ACHR - Stocks To Watch: Spotlight On Amazon Microsoft Coca-Cola And eVTOL Players

2023-10-21 10:30:00 ET

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A huge week of earnings reports has the potential to shift the focus of investors away from the headlines on Middle East and surging Treasury yields. Some of the heavyweights due to report include Amazon (AMZN), Microsoft (MSFT), Meta Platforms (META) ( preview ), Coca-Cola (KO) ( analysis ), AbbVie (ABBV) ( analysis ), and Chevron (CVX) ( analysis ). Notable events on the calendar include Qualcomm's (QCOM) Snapdragon Summit and the shareholder vote at Capri Holdings (CPRI) on the Tapestry (TPR) mega-merger of apparel giants that aims to bring Versace, Coach, Michael Kors, Kate Spade, Jimmy Choo, and Stuart Weitzman under one umbrella. Interest rates will also be top of mind with investors. The European Central Bank will announce its interest rate decision on October 26. The ECB is expected to hold rates steady after firing off 450 points of rate hikes since July of 2022. As for the Federal Reserve, members will be in a blackout period ahead of the next FOMC meeting in November, but the "higher for how much longer" guessing game will go on. For its part, BNP Paribas expects the Federal Reserve to hold rates steady for the rest of 2023, and not lower rates until June of 2024, while Seeking Alpha analyst John M. Mason reminded that the Fed has no intention to go soft on inflation and Seeking Alpha analyst Mott Capital Management warned the Fed's policy challenges are also a stock market obstacle.

Earnings spotlight: Monday, October 23 - Packaging Corporation of America (PKG) and Brown & Brown (BRO)

Earnings spotlight: Tuesday, October 24 - Microsoft (MSFT), Alphabet (GOOG), Visa (V), Coca-Cola (KO), Texas Instruments (TXN), and General Electric (GE).

Earnings spotlight: Wednesday, October 25 - Meta Platforms (META), T-Mobile US (TMUS), Thermo Fisher Scientific (TMO), Boeing (BA), and General Dynamics (GD).

Earnings spotlight: Thursday, October 26 - Amazon.com (AMZN), Mastercard (MA), Merck & Co. (MRK), Intel (INTC), Altria (MO), Chipotle Mexican Grill (CMG), Northrop Grumman (NOC), and United Parcel Service (UPS)

Earnings spotlight: Friday, October 27 - Exxon Mobil (XOM), Chevron (CVX), AbbVie (ABBV), and Charter Communications (CHTR).

Volatility watch: Short interest levels are elevated on Groupon (GRPN), Zynex (ZYXI), and C3.ai (AI). Options trading volume has moved higher in the last few days on electric vehicle makers Tesla (TSLA) and Nikola (NKLA). The most overbought stocks per their 14-day relative strength index are Acurx Pharmaceuticals (ACXP), PCTEL (PCTI), and MMTec (MTC). The most oversold stocks per their 14-day Relative Strength Index are Aldeyra (ALDX), Seres (MCRB), and Redfin (RDFN).

Dividend watch: Companies projected to boost their quarterly dividend payouts include LKQ Corporation (LKQ) to to $0.30 from $0.275, WestRock (WRK) to $0.30 from $0.275, Rollins (ROL) to $0.15 from $0.13 See Seeking Alpha's list of Quick Dividend Stock Picks.

IPO watch: Mach Natural Resources (MNR) is expected to price its IPO and begin trading during the week. The company, which operates as an upstream oil & gas exploration company in the Anadarko Basin in the U.S., expects to sell 10M shares in a price range of $19 to $21. Also on the calendar, quiet periods end on VS MEDIA (VSME), Lead Real Estate (LRE), Adlai Nortye (ANL), and Syra Health (SYRA) to open up analysts to post ratings.

Microsoft earnings preview: Microsoft (MSFT) is due to report earnings on October 24 with expectations for revenue of $54.5B and EPS of $2.65 to be churned up. Commercial cloud revenue is forecast to jump to $31B in Q3 and be a highlight of the report. The Seattle tech giant is expected to churn up adjusted operating income of $24.1B on a margin rate of 44.3%. The bull thesis on Microsoft hinges in parts on the three A's (Azure, AI, & Activision), while the cautious view on the tech giant is that the macroeconomic backdrop and high level of interest rates will keep the valuation in check. The very latest read from Evercore ISI on the Microsoft print is that Azure revenue guidance may surprise to the upside. Other factors seen working in Microsoft's favor are easier Windows comparisons in 2024, O365 copilot monetization, continued growth in demand for Azure AI services, the impact of Activision on gaming estimates, further share gains in security, and a continued balance between revenue and op-ex growth. The firm's view is that at 29X CY24 EPS, Microsoft remains an attractive EPS/cash flow compounding story with a significant amount of upside optionality around AI, cloud and gaming over the next few years. Morgan Stanley said it remains firmly convinced that there is a large opportunity ahead of Microsoft within Generative AI and the company's strong positioning to execute to that opportunity, however warned investors must keep in mind the timing of enterprise adoption cycles in setting expectations for upcoming results. On Seeking Alpha, analyst JR Research is with expectations still running high for MSFT as we head into its fiscal first-quarter earnings release, a worse-than-expected report by the company could send holders running for cover. That could open up a more attractive opportunity for patient investors to capitalize. Options trading on Microsoft implies a 5.5% swing in share price after the report drops.

Coca-Cola earnings preview: Organic revenue is forecast to rise 6.9% during the quarter off a 6.2% increase in pricing and 1.3% increase in unit volume, which will offset negative impacts from FX and M&A. Organic revenue for the North America segment is forecast to be up 4.8%. Evercore ISI said that heading into the end of 2023, investor attention is now shifting to 2024. The firm noted that commercial momentum remains strong to support the top line, but Coca-Cola will see less pricing benefits as the company laps 2022-2023 actions and returns to a more normal 2% to 3% environment. While lower pricing is a potential headwind, input costs continue to moderate and, despite remaining inflationary, are likely much less of a headwind in 2024 than 2023. On the earnings call, Coca-Cola (KO) executives could be asked to discuss the consumer environment, tax litigation, strategies for the Costa business, and any potential impact from GLP-1 weight loss drugs. Coca-Cola (KO) could also delve into its plans with alcohol partnerships. The beverage giant just announced a new partnership with Pernod Ricard SA (PDRDF) to debut Absolut Vodka & Sprite as a ready-to-drink pre-mixed cocktail in 2024. Nielsen data over the summer indicated that prepared cocktails continued to be the fastest growing category in distilled spirits. High Noon, Anheuser-Busch's (BUD) Cutwater Spirits and Jose Cuervo products all were red-hot during the summer with consumers.

All things eVTOL: The eVTOL Show USA is also on the calendar in the week ahead. The event will feature participation from Eve Air Mobility, Archer Aviation (ACHR), and (AMPX). The eVTOL industry has created quite a bit of buzz in the last few weeks. Archer Aviation announced an agreement with the Abu Dhabi Investment Office to make Abu Dhabi its first international launch partner, with plans to commence air taxi operations in 2026. Archer Aviation (ACHR) also disclosed that the U.S. Air Force provided the company with its first installment of nearly $1M on their recently announced contracts valued at up to $142 million. Meanwhile, Joby Aviation (JOBY) CEO JoeBen Bevirt set an ambitious target to launch its commercial air taxi service in 2025. Notably, Joby delivered its first eVTOL to the Air Force last month and expanded its flight test program to include flying with a pilot on board the aircraft. Archer Aviation (ACHR), Volocopter, and Vertical Aerospace (EVTL) also have plans for commercial eVTOL use in the 2025-2026 timeframe. Japan's Nidec (NJDCY) and Brazil's Embraer (ERJ) also turned some heads after receiving approval from all necessary regulatory authorities for the establishment of their joint venture, Nidec Aerospace LLC. EHang Holdings (EH) also posted its highest close in nearly two years Friday last week after the Civil Aviation Administration of China approved the start of trial air taxi operations this year, a step toward its goal of launching the world's first commercial service using passenger-carrying unmanned aerial vehicles. Lilium (LILM) is also attracting attention after it struck a partnership with a full-service air brokerage and management company to connect the company to the private jet market.

Key events: Qualcomm (QCOM) will update on its innovation plans as part of the company's Snapdragon Summit on October 24. The Women's Wear Daily Apparel & Retail CEO Summit will feature a long list of notable speakers, including Macy's (M) CEO Jeff Gennette, Prada (PRDSY) CEO Andrea Guerra, Abercrombie & Fitch (ANF) CEO Fran Horowitz, Saks CEO Marc Metrick, and Neiman Marcus Group CEO Geoffrey Van Raemdock. Anthropic Co-founder and Chief Scientist Jared Kaplan will be one of the speakers at the Bloomberg Technology Summit. Amazon (AMZN) recently disclosed that it will invest up to $4B in the San Francisco-based artificial intelligence ((AI)) startup. On October 25, shareholders with Capri Holdings (CPRI) will vote on the takeover offer from Tapestry (TPR).

Conference schedule: The conference schedule is light next week, but NeuroBo Pharmaceuticals (NRBO), Akero Therapeutics (AKRO), Sagimet Biosciences (SGMT), and other healthcare firms will present at the H.C. Wainwright 7th Annual NASH Investor Conference. The Robin Hood conference will take place in New York on October 24-24. The event will feature stock picks and investing discussions. Participants include Stanley Drunkenmiller, Paul Tudor Jones II, David Einhorn, James Chanos, Citadel, Point72, Glenview Capital Management, Muddy Waters, and OpenAI's Sam Altman.

Quant ratings: Stocks with recent quant rating changes include Berkshire Hathaway (BRK.B) to Strong Buy from Hold, Qorvo (QRVO) to Buy from Hold, and ContextLogic (WISH) to Sell from Hold. See the stocks with the very highest rated Seeking Alpha Quant Ratings.

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