Month: July 2023

(C) Reuters.

Here is your Pro Recap of the biggest analyst picks and cuts you may have missed today: Upgrades at Adobe, Wayfair, and Chevron, and a downgrade at Carvana.

InvestingPro subscribers got this news first. Never miss another market-moving headline.

Adobe gains on Morgan Stanley upgrade

Adobe Systems (NASDAQ:ADBE) shares gained more than 2% pre-market today after Morgan Stanley upgraded the company to Overweight from Equalweight and raised its price target to $660.00 from $510.00, as reported in real-time on InvestingPro.

The analyst cited increased clarity on AI-enabled products and the roadmap for monetization have bolstered their confidence in Creative Cloud’s organic growth potential. The firm added that the expectation of mid/high-teens EPS growth within the next three years provides further justification for a hiked multiple and price target.

Carvana slashed to Underperform at Jefferies

Jefferies downgraded Carvana (NYSE:CVNA) to Underperform from Hold and cut its price target to $30.00 from $55.00, representing the fifth downgrade this month.

Consensus appears to overestimate the sustainability of recently elevated profitability, which we believe benefited from transitory tailwinds that will abate in the coming quarters. Our revised ’24 GPU/EBITDA are ~10%/45% below the Street, despite us assuming per unit economics remain well above prepandemic levels.

Shares were losing 1.2% in premarket trading.

Wayfair shares jump on upgrade

Piper Sandler upgraded Wayfair (NYSE:W) to Overweight from Neutral and raised its price target to $97.00 from $35.00. As a result, shares jumped over 8% pre-market today.

The upgrade was driven by stabilizing the home furnishings industry, improving sales, positive supplier feedback, attractive valuation, and the potential for sustained EBITDA profitability.

The company is set to report its Q2/23 earnings on Thursday before the market opens.

Chevron earns an upgrade at Goldman Sachs

Goldman Sachs upgraded Chevron (NYSE:CVX) to Buy from Neutral with a price target of $187.00, following the company’s reported Q2 beat on Friday.

We upgrade Chevron from Neutral to Buy on (a) leading capital returns; (b) clear inflection in cash flow in 2024 and volumes in 2025; and (c) relative valuation, particularly in 2025.

Shares gained more than 1% pre-market today.

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(C) Reuters

Investing.com — U.S. stock futures have started Monday in a subdued manner, but the market remains on course to post strong gains this month on expectations of an end to the Federal Reserve’s tightening cycle as well as generally strong corporate earnings.

By 06:30 ET (10:30 GMT), the Dow Futures contract was up 25 points, or 0.1%, S&P 500 Futures traded 2 points, or 0.1%, higher, while Nasdaq 100 Futures dropped 7 points, or 0.1%.

The benchmark Wall Street indices have all recorded healthy gains this month, with the blue chip Dow Jones Industrial Average up 3.1% in July, after posting a 13-day winning streak, which ended last week. The broad-based S&P 500 has gained 3% and the tech-heavy Nasdaq Composite 3.8%, with both of these indices on track for a fifth consecutive winning month.

Jobs report is the week’s data highlight

The Federal Reserve raised interest rates to the highest level in 22 years last week, but also changed its forecast to no longer predict a U.S. recession this year.

Additionally, expectations are growing that inflation is slowing enough for this to be the last hike of the central bank’s year-long tightening cycle, helped by Friday’s second-quarter Employment Cost Index falling to 1.0%, a drop from 1.2% in the first quarter and a peak of 1.4% in the first quarter of 2022.

Fed chair Jerome Powell made it clear any future decisions would be data dependent, which brings Friday’s U.S. jobs report firmly into focus. This is expected to show that the economy added 200,000 jobs in July, while the unemployment rate remained at a historical low of 3.6% and average hourly earnings cooled.

Positive earnings boost sentiment

The earnings season rolls on, with megacaps Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) due to report earnings later this week.

More than half of the firms listed on the S&P 500 had reported second-quarter earnings as of Friday, out of which 78.7% have surpassed analyst expectations, according to Refinitiv data, cited by Reuters.

Citigroup raised its year-end target for the S&P 500 by 15% earlier Monday as it now sees a higher probability of a soft landing for the U.S. economy, as well as an earnings upside.

Elsewhere, Walmart (NYSE:WMT) is likely to be in the spotlight after the Wall Street Journal reported that the retail giant has increased its stake in Flipkart through a $1.4 billion purchase of shares from a major investor in the Indian e-commerce group.

Crude gains on U.S. economic optimism

Oil prices rose Monday as a more upbeat look at the crude market by Goldman Sachs overshadowed weak Chinese manufacturing activity data.

Influential investment bank Goldman Sachs on Sunday lifted its global oil demand forecast for the year to an all-time high of 102.8 million barrels per day in July, citing a reduced recession risk and a strong effort by the Organization of the Petroleum Exporting Countries to push up prices.

The crude market is on track for its biggest monthly gain in over a year on expectations of tightening global supply with Saudi Arabia seen as likely to extend its production cuts into September.

By 06:30 ET, U.S. crude futures traded 0.7% higher at $81.17 a barrel, while the Brent contract climbed 0.6% to $84.92.

Both contracts settled on Friday at their highest levels since April, gaining for a fifth straight week, and are on track to close this month with their biggest monthly gains since January 2022.

Additionally, gold futures fell 0.2% to $1,995.10/oz, while EUR/USD traded 0.2% higher at 1.1037.

(Oliver Gray contributed to this item.)

(C) Reuters Dow Jones, Nasdaq, S&P 500 weekly preview: Citi boosts SPX target

S&P 500 (SPX) rose 1% last week after investors used a Thursday mini-selloff as a buying opportunity. Moreover, recent economic data shows the U.S. economy is performing stronger than expected, fueling bets that the Federal Reserve will still manage to deliver a soft landing.

While the Fed hiked again last week and reiterated its concern over still-elevated inflation, market participants currently do not expect further rate hikes this year.

Nasdaq Composite Index (IXIC) gained as much as 2% last week, underpinned by gains on mega-cap stocks like Meta Platforms (NASDAQ:META) and Google-parent Alphabet (NASDAQ:GOOGL). Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) are due to report on Thursday after the market close.

“The current setup is fairly similar to last quarter, where the combination of a low hurdle rate, along with the improving fundamentals, eventually led to meaningful beats. Q2 EPS projections for S&P 500 were cut significantly ahead of the reporting season, and most macro data showed a sequential improvement versus Q1,” JPMorgan analysts wrote recently.

Dow Jones Industrial Average (DJI) continues to rise, recording its 3rd consecutive weekly gain. The index also hit the highest levels seen since last February.

For this week, the jobs report (Friday) will be the highlight, along with the ADP employment change and JOLTS.

Apple and Amazon to report

According to FactSet, 51% of S&P 500 companies reported actual results as of Friday, July 28. As many as 80% of S&P 500 companies have reported a positive EPS surprise while 64% of S&P 500 companies reported a positive revenue surprise.

The blended earnings decline so far for the second quarter is 7.3%, worse than the expected decline of 7%. For Q3 2023, 27 S&P 500 companies have issued negative EPS guidance and 18 S&P 500 companies have issued positive EPS guidance, FactSet data shows.

“For companies that generate more than 50% of sales inside the U.S., the blended earnings growth rate is 0.4%. For companies that generate more than 50% of sales outside the U.S., the blended earnings decline is -20.8%,” analysts at FactSet wrote.

Citi analysts are increasingly bullish on the S&P 500’s earnings potential for 2024, hence they raised the 2023 year-end price target to 4600 and the mid-2024 target to 5000.

“These new targets will be perceived as chasing the year-to-date move in the S&P 500. However, they better reflect an evolving macro and fundamental backdrop,” they said.

Ahead of us is another super busy earnings week. Major reporting companies include Caterpillar (NYSE:CAT), Pfizer (NYSE:PFE), Uber (NYSE:UBER), AMD (NASDAQ:AMD), Starbucks (NASDAQ:SBUX), PayPal (NASDAQ:PYPL), Qualcomm (NASDAQ:QCOM), Apple, Amazon, Block (NYSE:SQ), as well as online travel companies like Booking (NASDAQ:BKNG) and Airbnb (NASDAQ:ABNB).

What analysts are saying about U.S. stocks

JPM: “We were OW Value vs Growth style in 2022, through longs in Commodities and in Financials, against an UW Tech, but have reversed that view for this year, partly driven by the above call from last October that US yields have peaked. We think that the OW Growth vs Value style should stay relevant through the rest of 2023.”

Sevens Report: “We and others said at the start of the year that economic data would drive this market in 2023, and that’s what’s happened. The data has been Goldilocks, inflation has fallen, and the Fed isn’t worse than feared. But just like those were positive surprises YTD, they can also turn into negative surprises, as anyone who was in this business in ’99-’00 and ’07-’08 can tell you.”

Morgan Stanley: “Consider preparing portfolios for a period of higher-for-longer rates, powered by both real and inflation-expectations components. That means trimming exposure to the most richly valued US stocks and rotating toward those with growth at a reasonable price or value attributes and visible earnings achievability.”

Goldman Sachs: “S&P 500 has a long-term track record of outperforming other global equity markets so “hope over experience” may be the reason why investors YTD have been net sellers of US stocks and ETFs and net buyers of international equities. The large Information Technology sector weight is one key driver of the superior returns. Our analysis suggests the focus by US executives to improve return on shareholder equity (ROE) is also an important contributor.”

Vital Knowledge: “The market’s near-term “story” should stay bullish (goldilocks data, Fed ending, healthy earnings, China stimulus, etc.), which makes this a tough tape to avoid from the long side and an especially difficult one to be short. Our main problem is still valuation (especially given where rates are).”