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The week ahead will include a major focus on economic releases, with the Fed’s favorite inflation gauge and the August jobs report both due to arrive. The hawkish tone from Federal Reserve Chairman Jerome Powell was an indication that there won’t be much slack in the battle to bring down inflation, while the jobs report on September 1 will be the last such release before the central bank’s meeting on September 20. Economists expect payroll gains to moderate to 150K in August from 187K in July, and for the unemployment rate to tick up to 3.6% from 3.5%. Hourly earnings growth is forecast to slow to +0.3% month-over-month from +0.4%. The economic reports will arrive with Treasury yields on the march higher and futures trading pricing in roughly a two-thirds probability that the central bank will boost its key interest rate by a quarter percentage point in November after a pause in September. In geopolitics, a key event that could impact trading next week will be U.S. Commerce Secretary Gina Raimondo’s visit to China from August 27-30. Amid high U.S.-China tensions, developments from the visit could impact certain stocks depending on the outcome, particularly in the semiconductor sector. Meanwhile, the earnings calendar includes key reports from Salesforce (NYSE:CRM) (analysis), Broadcom (AVGO) (preview), and Lululemon (LULU) (preview). Other items to watch include potential new regulations from the FDIC in midsize lending and the release by the Biden Administration of the first 10 prescription drugs selected for Medicare price negotiations. In the tech sector, investors will be on alert for updates from the Google Cloud Next Conference, the Jeffries Semiconductor, IT Hardware and Communications Infrastructure Summit, and the Deutsche Bank 2023 Technology Conference.
Earnings spotlight: Monday, August 28 – Nordic American Tankers (NAT) and Baozun (BZUN).
Earnings spotlight: Tuesday, August 29 – Best Buy (BBY), J.M. Smucker (SJM), PDD Holdings (PDD), Bank of Montreal (BMO), HP (HPQ), NIO (NIO), and Bank of Nova Scotia (BNS).
Earnings spotlight: Wednesday, August 30 – Salesforce (CRM), CrowdStrike (CRWD), Brown-Forman (BF.A), and Five Below (FIVE).
Earnings spotlight: Thursday, August 31 – Campbell Soup (CPB), Broadcom (AVGO), UBS Group (UBS), VMware (VMW), Dell Technologies (DELL), and lululemon (LULU).
Volatility watch: Short interest levels moved higher again on Applied Optoelectronic (AAOI) and C3.ai (AI). Options trading volume on Digital World Acquisition (DWAC) has picked up after former President Trump returned to posting on X/Twitter. VinFast (VFS) is on watch to cool off after a sizzling rally that took the market cap of the Vietnamese electric vehicle stock to higher than the caps of General Motors (GM) and Ford (F) combined.
IPO and spinoff watch: Inspire Veterinary Partners (IVP) is expected to price its $28M IPO and start trading on August 29. The company is looking to scale up in the veterinary hospital market. Quiet periods expire on Financial (NASDAQ:BVFL), Pixie Dust Technologies (NASDAQ:PXDT), Mira Pharmaceuticals (NASDAQ:MIRA), Hanryu Holdings (NASDAQ:HRYU), and Cheetah Net Supply Chain Service (NASDAQ:CTNT) to free up analysts to post ratings. The filing by Instacart (CART) of its long-awaited IPO could create some buzz over other major IPOs on the pending list.
Dividend watch: Companies projected to boost their quarterly dividend payouts include Verizon (NYSE:VZ) to $0.665 from $0.6525. At the current share price, the increase would give new investors a dividend yield of 7.97%, which would rank near the top of all S&P 500 Index stocks. See Seeking Alpha’s list of Quick Dividend Stock Picks.
Chinese EV sector: Investors will be watching the Chinese electric vehicle sector closely next week, with industry data due out. Chinese EV stocks have cooled off after a strong rally in July, due in part to concerns over the macroeconomic backdrop and high interest rates. Adding to the caution, another recent round of price cuts and promotions in the broad China auto market could pressure margins even further in the back half of the year, warned Mizuho. The firm pointed to new price cuts from Geely (OTCPK:GELYF), Hozon Auto, Great Wall Motor (OTCPK:GWLLF), Leapmotor, Volkswagen (OTCPK:VLKAF) and NIO (NIO). As has been widely reported, Tesla (TSLA) has fired off several rounds of price cuts in China during the summer in order to boost demand. The Austin, Texas-based electric vehicle company began cutting vehicle prices in the Chinese market around a year ago, which led to a discount war that saw several other local EV makers reduce their prices to remain competitive. Meanwhile, XPeng (XPEV) just posted its largest quarterly loss ever with its Q2 earnings report, due in part to lower EV prices. Looking ahead, NIO (NIO) will report earnings on August 29 to expectations for another quarterly loss and the monthly deliveries reports will arrive from major China EV players on September 1.
Lululemon earnings preview: Lululemon (LULU) steps into the earnings batter’s box after a rough week for retail that saw Dick’s Sporting Goods (DKS), Foot Locker (FL), and Peloton Interactive (PTON) all plummet following their earnings reports. Consensus estimates for Lululemon (LULU) are for revenue of $2.17B to be reported and EPS of $2.54. Same-store sales are forecast to jump 11.4% from a year ago, including a 7.6% increase at stores and 13.8% rise in online sales. The two-year same-store sales comparison is expected to show a blistering increase of 37.3%. Gross margin is expected to be 58.5% of sales in Q2 and operating margin is anticipated to be 21.1% of sales. Ahead of the report, Seeking Alpha analyst Geoffrey Seiler warned the LULU brand is not completely immune to macro factors and competition. On Wall Street, Citi expects a beat-and-raise quarter from Lululemon that will support its view that the company is in the early stages of significant international growth, particularly in China. Looking further ahead, Bank of America expects Lululemon (LULU) to show a continuation of balanced growth across products, gender, and channels that will drive confidence that the playbook of diversified growth remains intact. “While we expect China to lead the growth, we are confident that newness and innovation will lead to strong sales in North America,” updated the firm. Bank of America’s price objective of $450 on LULU $450 is based on a 19X EV/EBITDA multiple vs. the 16X multiple today. On a historical basis, LULU is noted to have traded at a 6X premium on P/E to Nike vs. the current 2.5X multiple. As the company continues to track above its medium-term sales algorithm and deliver on margin expansion, BofA expects the multiple to continue to rerate higher and give shareholders a larger premium.
Luxury thoughts: In a bit of a contrarian move, Roundhill Investments launched the Global Luxury ETF (NYSEARCA:LUXX) at a time when consumer discretionary spending is showing plenty of signs of cracking. The LUXX fund manager noted that luxury companies have historically benefited from strong pricing power and high margins, driving significant free cash flow generation. Luxury stock fundamentals were noted to have translated into long-term price performance, as evidenced by the S&P Global Luxury Index, which has generated an annualized total return of 11.8% since its launch in 2011. Some of the top holdings of the Roundhill Global Luxury ETF at its inception were Hermès International (OTCPK:HESAF), LVMH Moet Hennessy Louis Vuitton SE (OTCPK:LVMHF), Compagnie Financière Richemont SA (OTCPK:CFRHF), Mercedes-Benz Group AG (MBGAY), Kering SA (OTCPK:PPRUF), Ferrari NV (RACE), Diageo PLC (DEO), Nike (NKE), Pernod Ricard SA (OTCPK:PDRDF), and Tesla (TSLA).
Stock splits: Faraday Future Intelligent Electric (FFIE) fired off a 1-for-80 reverse stock split that becomes effective on August 28. The 3-for-2 stock split for Rush Enterprises (RUSHA) will become effective on August 29. The 2-for-1 Distributions Solutions Group (DSGR) stock split will become effective on September 1.
Quant ratings: Stocks with recent quant rating changes include Zuora (ZUO) to Strong Buy from Hold, Teladoc Health (TDOC) to Buy from Hold, and AST SpaceMobile (ASTS) to Strong Sell from Hold. See the stocks with the very highest rated Seeking Alpha Quant Ratings.
Box office special: The U.S. box office has already seen eight movies top $200M in gross this year, led by Warner Bros.’ (WBD) Barbie at $575M and Universal Pictures (CMCSA) The Super Mario Bros. Movie, but the industry is looking to keep the strong run going. As part of the second annual National Cinema Day on August 27, movies will be priced at just $4 at more than 3K participating theaters operated by leading chains AMC (AMC), Cineworld’s (OTCPK:CNNWQ) Regal, Cinemark (CNK), and Marcus (MCS). IMAX (IMAX) could also get a weekend boost if the summer box office stays hot.
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
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