Weekly Market Preview: Four Stocks To Watch For the Coming Week 2-17-19 (CVS, DPZ, IQ, DBX)
The market surged on Friday, driven by renewed optimism that when the March 1 deadline comes around, the U.S. and China would have already shaken hands on a trade truce. Tariff-related rhetoric and thoughts of an economic slowdown had become a restraint, particularly amid the recent market rebound. Was it a “head fake,” as some have wondered? There are now reasons to believe the worst could finally be over.
On Friday the Dow Jones Industrial Average rose more than 450 points, closing up 1.7%, booking its eighth consecutive weekly gain. You would have to go all the way back to Nov. 3, 2017 to find the last time the blue-chip index had such a streak. The S&P 500 SPX rose 1.1%, while the Nasdaq Composite — posted its eighth consecutive weekly gain — rose 0.6%. For the week, each of the indexes added at least 2.4%, led by the Dow’s 3.1% gain.
The reasons for these outsized gains has been the plethora of not only positive earnings that have been reported so far, but also the implied confidence in the guidance for 2019. Next week will also be a strong gauge on consumer confidence when Walmart (WMT) reports its results for the holiday quarter. What the company says on Feb 19 could have major implications on rivals Target (TGT) and Costco (COST). Here are a few more stocks to keep an eye on.
CVS Health (CVS) – Reports after the close, Tuesday, Feb. 19
Wall Street expects CVS to earn $2.05 per share on revenue of $54.58 billion. This compares to the year-ago quarter when earnings came to $1.92 per share on revenue of $48.38 billion.
What to Watch: CVS has major ambitions in 2019, focusing on a strategy of expanding beyond its retail pharmacy operations and to become a healthcare services company and pharmacy benefit manager. In an effort to expand its customer base, management has made it clear that the company’s Health’s specialty business is its top priority. With the addition of Aetna starting in 2019, investors are looking for increased profitability, despite the merger risks. Aside from an opportunity to differentiate itself from its peers, the Aetna deal will position CVS for long-term growth as it benefits from drug price inflation and new product launches.
Dominos Pizza (DPZ) – Reports after the close, Wednesday, Feb. 20
Wall Street expects Dominos to earn $2.69 per share on revenue of $1.09 billion. This compares to the year-ago quarter when earnings came to $2.09 per share on revenue of $891.51 million.
What to Watch: After several years of breathtaking growth, driven by expanding store counts, increased market share and strong same-store sales growth, investors are starting to see some deceleration in Dominos’ growth metrics. In the last quarter, U.S. same store sales grew 6.3%, while international restaurants grew just 3.3%. And that’s not what the pizza chain wants to project at a time when its stock is trading some 20% higher than its historical P/E norms. On Wednesday the management will need to convince the Street they still have the right recipe to deliver where it matters the most.
iQiyi (IQ) – Reports after the close, Thursday, Feb. 21
Wall Street expects iQiyi to post a per-share loss of 65 cents per share on revenue of $982.51 million.
What to Watch: Often referred to as the “Netflix of China,” iQiyi has begun to trade like its U.S. rival. The leading streaming player in China, iQiyi has already made a name for itself by capturing billions of eyeballs in the world’s most populous country. But it has fallen victim to the U.S./China trade war spat. The stock, currently trading around $21, is well off its post-IPO price of $46. Investors who have waited for a better entry point may want to consider the recent correction as a solid buying opportunity.
Dropbox (DBX) – Reports after the close, Thursday, Feb. 21
Wall Street expects Dropbox to earn 8 cents per share on revenue of $370.01 million. This compares to the previous quarter when earnings came to 11 cents per share on revenue of $360.3 million.
What to Watch: Dropbox announced last month it acquired HelloSign — an electronic signature and document workflow platform — for $230 million. With the deal, Dropbox, which makes money by selling cloud subscriptions to their product, is boosting its value proposition to its customer base, while differentiating itself from its competitors. In essence, the company is creating its self-described ‘Dropbox flywheel,’ which it believes creates network effects. On Thursday the company must convince analysts that it can quickly bring synergy to this deal.
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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