- U.S. PCE Inflation, Q3 GDP, Powell speech will be in focus this week.
- CrowdStrike is a buy with explosive earnings and sales growth expected.
- Foot Locker is a sell with weak earnings and disappointing guidance on deck.
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Stocks on Wall Street closed mostly higher on Friday to notch another winning week on growing expectations the Federal Reserve is done with raising interest rates and could start cutting them next year.
All three indexes notched their fourth consecutive positive week, the longest for the S&P 500 and Nasdaq since June.
The major indexes have had a huge November so far, with the Dow up 7.1%, the S&P 500 up 8.7% and the Nasdaq up 10.9%.
The week ahead is expected to be another eventful one as the calendar flips from November to December and investors continue to gauge the outlook for the economy, inflation, and interest rates.
Most important on the economic calendar will be the core personal consumption expenditures (PCE) price index, due on Thursday. In addition, there is also important third quarter GDP data due on Wednesday, which will provide more clues as to whether the economy is heading for recession.
In addition, investors will scrutinize a speech from Fed Chairman Jerome Powell, as well as comments from a handful of other Fed policymakers.
Elsewhere, some of the key earnings reports to watch include updates from Salesforce (NYSE: CRM ), CrowdStrike, Snowflake (NYSE: SNOW ), Zscaler (NASDAQ: ZS ), Ulta Beauty (NASDAQ: ULTA ), Dollar Tree (NASDAQ: DLTR ), and Foot Locker as Wall Street’s Q3 reporting season draws to a close.
Regardless of which direction the market goes, below I highlight one stock likely to be in demand and another which could see fresh downside. Remember though, my timeframe is just for the week ahead, Monday, November 27 - Friday, December 1.
Stock to Buy: CrowdStrike
After closing at a new 52-week high on Friday, I foresee another strong performance for CrowdStrike (NASDAQ: CRWD ) this week as the information security specialist’s latest earnings and outlook will easily top estimates due to favorable cybersecurity demand trends.
CrowdStrike is scheduled to deliver its third quarter update after the U.S. market closes on Tuesday at 4:05PM ET, and results are likely to have been boosted by the ongoing surge in cyber spending from corporations and governments around the world as they respond to growing digital security threats.
Market participants expect a sizable swing in CRWD stock following the print, as per the options market, with a possible implied move of roughly 8% in either direction. Shares rallied 11.1% after the company’s last earnings report in late August.
Not surprisingly, an InvestingPro survey of analyst earnings revisions points to mounting optimism ahead CrowdStrike’s Q3 print, as Wall Street grows increasingly bullish on the cybersecurity company. Profit estimates have been revised upward 38 times in the last 90 days, compared to zero downward revisions. Meanwhile, 49 out 51 analysts covering CRWD have either a ‘buy’ or ‘hold’-equivalent rating on the stock.
Consensus calls for the Austin, Texas-based security software company to report adjusted earnings per share of $0.74, jumping 85% from EPS of $0.40 in the year-ago period. Revenue is forecast to rise 35% annually to $777.4 million, reflecting growing demand for its cloud-based cybersecurity tools.
Looking ahead, I believe CrowdStrike’s guidance for the January 2024 full fiscal year will come in modestly above consensus as it remains well positioned to thrive amid the uncertain geopolitical climate.
CrowdStrike has topped Wall Street’s expectations for earnings and revenue in every quarter since it went public in June 2019, demonstrating the strength and resilience of its business.
CRWD stock ended Friday’s session at $210.66, its highest closing price since April 2022. Shares are up 100% year-to-date, reflecting the endpoint security leader’s strong fundamentals and long-term growth prospects.
At its current valuation, CrowdStrike has a market cap of about $50 billion.
Stock to Sell: Foot Locker
I believe Foot Locker (NYSE: FL ) will suffer a disappointing week ahead, as the struggling footwear and athletic apparel chain’s third quarter financial results will likely reveal another sharp slowdown in both profit and sales growth due to the challenging economic environment.
Foot Locker’s Q3 report is scheduled to come out ahead of Wednesday's opening bell at 6:45AM ET and results are likely to take a hit from slowing consumer demand for sneakers and clothes in the face of still-high inflation.
As per the options market, traders are pricing in a massive move of about 13% in either direction for FL stock following the release. Shares plunged 25% after the sportswear retailer’s Q2 report came out in mid-August.
Underscoring several near-term headwinds Foot Locker faces, all 17 analysts surveyed by InvestingPro cut their EPS estimates in the three months leading up to the print to reflect an 82% drop from their initial profit forecasts.
Wall Street sees the New York-based sportswear retailer earning $0.22 per share, tumbling more than 80% from EPS of $1.27 in Q3 last year, mostly due to the negative impact of heavy markdowns and write-offs associated with inventory shrink, or retail theft.
Meanwhile, revenue is forecast to drop 10.1% year-over-year to $1.95 billion as the retailer faces a challenging economic environment which is seeing Americans cut back spending on discretionary items as their disposable income shrinks.
Like other retailers, Foot Locker has had to increase promotions and resort to steeper discounts to appeal to price-sensitive consumers amid the current macro backdrop.
As such, it is my belief that Foot Locker executives will disappoint investors in their forward guidance for the key fourth quarter, which covers the holiday shopping season, and strike a cautious tone amid soft consumer spending and declining operating margins.
FL stock - which sank to a 13-year low of $14.84 on August 23 - closed Friday’s session at $23.32. At current levels, Foot Locker has a valuation of $2.2 billion.
Shares have lagged the year-to-date performance of the broader market by a wide margin in 2023, falling 38.3%. That compares to a gain of 5.7% recorded by the SPDR® S&P Retail ETF (NYSE: XRT ), which tracks a broad-based, equal-weighted index of U.S. retail companies in the S&P 500.
Be sure to check out InvestingPro to stay in sync with the latest market trend and what it means for your trading decisions.
Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR S&P 500 ETF (SPY), and the Invesco QQQ Trust ETF (QQQ). I am also long on the Technology Select Sector SPDR ETF (NYSE: XLK ). I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials. The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
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