Are These The Best Stocks To Trade This Week?
The stock market has gotten off to a choppy start in September. For this reason, investors are likely to keep a close eye on how the markets are going to move. Steep declines last week dragged the Nasdaq to its worst weekly performance since March. While no one can be exactly sure what sent the stocks down, it can probably be attributed to a few factors. The uncertainty lingering around the U.S. presidential election, the lack of speedy progress on Congress’s stimulus bills, and a healthy dose of profit-taking.
The recent earnings from top software stocks proved their stance of being the beneficiary from the coronavirus pandemic, which most of them have reported better than expected earnings. For instance, Salesforce (CRM Stock Report) and DocuSign (DOCU Stock Report) have both reported strong earnings but have tumbles along with the broader market. This week, only a handful of major companies are reporting earnings. Amongst them are Peloton, Slack, and Lululemon Athletica. Of course, Peloton and Slack are looking like “winners” during the pandemic as most people continue to stay home to work and study. Can we expect these stocks to reverse the bearish momentum if their earnings beat expectations?
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Top Stocks To Trade Ahead Of Earnings: Peloton
The first stock on the list, Peloton (PTON Stock Report) expects to report its quarterly results later this week. It saw a 170% run-up in shares year-to-date. Many analysts have appeared to be optimistic about the prospects of the fitness company amid nationwide closure or limited opening of gyms. And in some parts of Asia, gyms are mandating people to wear masks while exercising.
“Peloton is on our US Analyst Focus List and is one of our top picks along with Amazon (AMZN Stock Report), Facebook (FB Stock Report), and Snapchat (SNAP Stock Report),” JPMorgan analyst Doug Anmuth said in a note last week. “We continue to like shares into earnings and believe there is significant upside potential to consensus estimates both near- and long-term.”
Like many work-from-home stocks, some investors are speculating that the demand will dry up once the pandemic is over. Meaning, Peloton’s biggest near-term challenge would most probably be to keep up with the elevated demand for its bike delivery. That said, would you sell, hold or buy PTON stock this week?
Top Stocks To Trade Ahead Of Earnings: Slack
Next up, Slack (WORK Stock Report) has experienced rapid growth helping employees communicate more efficiently. And because of that, WORK stock has been on investors’ radar during the pandemic. While revenue has grown exponentially over the last few years, Slack is a relatively small company. It still has huge potential to gain the business of more customers across different industries.
Slack saw a net addition of a record 12,000 paid customers and 90,000 new organizations in its fiscal first quarter. As many expected, remote working led to a jump in the adoption of the platform. Of course, Slack continues to face competition from Microsoft’s (MSFT Stock Report) Teams service.
But Slack has so far maintained its composure. It recorded a 132% net dollar retention rate. Nevertheless, some analysts are seeing some downside risk to second-quarter results. That’s because the strong growth Slack saw earlier this year could have brought adoption forward from the rest of the year.
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Top Stocks To Trade Ahead Of Earnings: Lululemon Athletica
Lululemon (LULU Stock Report) surprised investors with its previous earnings report, which showed only modest sales declines during the early days of the pandemic. The company even managed to generate a profit during the pandemic despite widespread store closures. However, the second quarter is making some investors really anxious. Some clarity will be provided when LULU announces second-quarter results tomorrow as the stock market reopens after the long weekend.
The apparel specialist has just received a new Street-high price target from Stifel Nicolaus’ Jim Duffy. This five-star analyst reiterated his buy rating while taking his stock price forecast from $365 to $445.
Crucially, LULU’s recent boost is not just a short-term trend, says Duffy, but a preview of a ‘new normal’ of lasting consumer behavioral changes. “Beyond the near term, we see durable consumer behavioral change that expands the wearable occasion and addressable market,”