ABNB, PTON, ROKU)

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Credit: Andrew Kelly - Reuters / stock.adobe.com

If judging by this week’s price movement in stocks, maybe things aren’t as bad as feared. By “things” I’m referring to corporate revenue, profits and the all-important forward guidance. In total, it appears “less bad” continues to be just good enough.” This has been the theme of the third-quarter earnings season so far, particularly on the heels of an important week which just concluded, where tech giants such as Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Google parent Alphabet (GOOG , GOOGL) and Microsoft (MSFT), among others, reported their results.

Their numbers as a collective suggested that economic conditions are not as bad as feared. The results from Intel (INTC), which boosted the stock more than 10%, were also encouraging signs that the worst might now actually be behind us. Overall, it has been a mixed bag so far. For some investors, this scenario between good and bad has created some buying opportunities. For others, the outlook remains too muddied to buy any dip during this selloff. Speaking of "selloff," is that still a thing?

This week’s stock market performance suggests the bottom is now in, capped off by a strong boost on Friday. The Dow Jones Industrial Average continued its rally, rising 828.52 points, or 2.59%, to end the session at 32,861.80. The S&P 500 rose 93.76 points, or 2.46%, finishing at 3,901.06, while the tech-heavy Nasdaq Composite added 309.78 points, or 2.87%, to close at 11,102.45. Aside from the aforementioned Intel, and its 10% gain, the Nasdaq was powered by strong gains in Apple (up 7.56%) and Nvidia (NVDA) which gained 5%. Microsoft and AMD (AMD) were also dominant, rising 4.02% and 5.82%, respectively.

Although still early with more than half of earnings season remaining, investors are more confident about the direction of the economy and the impact monetary policy decisions will have. Plus, the forward guidance that companies have provided so far suggests rising inflation and rising interest rates are manageable, particularly as we head into the all-important holiday shopping season. Will the rally continue? Here are the earnings I’ll be watching this week.

Advanced Micro Devices (AMD) - Reports after the close, Tuesday, Nov. 1

Wall Street expects AMD to earn 72 cents per share on revenue of $5.69 billion. This compares to the year-ago quarter when earning were 73 cents per share on $4.31 billion in revenue.

What to watch: Despite consistent headwinds with chip supply chain challenges, AMD continues to deliver strong operating results, while taking market share from rivals such as Intel (INTC). However, the company recently released a set of preliminary Q3 numbers that weren't as prolific as the market would have liked. In the press release, the company highlighted the decline in average selling prices had an effect of $160 million worth of a one-time inventory charges. Overall, the numbers suggests plenty of uncertainty still remain about the sales trends for the fourth quarter and beyond. This has been the trend in recent quarters as the company navigates various headwinds related to supply chains, declining PC demand and inflationary impacts on its high-margin enterprise business. AMD has felt these pressures over the past several months as the stock has fallen some 60% year to date, trailing the 20% decline in the S&P 500 index. Over the trailing twelve months, shares have suffered declines of more than 52%, while the S&P 500 index has fallen just 16%. However, the decline in the stock during that span comes even as the company still managed to surpass both revenue and profit estimates in twelve straight quarters. Assuming the company’s growth metrics remains intact in Q3 and upward guidance for Q4, this would present a great buying opportunity for AMD stock.

Airbnb (ABNB) - Reports after the close, Tuesday, Nov. 1

Wall Street expects Airbnb to earn $1.55 per share on revenue of $2.85 billion. This compares to the previous quarter when earnings were $1.22 per share on revenue of $2.24 billion.

What to watch: There’s no question that when we talk about a category-defining leader in the travel industry, and the home-sharing market in particular, Airbnb is often the name that comes to mind. But the company hasn’t been immune to the plight of the overall industry which, in many ways, is still recovering from the pandemic. Airbnb stock has fallen 26% over the past six months, compared to 9% decline for the S&P 500 index. And on a year-to-date basis, the stock has suffered a 33% decline, while the S&P 500 has fallen 20%. But despite the decline in share price, and decent (not solid) Q2 earnings, Airbnb has an attractive business model and competitive strengths that are superior to its rivals. Aside from several powerful economic moats, including a network effect that rivals any business, the company's global brand recognition gives it the sort of pricing power that’s tough to compete with. Currently, the company’s gross bookings metric, which is often an early indicator for future revenues, is the main driver of the stock. Gross bookings is the dollar value of bookings on the platform. It includes the portion paid to the host as well as service fees, cleaning fees, and taxes, net of cancellations and alterations. If Airbnb can produce better-than 20% bookings growth for the just-ended quarter, the shares are poised to rebound toward the $150 level. Airbnb on Tuesday also need to deliver strong revenue guidance for the holiday quarter and full year.

Roku (ROKU) - Reports after the close, Wednesday, Nov. 2

Wall Street expects Roku to lose $1.21 per share on revenue of $696.04 million. This compares to the year-ago quarter when earnings came to 48 cents per share on revenue of $679.95 million.

What to watch: Is now a good time to buy Roku stock? Shares of the video streaming specialist have struggled over the past several weeks, losing some 34% and 40% of their value in the respective three months and six months. When factoring a drop of 11% in the past thirty days, the stock has lost 77% year to date, trailing the 20% decline in the S&P 500 index. But after a brutal beating over the past fifteen months, during which the stock has lost 90% of its value, now could be a good time to bet on a recovery. The company recently launched wireless smart cameras to complement and tie into TV set-top boxes and internet connected devices. The company began selling the cameras exclusively at Walmart (WMT) for as low as $27 each. Roku also offers annual cloud storage plans that start at $30 per camera. Whether on the tv screen or smartphone, consumers will now have the ability to switch between streaming entertainment content or the images on their cameras through the Roku device. For added convenience, the company says that user can also speak into the Roku TV remote to view different cameras, and to change lighting, or power an appliance. The voice commands also supports Google Assistant or Amazon Alexa. The company aims to be more integrated into the home, thereby making its product much tougher to separate from. Given these new initiatives, Roku stock appears more appealing on this recent drop. On Wednesday the company must do its part to demonstrate that value.

Peloton Interactive (PTON) - Reports before the open, Thursday, Nov. 3

Wall Street expects Peloton to lose 67 cents per share on revenue of $637.03 million. This compares to the year-ago quarter when the loss was $1.10 per share on revenue of $805.2 million.

What to watch: The quarterly losses, declining revenue and a debt burden have been the reasons for Peloton’s struggle. Aside from waning consumer demand, which has come to a crawl after the pandemic, the company has also been hurt from some negative headlines. But it’s hard to remain pessimistic about the company’s ability to turn things around. After such a drastic fall, all of the bad news is now priced into the stock. The management has outlined ways to turn things around: Aside from plans to boost revenue by renting certain products, the company has recently struck a deal with Amazon (AMZN) to sell its product on its platform. What’s more, the company is also experimenting with "Fitness as a Service," which it hopes can get more people excited about the products, as well as price increases on selects items such as the Bike+ and Tread products to boost its profit margins. On Thursday the company must talk about how these initiatives can boost engagement and lead to expanding gross margins and free cash flow in the quarters ahead.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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