Weekly Preview: Earnings to Watch This Week (BYND, DIS, NIO, PTON)

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An important week in the first quarter earnings season just concluded, and unlike previous reporting periods, there appears to be some consensus that the market can (and will) get worse before things get better. After scoring some gains earlier in the week, all three major benchmarks were punished the last two days. On Thursday, the Dow Jones Industrial Average was hammered by 1,063.09 points, or 3.1%, marking the index’s worst drop since Oct. 28, 2020 (on a percentage basis).

The decline continued Friday with the Dow falling 98.60 points, or 0.3%, to close at 32,899.37. Dip-buyers are still nowhere to be found. The S&P 500 declined 23.53 points, or 0.6%, to finish at 4,123.34. The S&P 500 has now fallen for a fifth straight week — its longest weekly losing streak in more than a decade. Following its 52-week low reached on Thursday, the tech-heavy Nasdaq Composite lost 173.03 points, or 1.4%, to end Friday’s session at 12,144.66.

Amid heightened stagflation fears, investors continue to adopt a risk-off approach despite solid April jobs data. Following the Dow’s 1,000+ point decline on Thursday, which came immediately after Wednesday’s strong gain, it’s become increasingly hard to muster any market confidence, particularly given the confluence of near-term headwinds that can stunt growth in the quarters ahead. Investors are seemingly confused by the erratic swings. For the week, the Dow and S&P 500 each declined 0.2% while the Nasdaq fell 1.5%, reaching its fifth straight week of declines.

On the positive front, the U.S. Bureau of Labor Statistics reported that the U.S. economy added 428,000 new jobs in April, topping economists’ forecasts of 400,000 new jobs. The jobs number kept the unemployment rate was unchanged at 3.6% — which is still above a 54-year low. Even the steady job gains, combined with with less wage pressure, couldn’t keep investors from inflation-related worries. Confidence in the market and in the Fed is nowhere to be found right now.

Investors are understandably nervous about what is broadly expected to be an aggressive round of rate increases by the Federal Reserve. Heading into the new week, there are arguments to be made that stocks have reached some oversold levels. Is that optimism well placed? I suspect that this question will be answered by the end of this earnings season.

On the earnings front, here are the stocks I’ll be watching this week.

Peloton (PTON) – Reports after the close, Tuesday, May 10

Wall Street expects Peloton to lose 94 cents per share on revenue of $969.82 million. This compares to the year-ago quarter when earnings were breakeven on revenue of $1.26 billion.

What to watch: Peloton has been under heavy selling pressure over the past year, plunging some 35% and 70% over the respective thirty days and six months. Not only is the stock down 52% year to date, but if you’ve held the shares since they reached their all-time high of $171, you’ve suffered as much as 90%. The market has lost confidence that Peloton’s at-home connected subscription platform can be monetized to produce sustainable results. The company is navigating multiple headwinds, including supply chain constraints and balance sheet pressures. The company is reportedly looking to sell a major stake to private equity players and technology peers, according to the Wall Street Journal. In desperate need a capital injection, the stake being offered to minority investors could be around 15% to 20%, per sources. It remains to be seen if anything materializes from this. But investors to develop any sort of confidence in the stock, it’s all about execution. On Tuesday the market will want to hear how the company is navigating these headwinds to deliver revenue and profit growth in the quarters ahead.

Disney (DIS) – Reports after the close, Wednesday, May 11

Wall Street expects Disney to earn $1.19 per share on revenue of $20.04 billion. This compares to the year-ago quarter when it earned 79 cents per share on revenue of $15.61 billion.

What to watch: Has the magical rise in Disney finally come to an end? The enormous gains from the streaming success has since been overtaken by political controversy in Florida and various headlines and ongoing criticism of Disney management related to the so-called “Don’t Say Gay” bill, all of which has caused increased volatility in Disney shares. Down 30% year to date, the stock has fallen almost 20% in thirty days, while giving up close to 40% in six months. Notably, this is despite Disney benefiting from the return of big theatrical releases, as well as strong demand at its theme parks. The question is, does the recent selloff present a buying opportunity or should investors expect more pain in the quarters ahead? The company has exceeded Wall Street’s growth expectations over the past several quarters. On Wednesday investors will nonetheless want more details about Disney’s long-term growth strategy to assess its true valuation.

Beyond Meat (BYND) – Reports after the close, Wednesday, May 11

Wall Street expects Beyond Meat to lose 98 cents per share on revenue of $111.50 million. This compares to the year-ago quarter when the loss came to 42 cents per share on revenue of $108.16 million.

What to watch: What will it take for Beyond Meat stock to past the taste test? The plant-based meat giant, which has seen its stock plunge more than 40% year to date, including a decline of 61% and 20% in the respective six months and thirty days. Without question the company has lost tons of sizzle, especially when considering that the stock now trades lower than its first day of trading as an IPO. The stock’s decline has been due to a combination of factors. Aside from valuation concerns and increased fears of emerging competitive threats, the company is also dealing with wage inflation and supply chain shortages which has impacted its once-torrid growth pace. The company posted just 14% growth in 2021, down from 37% growth in 2020 and drastically below the 239% growth generated in 2019. What’s more, its gross margin has also come down considerably, declining to to 25.2%, down 490 basis points, while operating expenses grew by over 2,000 basis points. Is now time to nibble on a few shares? Thinking that the bottom is in after the recent selling pressure, some analysts believes the current share price does not reflect Beyond Meat’s growth potential. On Wednesday the company will need to outline what that potential looks like.

Nio Limited (NIO) – Reports after the close, Thursday, May 12

Wall Street expects Nio to report a per-share loss of 13 cents on revenue of $1.49 billion. This compares to the year-ago quarter when it reported a per-share loss of 49 cents on revenue of $1.23 billion.

What to watch: Shares of Chinese electric vehicle maker Nio have been in reverse over the past year, losing some 60% of its value. With the stock now down 51% year to date, including a 31% decline over the past thirty days, investors want to know if now’s the right time to take a position. Covid-related supply chain issues have pressured the entire industry, but the issue is not impacting every EV stock the same. In the case of NIO, it is one of only a handful of electric vehicle makers that has positive free cash flow. What’s more, not only is NIO delivering vehicles to customers each year, the company’s deliveries are growing. Estimates suggests that electric vehicle sales are projected to grow at a compound annual rate of 24.5% through 2028. These trends are poised to benefit NIO. But with the stock down significantly from its 52-week high, the company on Friday can make a strong case for its value by delivering a top- and bottom line beat, along with strong delivery guidance for the next quarter and full year.

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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