RIVN - Stocks To Watch: Automakers In The Spotlight To Begin Second Half

2023-07-01 09:30:00 ET

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Economic releases covering construction spending, factory orders, and initial jobless claims will be sandwiched around the 4th of July holiday before the June jobs report lands on the laps of investors on July 7. Economists forecast 213K jobs were added during the month and for the unemployment rate to dip to 3.6% from 3.7%. Average hourly earnings are forecast to be 0.3% month-over-month and 4.2% year-over-year.

Major banks will also be watched closely next week after the group passed the Federal Reserve's stress tests that simulated a severe recession. Analysts expect dividends to be increased by most large banks, but share repurchases are expected to be relatively subdued in the near term until the direction of the economy becomes more clear. Bank of New York Mellon (BK), JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), Goldman Sachs (GS), Morgan Stanley (MS), Truist Financial (TFC), Citigroup (C), and State Street (STT) are some of the banks in the spotlight for capital allocation developments. Seeking Alpha analyst Logan Kane thinks that while large banks are likely to weather the storm, dozens of smaller banks may fail over the next 12-18 months due to risky real estate loans and falling deposits. A light week of calendar events means that Apple's (AAPL) dalliance with a $3T market cap and Tesla's (TSLA) Q2 deliveries report could attract outsized attention.

Earnings spotlight: Thursday, July 6 - Levi Strauss (LEVI), Kura Sushi (KRUS), and Simulations Plus (SLP).

Earnings spotlight: Friday, July 7 - AZZ (AZZ) and Urban One (UONE).

Volatility watch: Short interest on both ImmunityBio (IBRX) and Kura Sushi (KRUS) is at more than 25% of total float. Options trading volume is elevated on Vroom (VRM) and FibroGen (FGEN) once again. Virgin Galactic (SPCE) continues to see huge price swings as longs and shorts battle it out.

IPO and spinoff watch: Prestige Wealth (PWM) and Chi Ko Holdings (CKHL) could price their IPOs next week. Looking ahead, analysts expect some companies to resume their IPO plans after a summer lull and with the macroeconomic visibility improving. Some of the bigger IPOs investors have been watching for include design software maker Canva, content company Reddit (REDDIT), online food delivery specialist Instacart (ICART), sports industry giant Fanatics (FANA), ticket site StubHub, and data management company Databricks.

Dividend watch: Companies forecast to boost their payouts include John B. Sanfilippo (JBSS) to $1.00 annually from $0.75, PNC Financial (PNC) to $1.60 quarterly from $1.50, and Bank OZK (OZK) to $0.36 quarterly from $0.35. See Seeking Alpha's list of Quick Dividend Stock Picks.

Automakers in the spotlight: Investors in the automobile sector have a busy week ahead with monthly deliveries reports or quarterly sales reports due in from manufacturers such as Tesla (TSLA), NIO (NIO), XPeng (XPEV), Li Auto (LI), Rivian Automotive (RIVN), Toyota Motor (TM), Ford Motor (F), General Motors (GM), and more. Looking at the U.S. auto sector broadly, S&P Global Mobility said mixed signals continue to prevail within a new demand environment. The forecast from S&P is for sales volumes over the next several months to not dynamically change much from the current trend. S&P Global Mobility projects full-year new vehicle sales volume to reach 15.1M to mark growth of 9% from last year's level. During the first week of July, monthly sales or quarterly deliveries reports will pour in from automakers such as Tesla (TSLA), Rivian Automotive (RIVN), General Motors (GM), Ford (F), and Toyota (TM). S&P thinks the reports will show signs of green shoots within the auto demand environment continued in June after solid volume levels were seen in April and May. For June, S&P Global Mobility projected new light vehicle sales volume to be up 17% year-over-year to 1.38M units. That tally would represent the 11th consecutive month in which volume has improved. "For the second consecutive month, auto sales volumes will be supported by month-end holiday programs," observed S&P analyst Chris Hopson. "That automakers have the ability to offer holiday clearance incentives is a positive sign. It also indicates that some of the concerns regarding new vehicle affordability, low inventories, macroeconomic uncertainty, rising interest rates, and tighter credit conditions are not causing retrenchment by consumers still in the market for a new vehicle," he added. Notably, S&P Global Mobility's proprietary analysis of advertised dealer inventory indicated June inventory levels remain consistent with the recent trend level of approximately 2.05M vehicles. Signs have emerged that manufacturers are working to preserve their strong pricing power at the expense of building back inventory levels at an excessive pace. Tesla (TSLA) +113% and Blue Bird (BLBD) +110% were the top gainers in the automobile sector for the first half of the year, while Zapp Electric Vehicles Group (ZAPP) -76% and Proterra (PTRA) -68% fell the most.

Eyes on BorgWarner: BorgWarner (BWA) is expected to complete the spin-off of PHINIA at the end of the day on July 3 to set up the stock to start trading on the New York Stock Exchange under the ticker symbol PHIN on July 5. PHINIA will consist of BorgWarner's Fuel Systems and Aftermarket segments. BorgWarner management previewed at an investor event that PHINIA is likely to be a double-digit margin supplier of fuel injection technologies and aftermarket products with a significant exposure to the commercial vehicle market. Meanwhile, the PHINIA spinoff sets up BorgWarner to move aggressively forward with its Charging Forward plan. The company aims to be the top non-captive inverter producer by 2025, as well as a market leader in high-voltage coolant eHeaters by 2025 and nab 11% market share in outsourced eMotors.

Corporate events: The holiday-shortened week has a nearly empty agenda of corporate events or conferences in the U.S. Across the Atlantic Ocean, Coty (COTY) will hold a Paris Investor Conference on July 6. The company said the event will provide a comprehensive overview of Coty, its strategic pillars and value proposition to the European investment community. Recent reports suggested Coty (COTY) is considering exploring a dual listing on the Paris Stock Exchange. In the healthcare sector, the highly-anticipated FDA action decision on the full approval of Eisai and Biogen's Alzheimer's disease drug Leqembi will be watched. An advisory panel of the FDA voted unanimously in June to recommend full approval of Leqembi. See a detailed list of key events for next week in Seeking Alpha's Catalyst Watch .

Quant ratings: Stocks with recent quant rating changes include Roivant Sciences (ROIV) to Strong Buy from Hold, Olin Corporation (OLN) to Buy from Hold, and Beyond Air (XAIR) to Strong Sell from Hold. See the stocks with the very highest rated Seeking Alpha Quant Ratings.

Box office preview: Disney's (DIS) Indiana Jones and the Dial of Destiny will debut over the extended holiday weekend. The fourth installment in the Harrison Ford-led franchise is forecast to bring in $65M in North America across 4,500 screens over the three-day weekend and about $90M for the five-day period through July 4th. The film is also expected to churn up an additional $80M in global markets over the opening weekend. The latest Indiana Jones film is the leadoff hitter in what the industry hopes will be a summer wave of blockbusters, including Mission Impossible 7, Barbie, and Oppenheimer later in July.

Barron's mentions: The cover story highlights the bargains in the real estate sector after a steep slide in commercial prices slammed share prices broadly. The publication noted that some areas of the sector are thriving, including warehouse/logistics properties and data centers. In addition, apartment owners are said to be enjoying healthy rental demand, as homebuyers remain sidelined due to high interest rates and macroeconomic pressures. For investors looking for value or income, the selling pressure on real estate stocks is noted to have led to cheaper valuations and higher dividend yields. The list of attractive real estate stocks called out included AvalonBay Communities (AVB), Equity Residential (EQR), Digital Realty Trust (DLR), Equinix (EQI), First Industrial Realty Trust (FR), Simon Property Group (SPG), Healthpeak Properties (PEAK), Kimco Realty (KIM), Cousins Properties (CUZ), and Highwoods Properties (HIW). In the tech sector, Rockwell Automation (ROK) was mentioned favorably this week due to its edge in automation and Alerian MLP (AMLP) made the list of best income plays for the second half of the year.

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