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Weekly Preview: Earnings to Watch This Week (AVGO, CRM, NIO, ZM)

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Stocks ended a brutal trading week with a strong rebound Friday, led by the Dow Jones Industrial Average which posted its best one-day performance in over a year. Once reports emerged that Russia was willing to engage in talks with Ukrainian leadership, dip-buyers immediately swooped in to shop for stock bargains. But will any talks of peace from Moscow actually manifest into meaningful peaceful action? Israel has offered to mediate and attempt to broker a ceasefire but as of this writing, Russia has not yet committed to any talks, and Ukraine rejected Moscow’s offer of talks in Belarus, saying it was not neutral territory but that they’d be willing to hold talks elsewhere. Ukraine’s President Volodymyr Zelensky said, “Warsaw, Bratislava, Budapest, Istanbul, Baku — we proposed all that to the Russian side. Any other city would work for us, too, in a country from whose territory rockets are not being fired.”

The Dow on Friday added 2.51%, surging 834.92 points to close at 34,058.75. You would have to go all the way back to early November 2020 to find when the blue-chip index notched its best daily gain. The Dow was powered by gains in Salesforce (CRM), Apple (AAPL), Microsoft (MSFT) and IBM (IBM). The S&P 500 also performed strongly, adding 2.24%, or 95.95 points to end at 4,384.65. The tech-heavy Nasdaq Composite Index gained 1.64%, adding 221.04 points to finish at 13,694.62. Notably, both the S&P 500 and Nasdaq erased losses that began earlier in the week to close out the week with respective gains of 0.8% and 1.1%.

For the week, the Dow declined by less than 0.1%. On Thursday the index closed up 92.07 points, or 0.3%, at 33,223.83, snapping a losing streak of five straight sessions. The market appears tempted to call the bottom. Aside from potential peace talks, investors are also wondering if the conflict could deter the U.S. Fed from raising interest rates, which it had been expected to do to combat inflation.

There is also the notion that higher gas prices, an expected byproduct of the Ukraine crisis, could hurt consumer spending. In the meantime, U.S. economic data remains strong evidenced by the report released Friday, which showed a 2.1% increase in American spending in January. Prior to that better-than-expected report, spending had fallen in December due to the omicron variant of the coronavirus. The spending decline was the first time in 10 months. But if last week’s stock action was any indication, bargain hunters seem believe the bottom is in.

As for earnings, here are the stocks I’ll be watching this week.

Zoom Video (ZM) – Reports after the close, Monday, Feb. 28

Wall Street expects Zoom to earn $1.07 per share on revenue of $1.05 billion. This compares to the year-ago quarter when earnings came to $1.22 per share on revenue of $882.49 million.

What to watch: It would be a gross understatement to say that Zoom shares have cooled off. Since the stock reached its all-time high of $588.84, it has plunged some 80% to a recent low of $120. The stock has been under pressure despite the company’s strong execution. Over the last 2 years, the company has surpassed the Street’s profit estimates in each quarter, while topping revenue estimates 100% of the time. Now trading near a 52-week low, investors want to know if there is more downside ahead. Since the quarter began, analysts have been more optimistic about what the company might report, as evidenced by the 12 upward (net) revisions given to EPS estimates. During that span, revenue estimates have been revised upward twice. Once the key beneficiary of the pandemic due to shelter-in-pace restrictions and the fact that offices and schools scrambled for video conferencing services, there are now concerns that the company won’t be able to sustain the strong growth it saw during the height of the pandemic. To reverse the stock’s bearish trend, in addition to growth re-acceleration, Zoom on Monday will have to issue strong revenue and earnings forecast.

Nio Limited (NIO) – Reports after the close, Tuesday, Mar. 1

Wall Street expects Nio to report a per-share loss of 12 cents on revenue of $1.54 billion. This compares to the year-ago quarter when it reported a per-share loss of 16 cents on revenue of $1.03 billion.

What to watch: Shares of Chinese electric vehicle maker Nio, which is vying to become the next Tesla (TSLA), have been in reverse over the past year, during which it has lost some 60% of its value. With the stock now down 33% year to date, including 15% plunge over the past thirty days, analysts are coming to the company’s defense. Barclays analyst Jiong Shao recently assigned a Nio with an Overweight rating and price target of $34, reflecting 61% upside from current levels. “We believe that the rapid adoption of EVs around the world and booming EV sales have presented China’s EV makers a rare opportunity to not only take a sizable market share of the domestic auto market – the largest in the world with about 25-30% global share by units sold per annum – but also build a dominant position on the world stage,” noted Shao. These trends are poised to benefit Nio in 2022. On Tuesday the company can make a strong case for itself and the stock by delivering a top- and bottom line beat, along with strong delivery guidance for the next quarter and full year.

Salesforce (CRM) – Reports after the close, Tuesday, Mar. 1

Wall Street expects Salesforce to earn 75 cents per share on revenue of $7.24 billion. This compares to the year-ago quarter earnings of $1.04 per share on revenue of $5.82 billion.

What to watch: Since reaching its all-time high of $312 in November, shares of Salesforce have been in a clear downtrend, losing as much as 37%. Since the start of the year, the stock has lost 20% of its value, including declines of 8% and 21% in the respective one months and six months. Investors want to know if this is a good time to buy; Morgan Stanley analyst Keith Weiss believes that to be the case, saying the company is likely to keep seeing tailwinds in front office software spending. There is “little evidence of spending being pulled forward given its unique market positioning and leadership in these categories.” Citing the company’s SaaS business model and its customer relationship management leadership, other analysts have weighed in on Salesforce’s ability to capture market share during the digital adoption of its enterprises customers. On Tuesday investors will look closely at Salesforce’s billings and booking metrics to assess how well these market share gains can turn to increased profits.

Broadcom (AVGO) – Reports after the close, Thursday, Mar. 3

Wall Street expects the company to earn $8.08 per share on revenue of $7.6 billion. This compares to the year-ago quarter when earnings came to $6.61 per share on revenue of $6.66 billion.

What to watch: After taking a massive hit over the past several months, chip stocks have come roaring back this past week, rising along with the rest of the tech sector on optimism that interest rates may not rise as swiftly as previously anticipated. Within the chip sector, Broadcom stock has regained some key technical levels. But unlike other chip stocks, its shares have risen over the past thirty days (up 7%), three months (up 4%) and six months (up 21%). In other words, Broadcom has not succumbed to the level of punishment its peers have endured. On a mission to become the world leader in infrastructure technology, the company has gone on an acquisition spree and diversifying its business away from its core semiconductor segments. With its focus also shifting to datacenter growth, which accounts for more than 30% of total revenue, Broadcom has a strong portfolio of services, particularly given its 5G capabilities. For the stock to maintain its uptrend, it will take upbeat semiconductor revenue guidance and datacenter results that excites the market.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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