Weekly Preview: Earnings to Watch This Week (MU, WBA)

Wall Street - Scott Eels, Bloomberg
Credit: Scott Eells/Bloomberg

When assessing the recent price movements and massive gains in both individual stocks and in the overall market, it seems the pessimism that dominated the past three months has given way to euphoria as evidenced by the recent market highs.

With inflationary pressures still in the mix, the question is: How long will this euphoria last? And will the back-and-forth trading between “price” and “value" resume their fight? These questions will be answered in due time with second quarter earnings season right around the corner. For now, investors seem content with celebrating strong economic data combined with bullishness surrounding the infrastructure spending agreement which pushed the market to all-time highs.

On Friday the Dow Jones Industrial Average rose 237.02 points, or 0.69% to close at 34,433.84. The Blue Chip index was powered by Nike (NKE) which surged 15.53% after reporting strong earnings on Thursday. Gains in IBM (IBM), Home Depot (HD) and JPMorgan Chase (JPM) also powered the Dow. The S&P 500 index, which rose to another record Friday, ended 14.21 points higher, or 0.33%, to close at 4,280.70, while the tech-heavy Nasdaq Composite lost 0.93 points, or 0.06% to end the session at 14,360.39.

Despite ending the session on a downbeat note, the Nasdaq on on Thursday logged its 17th record close of the year, thanks to strong recovery is work-from-home (WFH) stocks such as Zoom Video (ZM), CrowdStrike (CRWD) and DocuSign (DOCU). But it wasn’t just WFH that powered techs higher. With strong weekly gains in Microsoft (MSFT) (up 2.15%), Tesla (TSLA) (up 7.8%) and Apple (AAPL) (2.03%) the Nasdaq ended higher by 2.4% for the week. The Dow which added 3.4%, marking its best weekly rise since March 12, was the strongest performer, while the S&P 500 rose 2.7%, its largest weekly gain since Feb. 5.

As I’ve mentioned in previous posts, after the recent volatility we have seen in tech stocks, the market appears tempted to want to move higher. While concerns surrounding inflation and rising bond yields can re-emerge as a legitimate threat that can spark a selloff, staying invested remains the best way to realize a decent return. And the fact that the major averages are now trading at all-time highs, validates that belief. What’s more, when factoring the improving employment data and the pent-up demand for products and services as the economy continues to reopen, there are still tons of reasons to be confident in the market.

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

Micron (MU) - Reports after the close, Wednesday, Jun. 30

Wall Street expects Micron to earn $1.70 per share on revenue of $7.21 billion. This compares to the year-ago quarter when earnings came to 82 cents per share on revenue of $5.31 billion.

What to watch: While Micron stock has been one of the better performers in the chip sector amid the chip-shortage issue, the shares have pulled back underperformed the S&P 500 index year to date, rising just 7% against a 14% rise for the S&P 500 index. The shares have also trailed the S&P 500 over the past six months and thirty days. Demand disruptions caused by the pandemic, namely Micron’s NAND and DRAM (used in various mobile devices such as smartphones), have taken a toll. But now might be a good time to expect an upward surge. The company should benefit from improving trends in the DRAM market (accounted for 70% of total enterprise Q2 revenues) and the expanding profit margins. Not only is Micron expected to beat its own revenue and profit forecast for the just-ended quarter, estimates suggests DRAM can account for closer to 80% of Micron's total fiscal-year revenues. The market is also seemingly optimistic about demand prospects of memory chips that will power cloud computing, AI, and 5G. As such, on Wednesday Micron will need to issue guidance that firmly points to the confidence it has in the memory chip business.

Walgreens (WBA) - Reports before the open, Thursday, Jul. 1

Wall Street expects Walgreens to earn $1.17 per share on revenue of $33.76 billion. This compares to the year-ago quarter when earnings came to 71 cents per share on $34.63 billion in revenue.

What to watch: Investors who are looking for healthy returns have certainly flocked to Walgreens. Operating more than 9,000 retail locations across America, Puerto Rico and the U.S. Virgin Islands, Walgreens shares have been one of the better-performers in the retail sector, rising 31% year to date, besting the 13% rise in the S&P 500 index. The company has played an important role in the country’s Covid vaccination efforts from Johnson & Johnson (JNJ), Moderna (MRNA) and Pfizer (PFE) and has supported vaccinations across all fifty states and jurisdictions as part of the Federal Retail Pharmacy Program. And given that the total number of vaccinated adults in the United States have increased from 49.77 million to 167.734 million (almost 240% rise), Walgreens stands to benefit immensely from the increasing foot traffic which is likely to lead not only to higher sale, but also stronger profit margins. On Thursday investors will look for Walgreens to provide additional doses of strong execution.

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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