Stocks on Wall Street closed higher Friday after a weaker-than-expected jobs report bolstered hopes that the Federal Reserve could soon begin cutting interest rates.
Source: Investing.com
All three indices recorded their second consecutive week of increases.
The blue chip index and the technology stock index rose 1.1% and 1.4% respectively, while the benchmark index rose 0.5%.
The coming week is relatively poor in economic data. The latest initial claims for unemployment benefits are expected Thursday, while the University of Michigan consumer sentiment survey will be released Friday.
Source: Investing.com
These publications will be accompanied by a packed schedule of Fed speakers, with Governors Thomas Barkin, John Williams, Neel Kashkari, Michelle Bowman and Austan Goolsbee all expected to make public appearances.
As of Sunday morning, financial markets estimate that there is a 67% chance that the first rate cut will come in September, according to Investing.com.
Elsewhere, earnings season continues, with a slate of big tech-related names due for release, including Arm (NASDAQ:), Palantir (NYSE:), Arista Networks (NYSE:), Datadog (NASDAQ:), Twilio (NYSE:), Trade Desk (NASDAQ:), Shopify (NYSE:), Robinhood (NASDAQ:), and Roblox (NYSE:).
Other prominent reporters include Walt Disney (NYSE:), Uber (NYSE:), Airbnb (NASDAQ:), Tyson Foods (NYSE:), Beyond Meat (NASDAQ:), Toyota (NYSE:), Ferrari (NYSE:), :), Rivian Automotive (NASDAQ:), Lucid (NASDAQ:), AMC Entertainment (NYSE:) and Warner Bros. Discovery (NASDAQ:).
Regardless of which direction the market is headed, below I highlight one stock that may be hot and one that could see further decline. Remember, however, that my time horizon born covers that the coming week, from Monday 6 to Friday 10 May.
Stocks to Buy: Arista Networks
I expect Arista Networks (NYSE:) to see its stock outperform this week, as the network infrastructure company will likely deliver another quarter of strong net income and revenue growth and provide an optimistic outlook.
Arista is expected to report its first quarter results after the closing bell on Tuesday at 4:05 p.m. EST as analysts and investors grow increasingly bullish on the cloud networking solutions provider, known for its network switches. computer network that accelerates communications in data centers.
Interestingly, 19 of the last 21 analyst EPS revisions have been upward, while 25 of 29 analysts covering ANET have either an equivalent Buy or Hold rating on the stock.
According to the options market, traders are pricing in an implied move of around 9% in either direction for ANET stock following the print. Notably, shares lost 6% following the company’s fourth-quarter report in mid-February.
Source: InvestingPro
Consensus forecasts that the Santa Clara, Calif.-based technology company will post earnings per share of $1.74 for the first three months of 2024, an increase of 21.7% from EPS of $1.43 recorded during the previous period.
Meanwhile, revenue is expected to jump 14.7% year-over-year to $1.55 billion, reflecting strong demand for cloud infrastructure from large enterprises, small businesses, government agencies and educational establishments.
But as is usually the case, it’s more about predictions than results. Against this backdrop, I believe Arista CEO Jayshree Ullal will present an optimistic outlook for the current quarter as the company continues to benefit from growing demand for its range of networking products and solutions for cloud-based data centers.
Arista has carved a niche for itself in the networking technology industry with its innovative solutions and has managed to take market share from its main rivals, Cisco Systems (NASDAQ:) and Juniper Networks (NYSE:).
Meta Platforms (NASDAQ:) and Microsoft (NASDAQ:) are its two largest clients.
ANET stock ended Friday’s session at $274.40, just shy of the record high of $306.42 reached on March 22. At current levels, Arista Networks has a market cap of $86 billion.
Source: Investing.com
Shares are up 16.5% year to date, rising in line with much of the technology sector, thanks to enthusiasm over future business prospects linked to artificial intelligence.
As InvestingPro’s ProTips points out, Arista Networks boasts a near-perfect financial health score thanks to its strong earnings and sales growth, robust cash flow, and impeccable balance sheet.
Stock for sale: Rivian Automotive
I expect a weak performance for Rivian Automotive (NASDAQ:) this week, with shares likely to hit new record lows as the struggling electric truck startup’s latest results and forecasts will disappoint investors due to the negative impact of various headwinds on its activity.
Rivian’s first quarter results are expected to be released after the market closes on Tuesday at 4:10 p.m. ET. A conference call with analysts is scheduled for 5:00 p.m. ET.
Underscoring several near-term challenges Rivian faces in the current climate, six of nine analysts surveyed by InvestingPro reduced their earnings estimates ahead of print to reflect a roughly 10% decline from their initial expectations.
Market participants are expecting a significant move in RIVN stock following the release of the update, with an implied move of around 14% in either direction depending on the options market. Notably, RIVN shares plunged 28% after the latest report was released, suffering the worst earnings reaction day collapse since its IPO in late 2021.
Source: InvestingPro
Wall Street sees the Irvine, Calif.-based EV maker losing -$1.16 per share in the March quarter, compared to a net loss of -$1.25 in the prior period, when it continues to spend heavily to try to fend off competition from more established EV makers such as Tesla (NASDAQ:), Ford (NYSE:) and General Motors (NYSE:).
Revenue is expected to increase 74% year-over-year to $1.16 billion, but this would mark a slowdown from the previous quarter’s sales total of $1.32 billion as Rivian struggles with the Weakening demand in a deteriorating EV market.
This leads me to believe that there is a growing risk that Rivian will reduce its sales forecast and production and delivery outlook for the remainder of the year to reflect increased cost pressures and lower gross margins. .
RIVN stock, which fell to an all-time low of $8.26 on April 16, closed at $10.07 on Friday. At current valuations, Rivian has a market cap of $10 billion.
Source: Investing.com
Shares are down 57% so far in 2024, making it one of the worst performers of the year so far. More worryingly, RIVN remains approximately 95% below its all-time high of $179.47 reached shortly after its November 2021 IPO.
It’s no surprise that Rivian currently has an extremely poor Investing Pro Financial Health Score of 1.9 out of 5.0. The Pro Health metric is determined by ranking the company on more than 100 factors compared to other companies in the Consumer Discretionary industry.
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Disclosure : As I write this, I have a long position in the S&P 500 and 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 an ongoing assessment of risks related to the macroeconomic environment and the financial situation of companies.
The opinions expressed in this article are those of the author alone and should not be considered investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohen_Inv for more analysis and views on the stock markets.
