- Big Tech earnings, core PCE inflation data will be in focus this week.
- Meta Platforms is a buy with upbeat earnings expected.
- Tesla is a sell amid weak profit growth, disappointing guidance on deck.
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Stocks on Wall Street finished lower on Friday to suffer another losing week as tech shares plunged amid growing pessimism that the Federal Reserve would soon cut interest rates.
The Nasdaq Composite fell for a sixth straight session, notching its longest losing streak since October 2022. The downtrend comes as AI darling Nvidia (NASDAQ:NVDA) sold off, adding to recent market woes tied to geopolitical conflicts and sticky inflation.
For the week, the benchmark S&P 500 dropped 3.1%, the Nasdaq tumbled 5.5%, while the Dow Jones Industrial Average was unchanged.
Source: Investing.com
The week ahead is expected to be an eventful one as earnings season shifts into high gear, with reports expected four of the ‘Magnificent 7’ stocks, including Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Meta Platforms (NASDAQ:META), and Tesla (NASDAQ:TSLA).
Some of the other notable reporters include Intel (NASDAQ:INTC), IBM (NYSE:IBM), Snap (NYSE:SNAP), General Motors (NYSE:GM), Ford (NYSE:F), AT&T (NYSE:T), Verizon (NYSE:VZ), Caterpillar (NYSE:CAT), Boeing (NYSE:BA), United Parcel Service (NYSE:UPS), ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX), and Visa (NYSE:V).
In addition to earnings, most important on the economic calendar will be Friday’s core personal consumption expenditures (PCE) price index, which is the Fed’s preferred inflation measure.
As per Investing.com, core PCE, which strips out volatile food and energy prices, is seen rising 2.6% year-over-year in March, slowing from 2.8% in the preceding month.
Other economic data set to drop includes the preliminary GDP reading for the first quarter, which will provide more clues as to whether the economy is heading for a soft-landing.
Source: Investing.com
Meanwhile, Fed officials will be in a blackout period ahead of the U.S. central bank’s policy meeting scheduled for May 1.
Traders now see about a 70% chance of the first rate cut hitting in September, according to the Investing.com Fed Monitor Tool.
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, April 22 - Friday, April 26.
Stock To Buy: Meta Platforms
I expect Meta Platforms (NASDAQ:META) will outperform this week, as the social media giant will likely deliver another quarter of strong top-and bottom-line growth and provide an upbeat outlook amid improving conditions in the digital advertising market.
Meta is scheduled to deliver its Q1 update after the U.S. market close on Wednesday at 4:05PM ET. A call with CEO Mark Zuckerberg and CFO Susan Li is set for 5:00PM ET.
Market participants expect a sizable swing in META stock following the print, as per the options market, with a possible implied move of about 9% in either direction. Shares soared nearly 22% after its last earnings report in February.
It should be noted that profit estimates have been revised upward 21 times ahead of the print, according to an InvestingPro survey, compared to zero downward revisions, as Wall Street grows increasingly bullish on the parent company of social media networks Facebook, Messenger, Instagram, Reels, Threads, and WhatsApp.
Source: InvestingPro
Meta is seen earning $4.36 per share in the first three months of 2024, surging 98% from EPS of $2.20 in the year-ago period as the Menlo Park, California-based tech company continues to focus on improving operating efficiency and reducing expenses.
Meanwhile, revenue is forecast to increase 26.3% from the year-ago period to $36.2 billion, thanks to robust digital ad sales and growing adoption of its Reels short-video products.
As such, I believe Meta CEO Mark Zuckerberg will provide upbeat guidance for the current quarter as the social media company reaps the benefits of its expanding user base and fresh AI initiatives, including its AI-powered Advantage+ ad sales platform.
META stock - which rallied to an all-time high of $531.49 on April 8 - ended at $481.07 on Friday. At current levels, Meta has a market cap of $1.22 trillion, making it the sixth largest company trading on the U.S. stock exchange.
Source: Investing.com
Shares have soared 125% over the past 12 months, rising alongside much of the tech sector.
As ProTips points out, Meta is in great financial health condition, thanks to strong earnings and revenue growth prospects, combined with its attractive valuation and pristine balance sheet.
Stock to Sell: Tesla
After ending at a fresh 52-week low on Friday, I believe Tesla (NASDAQ:TSLA) will suffer another challenging week ahead as the Elon Musk-led electric vehicle maker will deliver underwhelming earnings and provide a weak outlook due to the negative impact of various headwinds on its business.
Tesla’s first quarter update is scheduled to come out after the close on Tuesday at 4:05PM ET in what will likely be one of the most closely watched reports of the week. A call with analysts is set for 5:30PM ET.
Underscoring several near-term headwinds Tesla faces amid the current climate, 14 out of 15 analysts surveyed by InvestingPro reduced their EPS estimates in the past three months to reflect a drop of over 50% from their initial expectations.
Market participants expect a sizable swing in TSLA stock following the print, with an implied move of roughly 10% in either direction as per the options market. Notably, TSLA shares tumbled almost 13% after the last earnings report to suffer their fourth straight earnings-reaction-day selloff.
Source: InvestingPro
Consensus expectations call for the Austin, Texas-based EV giant to post a profit of $0.50 per share, falling 41.2% from earnings per share of $0.80 in the year-ago period.
Revenue is seen declining 4.3% year-over-year to $22.3 billion, with automotive gross margins likely to come under pressure again due to the negative impact of its ongoing price-slashing strategy.
Despite the price cuts, Tesla has been struggling with demand concerns and elevated inventory levels amid growing competition from traditional legacy automakers as well as Chinese EV startups.
As such, it is my belief that Elon Musk and Tesla executives will disappoint investors in their forward guidance for the current quarter and strike a cautious tone amid the uncertain macroeconomic environment and declining operating margins.
TSLA stock closed at $147.05 on Friday, the lowest since January 25, 2023. At its current valuation, the EV company has a market cap of $469 billion.
Source: Investing.com
Shares are down 40.8% year-to-date, earning it the dubious title of the worst-performing stock in the S&P 500.
InvestingPro’s ProTips underscore Tesla’s precarious outlook, emphasizing its weak gross profit margins, declining earnings growth, and falling net income. Additionally, the stock currently trades at high earnings and revenue valuation multiples.
Be sure to check out InvestingPro to stay in sync with the market trend and what it means for your trading.
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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 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.