Weekly Market Preview: Five Stocks To Watch For the Coming Week (CRM, BOX, PANW, AMBA, HPQ)
It’s tough being an optimist in this market, where it seems few equities offer safe places to hide. Pressured yet again by a sustained decline in oil prices, equities closed firmly lower Friday as each of the three main benchmarks posted weekly declines of almost 4%.
The Dow Jones Industrial Average on Friday closed down 0.7% at 24,285, while the S&P 500 index ended the holiday-shortened session with a decline of 0.7% to 2,632. Notably, the S&P, which has decline 10% from its peak earlier in the year, is now in correction territory. The S&P joins the Nasdaq Composite Index, which was already in correction territory and extended its losses Friday down 0.5% at 6,938.
For the week, the Nasdaq lost 4.3%, the Dow ended lower by 4.4% lower, while the S&P 500 lost 3.8%. This marked the indexes worst-performing Thanksgiving trading week since 2011, according to Dow Jones Market Data. As bad as things might appear, I can’t envision a scenario — whether in three months, six months or a year from now — where equities are not higher from here.
The resolve of the optimist will be tested during that span, yes. But it won’t be in vain. Investors’ attention should remain on earnings, which have been — by and large — exceptional during the third quarter. While the number of companies still left to report is winding down, positive top- and bottom-line results and upward guidance should drive equities into the new year. As such, here are five stocks to keep an eye on:
Salesforce (CRM) – Reports after the close, Tuesday, Nov. 27
Wall Street expects Salesforce to earn 50 cents per share on revenue of $3.37 billion. This compares to the year-ago quarter when earnings came to 39 cents per share on revenue of $2.68 billion.
What to Watch: The cloud computing giant is broadly expected to report a top- and bottom-line beat Tuesday. However, the company’s outlook and its billings forecast will be the most closely watched aspects of the report. The stock has been under pressure recently, falling about 20% one the past three months. Investors have shifted their focus on the company’s tough comparisons from last year’s fourth quarter, making its commentary even more important. Not everyone is worried, however. Jefferies analyst John DiFucci, who has a Buy rating and a $189 price target on the stock, believes Salesforce’s Q4 billings outlook is “certainly achievable.” Investors hope he’ll be proved right.
Box (BOX) – Reports after the close, Wednesday, Nov. 28
Wall Street expects Box to post a per-share loss of 7 cents on revenue of $154.61 million. This compares to the year-ago quarter when the loss came to 13 cents per share on revenue of $129.3 million.
What to Watch: Can Box escape the shadows of its bigger competitors? The cloud content management company has been an intriguing name since its public debut in 2015. Since then the company has grown revenue at an impressive compound annual rate of 32%. But due to increasing competition, Box’s rate of growth has fallen off, reaching just 20% in the second quarter. And that’s despite strategic partnerships it has in placed with the likes of Microsoft (MSFT), IBM (IBM) and Google (GOOG , GOOGL), among other giants. The management has been investing in ways to grow and to continuously improve the platform. But with downbeat billings growth, there is now the fear of the company throwing good money after bad.
Palo Alto Networks (PANW) – Reports after the close, Thursday, Nov. 29
Wall Street expects Palo Alto Networks to earn $1.05 per share on revenue of $631.89 million. This compares to the year-ago quarter when earnings came to 74 cents per share on revenue of $505.5 million.
What to Watch: Has Palo Alto stock reached bottom? Amid the recent tech selloff, shares of the enterprise security specialist has fallen some 16% over the past thirty days. And Morgan Stanley analyst Keith Weiss believes now’s the time to buy. Citing the company’s relatively low valuation compared to the likes of Check Point (CHKP) and Fortinet (FTNT) within the firewall security market, Weiss, who rates the stock at Overweight with a $266 price target, contends Palo Alto has room for multiple expansion driven by potential to grow free-cash flow substantially. Weiss’ Price target assumed potential upside of 60% from Friday’s close.
Ambarella (AMBA) – Reports after the close, Thursday, Nov. 29
Wall Street expects Ambarella to earn 9 cents per share on revenue of $57.06 million. This compares to the year-ago quarter when earnings came to 75 cents per share on revenue of $89.1 million.
What to Watch: The recent selloff in semiconductor stocks, which has sunken the iShares PHLX Semiconductor ETF (SOXX) (down 15% in three months) due to the cyclical downturn in memory chips, has also punished Ambarella. But is the market overreacting and ignoring Ambarella’s business improvements? The company specializes on semiconductor chips that are low-powered and able to deliver high-definition and ultra HD video compression. While its ties to GoPro (GPRO) has hurt revenue growth, there are now signs that Ambarella is better diversifying its revenue stream and continues to decouple from GoPro.
Hewlett-Packard (HPQ) – Reports after the close, Thursday, Nov. 29
Wall Street expects Hewlett-Packard to earn 54 cents per share on revenue of $15.1 billion. This compares to the year-ago quarter when earnings came to 44 cents per share on revenue of $13.93 billion.
What to Watch: Major PC manufacturers have enjoyed a revival in PC sales, thanks to the steady rise in global PC shipments. And HP has been a beneficiary of this revival as the company saw its shipments rise for the tenth consecutive quarter, according to research firm IDC. With shipment growth of 0.3% in the third quarter, HP maintains its status as the world’s second-largest PC manufacturer, enjoying a global share of 22.8%, second only to China’s Lenovo’s (LNVGY), which commands a market share of 24%. The company on Thursday not only must show it can maintain its lead in the PC category, it can grow its profit margins.
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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