Weekly Preview: Stocks To Watch (ATVI, BYND, DBX, DIS, ROKU)
Stocks rebounded on Friday from early declines, powered by Big Tech earnings from Apple (AAPL), Amazon (AMZN) and Facebook (FB) which combined boosted to the Nasdaq to a 1.5% gain. Overall, however, indexes struggled to muster any momentum as policymakers failed to shake hands on another coronavius aid package.
But realizing the impact of the blowout quarters from the aforementioned tech giants, investors capitulated as if to recognize “things can’t get any worse.” And, as I’ve been saying for a while now, the TINA factor will be at play for the foreseeable future. With interest rates at zero, where else, if not the stock market, can you get a decent return on your cash — if you can stomach the volatility and headlines risk.
The Dow Jones Industrial Average rose 114.67 points, or about 0.43%, to close the session at 26,428.32. Among the Dow’s biggest gainers were Apple which surged 10.5% higher. On Thursday the iPhone maker not only crushed Street profit expectations, it announced a 4-for-1 stock split that will take effect at the end of the month. While Apple’s “split decision” will alter the pecking order of the price-weighted Dow, it wasn’t entirely a surprise — it was something I predicted earlier this year. Apple’s rise offset Dow decliners Caterpillar (CAT) and Chevron (CVX) which both fell nearly 3%.
The S&P 500 index added 24.90 points to close at 3,271.12, while the tech-heavy Nasdaq Composite Index surged 1.5% to close at 10,745.27. For the week, the Dow was the only loser, declining or 0.2%, while S&P rose 1.7%. The Nasdaq was the biggest gainer, rising 3.7%. Can these gains hold into next week if there are no signs of progress that Congress and the White House can agree on the next round of the pandemic relief bill? This is even more pressing given that expanded unemployment benefits expired Friday.
Congressional leaders and the White House are said to be negotiating through the weekend, meaning that a deal is still possible in the coming the days. And with the country experiencing record deaths from COVID-19 in states like California, Texas, Florida and Arizona, it’s hard to fathom Washington, which has signaled that it will do whatever is necessary to support the economy, not doing the right thing. In the meantime here are the stocks I’ll be watching this week.
Activision Blizzard (ATVI) - Reports after the close, Tuesday, Aug. 4
Wall Street expects Activision to earn 68 cents per share on revenue of $1.7 billion. This compares to the year-ago quarter when earnings came to 38 cents per share on revenue of $1.21 billion.
What to watch: Activision, publisher of popular video games such as Hearthstone, Overwatch, World of Warcraft and Diablo franchises, is seen as one of the best ways to play this earnings season, particularly as COVID-19 cases in many states continue to rise. Citing positive data trends in the company's Blizzard segment, analysts at Wells Fargo recently reiterated its Overweight rating on ATVI stock, boosting their estimates over consensus. The bank boosted its price target on the stock to $92 from $84, implying 11% upside from current levels. Investors will nonetheless want the company to guide in a manner that supports Wells Fargo’s confidence.
Beyond Meat (BYND) - Reports after the close, Tuesday, Aug. 4
Wall Street expects Beyond Meat to lose 2 cents per share on revenue of $99.84 million. This compares to the year-ago quarter when it lost 24 cents per share on revenue of $67.25 million.
What to watch: Beyond Meat stock has lost some sizzle this past month, falling 6% due to valuation concerns and increased competition from Impossible Foods which last week announced that Walmart (WMT) is rolling out Impossible Burger not only at 2,100 stores, but also through Walmart's website and app. In the case of Beyond Meat, while the company has demonstrated accelerated growth over the past year, COVID-19 has disrupted one of its main revenue drivers, which is the restaurant industry. On Tuesday these two topics, along with the company’s guidance, will likely be the main focus on the conference call.
Disney (DIS) - Reports after the close, Tuesday, Aug. 4
Wall Street expects Disney to lose 64 cents per share on revenue of $12.39 billion. This compares to the year-ago quarter when earnings came to $1.35 per share on revenue of $20.25 billion.
What to watch: The main question heading into this quarter will be the progress of park re-openings. The company reopened Disney World to the public on July 12. Since then, COVID cases have consistently risen throughout the U.S. to record levels. The market, meanwhile, has had limited data regarding Disney’s various theme parks, namely ticket sales and customer traffic. The company’s resorts, hotels, theme parks and cruise ships make up Disney’s largest business segment, generating some $26 billion in revenue last year, or 32.5% of its consolidated total. On Tuesday investors will decide in growth in the streaming business, which is a loss-leader and isn’t expected to turn a profit until 2024, make up for any perceived disappointment in Disney’s other lagging segments.
Roku (ROKU) - Reports after the close, Wednesday, Aug. 5
Wall Street expects Roku to lose 51 cents per share on revenue of $312.46 million. This compares to the year-ago quarter when the company lost 8 cents per share on revenue of $250.1 million.
What to watch: Roku stock has been on fire, soaring some 33% over the past month. While there’s still some concern about Roku’s valuation, the company fits the textbook definition of a stay-at-home stock which the markets sees as gaining increased tailwinds as coronavirus cases continue to rise. Fundamentally, Roku’s ad-driven streaming business is poised to sustain its growth, even more so now that Apple’s (AAPL) Apple TV+ and Disney’s (DIS) Disney+, among others, are added to the company’s platform. Nonetheless, the company on Wednesday must allay concerns about its ad pricing power during which is believed to have had negative impact on Q2 results.
Dropbox (DBX) - Reports after the close, Thursday, Aug. 6
Wall Street expects Dropbox to earn 17 cents per share on revenue of $465.29 million. This compares to the year-ago quarter when earnings were 10 cents per share on revenue of $400.91 million.
What to watch: Can Dropbox continue to benefit from the work-from-home trend? That’s the main question investors will be focusing on. The document storage and cloud company has delivered nine straight quarters of top- and bottom-line beats and has already established on strong track record for execution. And despite its strong position in home-work economy, Dropbox has been largely ignored compared to high-flyers such as Zoom Video (ZM), Shopify (SHOP), Peloton (PTON), Twilio (TWLO) and the rest of the so-called “stay-at-home” stocks which have dominated the market. On Thursday the company must demonstrate that it can monetize its user base to sustain long-term profitability.