ADBE - 7 Earnings Reports to Watch Next Week
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Editor’s Note: This article is regularly updated to bring you the latest information.
It would appear at the moment that all equity investors care about is interest rates. But they shouldn’t ignore the earnings calendar next week, either.
To be sure, there aren’t any companies reporting that likely are going to have the same impact as the Federal Reserve. Federal Reserve Chairman Jay Powell tried to reassure investors on Wednesday, but soaring yields on Thursday led to a late-session fade. Growth and tech stocks were particularly hard-hit, with the NASDAQ Composite closing down 3%.
Interest rates and, by extension, valuations will likely dominate the market conversation until earnings season returns next month. But in the meantime, we will get some intriguing earnings reports next week.
China bulls will get reports from Tencent Music Entertainment (NYSE:TME), gaming play Huya (NYSE:HUYA), social media platform Momo (NASDAQ:MOMO) and lodging leader Huazhu Group (NASDAQ:HTHT). Domestically, we’ll get news on the macro cycle from office furniture manufacturer Steelcase (NYSE:SCS), retailer At Home Group (NYSE:HOME), and homebuilder KB Home (NYSE:KBH).
But, broadly speaking, earnings next week seem less about the numbers and more about sentiment. This is a week where the reactions to earnings reports might be more interesting, and more illuminating, than the reports themselves. That’s particularly true for these seven earnings reports to watch:
- GameStop (NYSE:GME)
- Bionano Genomics (NASDAQ:BNGO)
- Adobe (NASDAQ:ADBE)
- General Mills (NYSE:GIS)
- GrowGeneration (NASDAQ:GRWG)
- RH (NYSE:RH)
- Darden Restaurants (NYSE:DRI)
7 Earnings Reports to Watch: GameStop (GME)
Earnings Report Date: Tuesday, March 23, after market close
The obvious question ahead of GameStop earnings is: will the report even matter? And the answer, at least at the moment, is: who knows?
In fairness, it’s not clear that the Q4 and fiscal 2020 results really should matter all that much. GameStop, like so many brick-and-mortar retailers, spent the year and the quarter dealing with closures and reduced traffic. The pivot to e-commerce projected by so many GME bulls hasn’t really begun yet. What GameStop was in Q4 is not what the company will be in 2022 or 2024.
That said, there likely will be two points of focus. The first will be strategic. GameStop has announced that it put board member and Chewy (NYSE:CHWY) co-founder Ryan Cohen in charge of its digital strategy. The Q4 conference call should give more detail on what Cohen’s plans are to move GameStop away from its reliance on in-store revenue.
What might be more important is GameStop’s strategy toward capital allocation. Unlike other “meme stocks” like AMC Entertainment (NYSE:AMC) and Sundial Growers (NASDAQ:SNDL), GameStop didn’t conduct an equity offering to raise capital during the January rally.
Many investors and analysts have been asking why. GameStop has said it was prohibited from doing so by financial regulations.
Those restrictions end once earnings are released. But GameStop has to walk a fine line. Putting a big slug of equity into the market could pressure the stock, in part because it would undercut the increasingly questionable “short squeeze” thesis. An “at the market” offering would make more sense, but too could rattle GME bulls.
All told, there could be fireworks in regular-session trading on Wednesday, no matter what GameStop’s numbers look like.
Bionano Genomics (BNGO)
Earnings Report Date: Tuesday, March 23, after market close
One of the market’s hottest stocks of the past quarter actually is stumbling ahead of earnings. BNGO stock is down 45% from February highs — yet amazingly still up over 1,500% over the last three months.
To stem the recent bleeding, Bionano needs to deliver good news on Tuesday afternoon. That doesn’t necessarily mean that Q4 earnings need to ‘beat’ Wall Street expectations (particularly given limited analyst coverage).
Rather, the story behind BNGO stock has been that its Saphyr genome imaging system is finally starting to gain traction. Management needs to keep that story intact, whether in giving guidance on reimbursement from insurers or increasing adoption by laboratories.
The question, even with the pullback of late, is whether even good news will be enough. A company worth BNGO clearly has been a retail investor-driven stock over the past three months, and more than a few bulls have taken profits over the past five weeks. It seems like it will take an awful lot from Bionano on Tuesday to reverse that trend.
Adobe (ADBE)
Earnings Report Date: Tuesday, March 23, after market close
One of the seemingly undercovered stories in the market of the past few months is the poor performance from so many “Big Tech” names. Stocks like Alibaba (NYSE:BABA), Amazon.com (NASDAQ:AMZN), and Facebook (NASDAQ:FB) have been “dead money” or worse since last summer.
And while regulatory concerns might be at play for all three names, ADBE seemingly has no such risk. Yet it, too, has struggled. Adobe stock is off 5% over the past six months; the NASDAQ Composite is up 18%.
It would seem like the underperformance has to end at some point. Yet earnings haven’t been quite good enough for most of Adobe’s mega-cap tech peers. If Adobe, one of the world’s best companies, can’t inspire confidence on Tuesday, it’s hard to see from where that confidence comes any time soon.
General Mills (GIS)
Earnings Report Date: Wednesday, March 24, before market open
Every quarter seems like a big quarter for General Mills, as the company tries to diversify away from stagnant legacy categories like cereal and yogurt. And, to be fair, investors do see progress. GIS stock touched a seven-year low in late 2018, but since has rallied over 50%.
That said, since the stock was considered a “pandemic winner” last spring, returns have been mostly negative, even with a recent bounce. General Mills clearly has more skeptics to convert.
Meanwhile, Wednesday’s fiscal third quarter report has a little extra import precisely because of the pandemic. Q3 is the last quarter for which General Mills enjoys normal year-prior comparisons. And as we saw this week with Dollar General (NYSE:DG), investors aren’t reacting well to “normalized” results that show year-over-year declines.
If General Mills stock is going to start heading in the right direction again, the news on Wednesday needs to be good.
GrowGeneration (GRWG)
Earnings Report Date: Thursday, March 25, after market close
Cannabis stocks soared following the U.S. elections. Even excluding a brief February spike (thanks in part to Reddit-driven buying of names like Aurora Cannabis (NYSE:ACB) and Tilray (NASDAQ:TLRY)), the ETFMG Alternative Harvest ETF (NYSEARCA:MJ) more than doubled in less than four months.
But earnings haven’t been kind to Canadian operators, with both Sundial Growers and Hexo (NYSE:HEXO) pulling back this week. We’ll see if GrowGeneration, a “picks and shovels” play on U.S. cannabis, fares any better.
It’s possible it will. The post-November rally in GRWG was more logical, given it should be a direct beneficiary of state-level legalization wins. GrowGeneration’s aggressive rollout gives it a significant first-mover advantage. There’s even a pandemic tailwind given that many consumers took up non-cannabis gardening as a way to relieve stress during lockdowns.
That said, GRWG is up 150% just since early November, and trades at 139x forward earnings. That kind of rally likely requires not just a good quarter, but an outstanding one.
RH (RH)
Earnings Report Date: Wednesday, March 24, after market close
It will be difficult to draw much in the way of broad conclusions from RH’s Q4 report. RH has been so effective and so dominant at the high end of the furniture market that its strength doesn’t necessarily mean that the entire industry is headed toward a strong 2021. That history admittedly does suggest that weakness could set off alarm bells.
But for RH itself, the report is big. RH stock has been a massive winner off March lows, gaining 565%. Yet the stock isn’t that expensive, trading at about 25x analyst earnings per share estimates for fiscal 2021 (ending January 2022). And with the operating margin potential inherent in the business, those estimates can jump in a hurry if RH can deliver another strong quarter.
In other words, if RH can keep doing what it’s been doing, RH stock can keep doing what it’s been doing. The next five years likely won’t see another 1,200% rally, but a strong quarter sets RH up to keep outperforming the market in 2021 and beyond.
Darden Restaurants (DRI)
Earnings Report Date: Thursday, March 25, before market open
The “reopening trade” gets perhaps its biggest test on Thursday morning. Darden is the biggest full-service restaurant operator in the world. Like so many companies in the industry, it battled through store closures and plunging sales.
And yet DRI stock actually has rallied, not just from March lows, but from pre-pandemic levels.
There is an argument for that rally. Smaller “mom and pop” competitors were wiped out by the effects of the pandemic, providing an edge to corporate chains going forward. And indeed, many other restaurant stocks have seen similar trading.
Still, there’s an obvious question as to whether reopening-driven buying is at or near an end. The response to Darden earnings should provide a signal as to whether that indeed is the case.
On the date of publication, Vince Martin did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.?
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