Weekly Preview: Earnings to Watch This Week (BABA, MRNA, NIO, ROKU)

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

An important week in the second-quarter earnings season just concluded, where tech giants such as Tesla (TSLA), Google (GOOG , GOOGL), Apple (AAPL), Facebook (FB) and Microsoft (MSFT), among others, erased any doubt that they can maintain their level of dominance. And even though Amazon (AMZN) didn’t blow expectations away, its Q2 revenue grew 27% to $113.1 billion from $88.9 billion a year ago, while Q2 EPS surged 47% to $15.12 per share, up from $10.30 a year ago.

Nevertheless, Amazon’s Q2 revenue miss was partly blamed for why stocks closed lower on Friday. Amazon stock ended the session 7.5% lower, contributing to the 105.59 point decline in the Nasdaq Composite Index, which lost 0.7% to end Friday’s session at 14,672.68. After briefly netting an intraday high, the Dow Jones Industrial Average gave up 149.06 points, or 0.4% to close at 34,935.47. The S&P 500 index declined 23.89 points, or 0.5%, to close 4,395.26.

Aside from Amazon’s results, the declines — which also resulted in a weekly loss for all three averages — were driven by fears of rising cases of the delta variant of the coronavirus. But there’s also a glass-half-full way to look at things. Leading into the quarter, concerns were raised about not only how expensive and overbought these tech stocks were, but also that the re-opening of the economy would be somewhat “disruptive” to their businesses. That hasn’t been the case.

Instead, what we learned this week was that many (if not each) of these tech giants focused on doing what they are good at, enabling e-commerce, cloud-services and digital adoption. To be sure, it’s still early and there are still half of the earnings from S&P 500 companies still remain. But the upside guidance are encouraging. What’s more, the strong online advertising growth from Facebook, Google as well as Twitter (TWTR) and Snap (SNAP) suggests that consumer shift towards online shopping and other digital behaviors adopted at the peak of the pandemic are here to stay.

Will the strong growth trend continue throughout the entire Q2 earnings season? That remains to be seen. The median GDP growth forecast for the second quarter is expected to be 9.3%. As noted, the guidance issued by the companies that have reported thus far are not only supportive of higher valuations, but also provide optimism that Friday’s pullback in stocks might just be a temporary pause in a rally that still has many more peaks to reach by the end of this earnings season.

As for earnings, here are the stocks I’ll be watching this week.

Alibaba (BABA) - Reports before the open, Tuesday, Aug. 2

Wall Street expects Alibaba to earn $2.24 per share on revenue of $32.54 billion. This compares to the year-ago quarter when earnings came to $2.21 per share on revenue of $22.23 billion.

What to watch: Alibaba stock continues to trade at a discount despite the fact that the company has demonstrated high-growth, high-profitability characteristics that are consistent with its America FAANG peers which enjoy premium valuations. Shares have fallen more than 50% since the start of the year driven by a combination of factors. Aside from fears over the company’s corporate governance which has lead to regulatory inquiries, there’s increased concern that the company’s rocky political standing in China can impede its future growth. Is now a good time to buy? In Q4 its annual active consumers was 811 million, rising by 32 million on a year-over-year basis. Meanwhile, the company's mobile monthly active users reached 925 million in March, an increase of 23 million over December 2020. Investors want to know: What will it take to revive these shares? With the the stock currently trading at an all-time high low valuation, the company on Tuesday must give investors a reason to believe the stock has significantly more room to run and can remain on a sustained path to recovery.

Nio Limited (NIO) - Reports after the close, Tuesday, Aug. 2

Wall Street expects Nio to report a per-share loss of 11 cents on revenue of $1.28 billion. This compares to the year-ago quarter when it reported a per-share loss of 18 cents on revenue of $550.47 million.

What to watch: Shares of NIO have been under pressure over the past six months, falling more than 25% compared to the 19% rise in the S&P 500 index. This is even though the Chinese electric vehicle maker which is vying to become the next Tesla (TSLA), has posted quadruple-digit returns over the past year. What’s more, the company is no longer cash-strapped and has reported record deliveries in six consecutive months. But while there are no signs of slowing down, China’s increased regulatory environment becomes a risk to Nio’s massive growth rate. Analysts have grown more cautious about the overall valuations in the electric vehicle sector which could suffer if the China outlook worsens. For Nio, which sold 8,083 vehicles in June, marking an impressive growth of 116%, this still represent a small fraction of the 1.3 million electric vehicles sold in China in 2020. This means there is still market share to be had in China where EV sales continue to rise. On Tuesday the company can allay concerns about valuation by delivering a top- and bottom line beat, along with strong delivery guidance for the next quarter and full year.

Roku (ROKU) - Reports after the close, Wednesday, Aug. 3

Wall Street expects Roku to earn 12 cents per share on revenue of $618.54 million. This compares to the year-ago quarter when the company lost 35 cents per share on revenue of $315.43 million.

What to watch: Can Roku maintain its history growth rate? The digital media device manufacturer has benefited from video streaming industry which has grow at a breakneck pace over the past few years. And thanks to continued shift away from traditional media, the industry that spawned record number of new user sign-ups not only across services like Netflix (NFLX), but also Apple’s (AAPL) Apple TV+, Disney’s (DIS) Disney+ platform and Time Warner’s (TWX) HBO Max. Not only are these services benefiting Roku which sells streaming devices to customers, Roku is parlaying its platform growth in the realm of subscriptions and advertising dollars that are shifting from linear television to streaming. Analysts have applauded these moves which are aimed at unlocking years of consistent growth. The company’s 80% revenue growth last quarter and its 132% profit growth underscores the strength of its business. On Wednesday the company must do its part to demonstrate further value.

Moderna (MRNA) - Reports before the open, Thursday, Aug. 4

Wall Street expects Moderna to earn $6.04 per share on revenue of $4.28 billion. This compares to the year-ago quarter loss of 31 cents per share on $66.35 million in revenue.

What to watch: Investors who are looking for healthy returns have certainly flocked to Moderna. And it has paid off handsomely. With its rapidly produced and highly-effective coronavirus vaccine, Moderna stock has skyrocketed 231% year to date, crushing the 18% rise in the S&P 500 index. This has sent Moderna's valuation soaring near close to $130 billion, ranking it as one of the market’s largest biotech stocks. But while that valuation might appear stretched, the delta variant of the coronavirus continues to rise in several states. As such, the company’s revenue and estimates have also been climbing. Over the past thirty days the EPS estimate for the just-ended quarter has risen more than 4% to the to the current level of $6.01 per share, which reflects year-over-year growth of more than 2000%. Meanwhile, Q2 revenue is expected to be $4.29 billion, up 6368% from the year-ago quarter. In other words, there are tons of high expectations attached to MRNA stock, which some analysts sees could be worth north of $1 trillion by 2030. Investors are anxious to hear what the company has to say on Thursday about its growth expectations for both the near term and long term.

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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