FUV - Stocks To Watch: Spotlight On AI Buzz May Jobs Report And Disney's Mermaids

2023-05-27 09:30:00 ET

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Investors head into next week positioned as if the U.S. debt ceiling crisis will be resolved one way or another. If that is the case, the tech sector could be a major focus after Nvidia (NVDA) recorded the single biggest one-day in market cap rise in the history of the market with its post-earnings surge in share price of more than 25%. It is likely the debate on Nvidia to ratchet up following the AI-inspired rally. Seeking Alpha analyst Dominic Rinaldi thinks the bull investment thesis on Nvidia is based on the view that we are at the beginning stages of what could be considered the fourth industrial revolution, while The Asian Investor warned investors may want to consider selling shares due to the expensive price-to-sales ratio now in play.

The earnings calendar slows down dramatically in the week ahead, although big reports are due out from Salesforce (CRM) ( preview ), Broadcom (AVGO) ( analysis ), and Dollar General (DG) ( analysis ). The corporate calendar includes key events for United Rentals (URI), Faraday Future (FFIE), Walmart (WMT), and Arcimoto (FUV).

The major economic release of the week will be the May jobs report on June 2. A drop in monthly payroll additions to 180K from 253K in April is anticipated and the unemployment rate is seen inching up to 3.5% from 3.4%. Average hourly earnings are forecast to decline to a +0.3% pace from +0.5% in April. The jobs report will arrive less than weeks before the next FOMC meeting and is likely to kick off more debate on if the Fed will raise rates again. Seeking Alpha Investing Group Leader Lawrence Fuller thinks the central bank is likely to stand pat with rates based on the incoming economic data over the next two weeks. "Labor market strength is not disrupting the disinflationary trend or the gradual decline in wage growth. It is the best of both worlds, which is how we arrive at a soft landing," predicted Fuller.

Earnings spotlight: Tuesday, May 30 - HP (HP), Hewlett Packard Enterprise (HP), Ambarella (AMBA), and Box (BOX).

Earnings spotlight: Wednesday, May 31 - Salesforce (CRM), Crowdstrike (CRWD), Chewy (CHWY), and Netapp (NTAP).

Earnings spotlight: Thursday, June 1 - Broadcom (AVGO), Dollar General (DG), Lululemon Athletica (LULU), Dell Technologies (DELL), Macy's (M), and Zscaler (ZS).

Volatility watch: Options trading volume is elevated in general on Akebia Therapeutics (AKBA), Icahn Enterprises (IEP), and Nikole (NKLA).

IPO and spinoff watch: The quiet periods expire on Kenvue (KVUE) and Acelyrin (SLRN) will end to open analysts up to post ratings on the stocks. On the spinoff front, Knife River Corporation (KNF) will start trading after being spun off from MDU Resources (MDU). The spinoff of the construction materials and contracting business will occur by means of a pro rata distribution of approximately 90% of the outstanding shares of Knife River common stock to MDU Resources stockholders of record as of the close of business May 22. Knife River will be added to the S&P MidCap 400 prior to the open of trading on June 1. MDU Resources Group will remain in the S&P MidCap 400 as well.

Dividend watch: Companies forecast to boost their quarterly payouts include NetApp (NTAP) to $0.52 from $0.50, Ralph Lauren (RL) to $0.775 from $0.75, and Alexandria Real Estate (ARE) to $1.24 from $1.21. See Seeking Alpha's list of Quick Dividend Stock Picks.

Salesforce earnings preview: Salesforce (CRM) will report earnings on May 31. Analysts expect the tech company to disclose revenue of $8.17B and EPS of $1.61 for the quarter. Shares of the San Francisco-based CRM software provider have surged over 50% higher to start the year. Of note, the cloud computing company’s generative AI for CRM, Einstein GPT, has attracted attention ahead of the print. Recent checks by Wedbush Securities indicated increased deal stability in the field for Salesforce. "While the macro is not roses and rainbows and CRM is still battling through various headwinds, overall we saw stronger cross-sell activity this quarter and particular strength out of the Tableau front with a number of larger more transformational suite wide deals inked during the quarter," noted analyst Dan Ives. Options trading implies a 8% swing for shares after the report drops. Salesforce rallied 12% after its last earnings report. Stocks that correlate very highly with Salesforce on earnings day include Oracle (ORCL) and SAP (SAP).

U.S. auto sales preview: S&P Global Mobility forecast new light vehicle sales volume will increase 18% in May to reach 1.31M units in a pace that works out to an estimated seasonally adjusted annual rate of 14.5M units. S&P noted supply chain issues have continued to ease, resulting in consistent increases in retail advertised inventory levels. "With increased supply comes increased negotiating power for consumers in the market for a new vehicle – as 40% of vehicle listings now reflect a price below MSRP, compared to less than 25% a year ago," updated S&P director Matt Trommer. For now, auto prices are still strong as data from J.D. Power and LMC Automotive indicated the average transaction price rose 0.7% year-over-year in May to $45,838 to mark a new record for the month. As always, the pace of EV sales will be closely watched amid new concerns the confusing new electric vehicle tax credit rules could impact demand. The new requirements have significantly reduced the number of vehicles that qualify for the full credit, creating downward pressure on the affordability of EVs. However, J.D. Power's Elizabeth Krear noted the restrictions does not apply when EVs because the vehicles are technically classified as commercial. "This makes the lessor eligible for the $7,500 credit, giving them the option to pass that credit along to customers," she highlighted. Of note, lease affordability has surpassed purchase affordability in the J.D. Power EV Index, suggesting that EV lease volumes will surge during the next several months. The leasing trend could be an important component for electric vehicle sellers such as Tesla (TSLA), Rivian Automotive (RIVN), Fisker (FSR), Lucid Group (LCID), General Motors (GM), and Ford (F).

Corporate events: Arcimoto (FUV) will host an Analyst and Investor Day on May 30 with the theme "Driving the Future Forward." United Rentals (URI) will host an Investor Day in New York City on May 31. Management is scheduled to provide an in-depth review of the company's strategy, key initiatives, and financial performance. Nikola (NKLA) CEO Michael Lohscheller will participate in a CEO Fireside Chat and Q&A Platform being held for stockholders on June 1. Arrowhead Pharmaceuticals (ARWR) will host a Research & Development Day in New York City on June 1 to discuss progress towards the company’s "20 in 25" goal to grow its pipeline of RNAi therapeutics that leverage the proprietary Targeted RNAi Molecule platform to a total of 20 clinical stage or marketed products in the year 2025. Also on June 1, Walmart (WMT) will hold its Associate Celebration and host a Question-and-Answer session with the investment community to be led by CEO Doug McMillon. See a detailed list of key events for next week in Seeking Alpha's Catalyst Watch .

Investor conferences: The conference schedule heats up next week, led by the Computex conference in Taipei with this year's main themes including HPC, Artificial Intelligence Application, Next-Gen Connectivity, Hyperreality, Innovations & Startups, and Sustainability. Nvidia (NVDA) CEO Jensen Huang and Super Micro Computer (SMCI) CEO Charles Liang are two of the Computex keynote speakers. Other notable conferences on the schedule include KeyBanc Industrials & Basic Materials Conference, TD Cowen Technology, Media & Telecom Conference, Bernstein 39th Annual Strategic Decisions Conference, Evercore Diamonds in the Rough SMID-Cap Conference, Jefferies Software Conference, and Mizuho Auto Technology Conference. The Bernstein conference stands out as one that has led to some share price moves in the past from presenting companies. This year's slate includes Rivian Automotive (RIVN), Union Pacific (UNP), Restaurants Brands International (QST), Estee Lauder (EL), Kraft Heinz (KHC), Rent the Runway (RENT), eBay (EBAY), and Yum Brands (YUM).

Quant ratings: Stocks with recent quant rating changes include Cantaloupe (CTLP) to Strong Buy from Hold, Vimeo (VMEO) to Buy from Hold, and Big Lots (BIG) to Sell from Hold. See the stocks with the very highest rated Seeking Alpha Quant Ratings.

Box office preview: The holiday weekend is likely to be dominated by Walt Disney's (DIS) live-action remake of its animated classic The Little Mermaid. The film drew $10.3M in Thursday previews and dives into 4,300 domestic theaters for the extended weekend. Tracking suggests The Little Mermaid is on pace for at least the $100M mark for the usual three days, and more like $120M-plus for the holiday period. The other Memorial Day weekend box office contenders will be Lions Gate's (LGF.A) (LGF.B) family comedy About My Father with Robert De Niro, Sony's (SONY) Russian-mob comedy The Machine, and A24 comedy You Hurt My Feelings with Julia Louis-Dreyfus.

Barron's mentions: Wynn Resorts (WYNN) is profiled favorably this week with the casino stock called much more than a Macau recovery play. The company's Las Vegas operations are noted to be still firing on all cylinders and Wynn is thinking growth by building casinos elsewhere to help expand its footprint beyond just the two global gambling centers. Wynn Resorts (WYNN) also recently announced that it will resume paying a quarterly dividend. The cryptocurrency market was also looked at positively this week in a cover story that drove home the point big funds and companies are still putting capital in. While the crypto crash has clearly slowed projects, people are not leaving the sector and the narrative on the utility of crypto is said to still be alive.

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