Here's your weekly Investing Action Plan: what you need to know as an investor for the coming week.
Markets will brace for another populist wave as Italian voters rejected a pivotal referendum Sunday, and the energy sector will watch a key OPEC meeting with nonmembers at the end of the week. In between are earnings from Apple (AAPL) supplier Broadcom (AVGO), telecom suppliers Finisar (FNSR) and Ciena (CIEN), as well as smaller but highly rated companies. Shares of Ulta Beauty (ULTA) and Foot Locker (FL) should also be on your radar.
Stocks To Watch
Ulta Beauty went on a wild ride Friday, initially breaking out past a double-bottom entry at 268.88. Then shares reversed lower, found support at the 50-day line and ultimately closed down 1.6% at 253.39. The beauty products retailer reported another estimate-beating quarter late Thursday and issued strong Q4 guidance. See if the stock can continue to hold above the 50-day line and break out of the base.
Facebook (FB) and Google owner Alphabet (GOOGL) have been notable losers in the postelection sector rotation. Facebook fell back below its 200-day line this past week, coming close to its Nov. 14 low of 113.55 – a level the stock hadn't seen since four months prior. Shares are now 13.5% below their October peak. Alphabet lost support at its 200-day line on Friday, and is 9% below its high.
Starbucks (SBUX) tested support at its 200-day line Friday after retaking that level on Nov. 22 but recovered some losses. The stock has been consolidating, i.e. moving sideways, since October 2015 and is 10.6% below its high reached at that time. The late-Thursday announcement that CEO Howard Schultz will be stepping aside to become executive chairman is weighing on shares.
After issuing estimate-beating earnings on Nov. 18, Foot Locker found support near the 50-day line and reversed to close the session higher. It soon after cleared a cup-with-handle base with a 73.47 buy point, and though the stock dipped below that level, it's now back in buy range.
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ECB To React To Latest Twist
The European Central Bank holds its policy meeting on Thursday, just days after Italy's referendum on changes to its constitution failed, as its quantitative easing program is set to expire in March. Analysts expect an extension to the ECB's monthly bond purchases of about 80 billion euros as President Mario Draghi has said that while easy-money policies have given eurozone leaders some breathing room to enact reforms, more work needs to be done. Economies in the region have improved, but the Brexit shock and uncertainty leading up to the Italy vote have added to volatility, while elections in France and Germany loom next year.
Sunday's constitutional referendum called for streamlining Italy's gridlocked government, which could then pass economic reforms that are hoped will revive growth. With the vote's failure, Prime Minister Matteo Renzi said he will resign, bolstering the anti-eurozone Five Star party, delaying efforts to prop up Italy's bad-loan-ridden banks and raising the risk of financial contagion. Watch shares of top European lenders Deutsche Bank (DB), UBS (UBS) and Credit Suisse (CS) as well as U.S. giants JPMorgan Chase (JPM) and Citigroup (C). While some have warned the vote could produce a Brexit-like shock, a failed vote may already be priced into the markets.
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OPEC Isn't Done Yet
The group's surprise agreement to lower output by 1.2 million barrels a day is contingent on a separate reduction. OPEC will hold talks with nonmembers on Friday to discuss a 600,000-barrel-per-day production cut. Russia pledged to cut up to 300,000 barrels per day, but has warned that the reduction will happen "gradually" due to technical issues. The Kremlin didn't say how the cuts would be implemented and enforced, but reports said Rosneft may take the largest share. If the cut happens, it would be the first time since 2001 that OPEC and Russia have coordinated efforts. Oman said it would cut 10% of its production and Azerbaijan and Kazakhstan have also said they might cut, but Mexico has rejected calls to reduce.
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Broadcom Accelerating
The chip designer is expected to post its third straight quarter of accelerating sales and earnings growth when it reports fiscal Q4 results Thursday. Analysts expect Broadcom to earn $3.38 a share excluding items, up 35%, on sales of $4.12 billion, up 122%. In the past three quarters, Broadcom has reported EPS growth of 15%, 19% and 29% and sales growth of 8%, 116% and 117%. The gains are mostly attributable to Broadcom's merger with Avago, which closed in February. The Apple supplier reports amid indications of slowing iPhone 7 demand and a steep sell-off among other top chip stocks.
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Ciena, Finisar Report
Ciena and Finisar report earnings on Thursday. Ciena makes system-level optical products for communications networks and data centers while Finisar makes components. Analysts estimate Ciena's fiscal Q3 EPS will climb 10% to 46 cents, with revenue rising 3.6% to $716.5 million. Finisar's fiscal Q2 EPS is seen surging 84% to 46 cents, with revenue rising 13.4% to $364.3 million. Both Ciena and Finisar are expected to get a lift from customer upgrades to 100-gigabit-per-second technology. Verizon Communications' (VZ) upgrade status could be an earnings call topic for Ciena.
Last month, Acacia Communications (ACIA), a maker of high-speed optical devices for communications networks, beat Q3 estimates and forecast Q4 sales above expectations, though not by much.
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Trumped Up Heath Savings Accounts
HealthEquity (HQY) issues its Q3 results after the close on Tuesday. The nonbank health savings account custodian is expected to see EPS rise 13% to 9 cents, a considerable slowdown from the 56% growth it saw in the prior quarter. Revenue is projected to surge 42% to $43.3 million, a slight deceleration from Q2's 45% top-line growth. The stock has soared since the election as any health policy changes President-elect Donald Trump makes are seen benefiting HSAs. HealthEquity's stock shot through its buy zone last month and jumped into profit-taking sell territory.
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Dave & Buster's: Get Your Game On
Restaurant and game chain Dave & Buster's (PLAY) reports Q3 results on Tuesday. Analysts expect EPS to rise 17% to 14 cents, with sales up 12% to $216.74 million. While Dave & Buster's same-store sales results and guidance disappointed Wall Street when it reported Q2 results, the company touted its outperformance in a struggling restaurant sector and its entertainment-centric business model, which insulates it more from food and other costs. Shares ended the week at 47.54, near a buy point of 50.
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First Time For Coupa
Coupa Software (COUP) reports earnings for the first time as a public company on Monday, and analysts estimate a Q3 loss of 49 cents a share on revenue of $31.24 million. Coupa sells cloud-based management software that provides visibility into and control over how companies spend money, including procurement and invoicing. Coupa went public on Oct. 16 with shares priced at 18. The stock jumped initially but has retreated. Coupa competes with Oracle (ORCL) and SAP (SAP).
Homebuilders
Toll Brothers' (TOL) fiscal Q4 EPS is expected to jump 23.8% to 99 cents with revenue rising 24.7% to $1.79 billion when the homebuilder reports quarterly results Tuesday. Hovnanian Enterprises (HOV) is out Thursday and analysts expect it to report an 19% drop in fiscal Q4 EPS to 13 cents but a 15.7% increase in revenue to $802.3 million. The housing market has been strong this year thanks to wage growth as well as low interest and unemployment rates. But mortgage rates have climbed along with Treasury yields in recent weeks.
Retailers
Analysts see Francesca's (FRAN) EPS rising 12.5% to 18 cents and sales up 12.3% to $116.5 million, when the boutique operator reports quarterly earnings Tuesday. Handbag and accessory maker Vera Bradley's (VRA) earnings are on tap for Wednesday and apparel and footwear designer Vince's (VNCE) results are slated for Thursday.
Discounters On A Roll
Ollie's Bargain Outlet (OLLI) profit is projected to rise 27% to 14 cents a share as sales are seen growing 15% to $201.5 million. Shares of the discounter, which also reports Wednesday, were consolidating until early November and are now slightly extended out of buy range from an 28.82 entry. Ollie's report follows upbeat holiday-quarter sales forecasts from fellow discounters Five Below's (FIVE) and Dollar Tree (DLTR), though Dollar General (DG) cut its full-year profit outlook.
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Costco
Costco Wholesale (COST) reports fiscal Q1 earnings on Wednesday after the market close. Analysts expect a 9% EPS rise to $1.19. The membership warehouse chain last Wednesday reported sales for the quarter ended Nov. 20 rose 3% to $27.47 billion, below analyst forecasts for $28.29 billion, amid a tough retail environment, especially for brick-and-mortar locations. November same-store sales rose just 1%, also a little light. Costco shares plunged from their Aug. 11 peak to Nov. 4. After retaking the 50-day line on Nov. 11, the stock has found support at that key level, but has been unable to cross its 200-day.
HD Supply
The industrial supplies distributor reports Q3 results before Tuesday's market open. Analysts expect to see a 24% EPS gain to 82 cents, with sales fractionally lower to $2.005 billion. HD shares plunged three months ago, when the company reported weaker-than-expected earnings and gave soft guidance. Shares gradually moved higher, surging after Election Day into buy range and beyond. It hit an all-time intraday high on Thursday.
Lululemon
When the yogawear seller reports on Wednesday, analysts expect Lululemon Athletica (LULU) to post 23% EPS growth to 43 cents on 13% revenue gains to $540.4 million. Activewear remains hot but Lululemon's stock isn't — shares have been trading well below their 50-day since early September — as many apparel retailers continue to struggle.
Economic Indicators
The Institute for Supply Management's nonmanufacturing gauge for November comes out Monday at 10 a.m. ET, the Commerce Department releases its October foreign trade report at 8:30 a.m., the Labor Department issues its job openings and labor turnover survey for October on Wednesday at 10 a.m. ET, and an initial reading of the University of Michigan consumer sentiment gauge for December is out Friday at 10 a.m.
