OKYO - Stocks To Watch: Retail Earnings Debt Standoff And ChatGPT Goes To DC

2023-05-13 10:00:00 ET

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The ticking bomb of a potential default by the U.S. government will be front and center with investors again next week. Treasury Secretary Janet Yellen will meet with JPMorgan Chase (JPM) CEO Jamie Dimon, Citigroup (C) CEO Jane Fraser and other board members of the Bank Policy Institute in Washington to discuss the debt limit talks. Dimon has already warned that markets will be gripped by panic as the U.S. approaches a possible default on its sovereign debt. On the same theme, Seeking Alpha analyst Logan Kane advised that the standoff could be even worse for markets than anticipated.

The economic calendar will include the release of the retail sales report on May 16. Economists forecast a 0.7% month-over-month increase in the headline number with auto sales cruising in stronger during the month. After stripping out the auto and gas categories, retail sales are expected to show a 0.2% gain. Other key reports out during the week include updates on industrial production, business inventories, housing starts, and initial jobless claims. The earnings calendar includes a heavy focus on the retail sector with Home Depot (HD) ( preview ), Target (TGT) ( analysis ), Walmart (WMT) ( analysis ), Fiverr International (FVRR) ( preview ) and Foot Locker (FL) all reporting. Investor events are scheduled for Dave & Buster's Entertainment (PLAY), ON Semiconductor (ON), BlackBerry (BB), and Illinois Tool Works (ITW) that could include long-term guidance and strategy updates.

Earnings spotlight: Monday, May 15 - XP (XP), Tower Semiconductor (TSEM), and Nu Holdings (NU).

Earnings spotlight: Tuesday, May 16 - Home Depot (HD), Sea Limited (SE), and Baidu (BIDU).

Earnings spotlight: Wednesday, May 17 - Cisco (CSCO), Target (TGT), TJX Companies (TJX), Jack in the Box (JACK), and Take-Two Interactive (TTWO).

Earnings spotlight: Thursday, May 18 - Walmart (WMT), Alibaba (BABA), Applied Materials (AMAT), Farfetch (FTCH), Canada Goose (GOOS), and Ross Stores (ROST).

Earnings spotlight: Friday, May 19 - Deere (DE) and Foot Locker (FL).

Volatility watch: Short interest on department store stocks Kohl's (KSS) and Nordstrom (JWN) is elevated ahead of upcoming earnings reports. Options trading volume is elevated in general on Vroom (VRM) and DISH Network (DISH). Options trading also implies a large share price move for Trevena (TRVN) following its earnings report on May 15.

IPO watch: Strong Global Entertainment (SGE) is once again expected to start trading after failing to price its IPO last week. The movie screen company downsized its IPO to $5M from $8M. Also next week, the IPO lockup period expires for certain blocks of shares of Acrivon Therapeutics (ACRV), Actelis Networks (ASNS), Clearmind Medicine (CMND), Visionary Education Technology Holdings Group (VEDU), and OKYO Pharma (OKYO). Acrivon is the only stock in the group that trades near its opening day price. The quiet periods expire on U Power Limited (UCAR), Top KingWin (TCJH), Wang & Lee Group (WLGS), and Trio Petroleum (TPET) to free up analysts to post ratings.

Dividend watch: Companies forecast to boost their quarterly payouts include Northrop Gruman (NOC) to $1.89 from $1.73, Lennox International (LII) to $1.15 from $1.06, Advanced Drainage (WMS) to $0.13 from $0.12. and LCI Industries (LCII) to $1.10 from $1.05. See Seeking Alpha's list of Quick Dividend Stock Picks.

Spotlight on AI: AI will be a major topic next week with investors in the wake of the strong reception to Google's (GOOG) (GOOGL) I/O event that was called a clearing event by some analysts. Of note, OpenAI CEO Sam Altman will participate in a bipartisan discussion at the U.S. Capitol on May 15 on the topic of AI and the future. OpenAI's ChatGPT has disrupted thinking on the integration of artificial intelligence into the business world. Following the launch of ChatGPT, OpenAI is now one of the fastest growing websites on the planet and is closing in on generating one billion unique visitors per month. However, lawmakers want to tackle some of the security concerns from inside and outside the tech industry. Altman said recently that he thinks Meta Platforms (META) could be a "surprising" new real player in artificial intelligence after an initial foray into AI that was called confused at best. Nvidia (NVDA) and Advanced Micro Devices (AMD) continue to generate AI buzz. Meanwhile, the question with Microsoft (MSFT) may be just how much AI monetization should be baked into the share price. In late January, Microsoft (MSFT) first announced a "multiyear, multibillion dollar" investment in OpenAI that has now become part of the investing thesis on the stock. ChatGPT had a dramatic impact on the earnings season for the first time in Q1 with investors looking a little closer at which companies could face an existential threat from AI products and services. Shockingly, online learning firm Chegg (CHGG) plunged nearly 50% after management warned that ChatGPT had a negative impact on new customer growth beginning in March due to student interest spiking in the new AI tool. The fear is that ChatGPT may replace many of Chegg's (CHGG) services relied on by students. In the week ahead, Chegg (CHGG) execs may update on the company's own AI initiative at an investor conference.

Retail heavyweights: The earnings season will pivot to a major focus on the retail sector next week with Home Depot (HD), Target (TGT), Walmart (WMT), and Foot Locker (FL), some of the big names due to step into the earnings confessional. For its part, Morgan Stanley said it is approaching the Q1 retail earnings rush cautiously. "Durable goods reversion is accelerating, big ticket discretionary purchases are slowing, price gains are moderating and promotions are trickling back in," noted analyst Simeon Gutman. While valuations screen as fair for the most part, Gutman advised that investors should continue to hunker down in defensive names like Dollar Tree (DLTR), Walmart (WMT), and BJ's Wholesale Club (BJ). Walmart (WMT) is forecast to report revenue of $38.4B and EPS of $3.82 for Q1. Analysts think the retail giant could surprise to the upside, yet still hold full-year guidance level in order to keep a cautious stance on the macroeconomic climate. Walmart is beginning to lap some quarters of high labor and transportation costs, which may make it easier to find EPS upside. Home Depot (HD) cruises into earnings with analysts expecting revenue of $38.4B and EPS of $3.82 to be reported. The home improvement retailer has a strong track record on earnings day over the last two years, beating EPS estimates in the past eight quarters and revenue estimates in seven of the past eight quarters. The key question for investors may be whether Home Depot will reiterate or lower its full year guide due to macroeconomic factors.

Corporate events: Dave & Buster's Entertainment (PLAY) will hold a virtual Investor Day event on May 16. The company has tipped off that its long-term strategies and targets will be discussed. ON Semiconductor (ON) has a financial analyst meeting set for May 16. Bank of America has circled the ON event as a potential share price catalyst with new long-term revenue growth targets anticipated and the company's role with automated, connected and electrified cars likely to be highlighted. BlackBerry's (BB) Analyst Day event on May 17, and Illinois Tool Works' (ITW) in-person investor conference on May 18 also have the potential to perk up shares. In the healthcare sector, the four-day American Society of Gene + Cell Therapy Meeting could create some ripples. The conference calendar is also loaded next week with notables including the JMP Securities Life Sciences Conference, MoffettNathanson Technology, Media, and Telecom Conference, J.P. Morgan Homebuilding & Building Products Conference, RBC Capital Markets Global Healthcare Conference, Needham Technology & Media Conference, BMO Capital Markets Global Farm to Market Conference, Evercore Battery Metals Conference, and Bank of America Transportation, Airlines, and Industrials Conference. Check out Seeking Alpha's Catalyst Watch for more events scheduled for next week.

Quant ratings: Stocks with recent quant rating changes include Duolingo (DUOL) to Strong Buy from Hold, Take-Two Interactive Software (TTWO) to Buy from Hold, and WideOpenWest (WOW) to Sell from Hold. See the stocks with the very highest rated Seeking Alpha Quant Ratings .

Barron's mentions: The publication tackled the opportunities in the space industry this week. The increasing frequency of rocket launches and shrinking costs of satellites were said to create early opportunities in space. While launches are the cornerstone for the space industry, areas of growth also include communications applications, Earth observation, satellite services, and construction. In the future, permanent moon installations and commercial space stations could provide even more opportunities for growth. For investors, the space sector has been a rough play to be parked in. The SPAC survivors are AST SpaceMobile (ASTS), Astra Space (ASTR), BlackSky Technology (BKSY), Momentus (MNTS), Planet Labs (PL), Rocket Lab USA (RKLB), Spire Global (SPIR), and Virgin Galactic Holdings (SPCE). The legacy space players are Globalstar (GSAT),Viasat (VSAT), and Iridium Communications (IRDM) still have big plans, while the old guard of Boeing (BA) and Lockheed Martin (LMT) is also highly active. A real blast of excitement for space investors could be SpaceX (SPACE) setting Starlink free in an IPO, per the Barron's reasoning.

Sources: EDGAR, Bloomberg, CNBC, Reuters

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