Southwest Airlines Flies Above Resistance After Lifting September Load Factor

Southwest Airlines Co. (LUV) shares rose 3.67% Wednesday after the low-cost carrier raised its September Load factor and flagged that its cash burn in the third quarter will be lower than expected.

The Dallas-based airline lifted its load factor this month to between 45- to 50% from its previous forecast of 40- to 50%. Looking further ahead, it sees the metric ranging between 45- and 55% in October. On the revenue front, Southwest reaffirmed its expectation of a top-line contraction of 65- to 70% in September and expects October revenue to fall 65- to 75%. While operating revenue declined 70% in August, the figure came in 5% better than expected.

The airline, easily recognized by its Disney-themed livery on selected jets, said summer leisure demand trends have so far continued into the early fall. Moreover, the company expects its third-quarter (Q3) cash burn to slow to $17 million a day, less than its earlier forecast of $20 million per day.

Through Wednesday’s close, Southwest stock has a market capitalization of $24.83 billion and trades 21.67% lower on the year. However, performance has taken off over the past three months, with the shares gaining around 15% as of Sept. 17, 2020.

Shrinking Capacity

Southwest expects Q3 capacity to decline by 30- to -35%, followed by a fall of between 35- and 40% in November due to its decision to leave middle seats unbooked on flights through Nov. 30 as part of its ongoing social distancing protocols during the pandemic. “As we transition into autumn and the upcoming Thanksgiving holiday season, we want Southwest customers to have the confidence of knowing that middle seats will remain open through Nov. 30 to accommodate their fall travel plans,” said vice president Ryan Green, per USA Today.

Wall Street View

Sell-side analysts remain overwhelmingly bullish on the stock, impressed by the airline’s ability to attract holiday travelers amid a sharp slump in corporate demand. It receives 13 ‘Buy’ ratings and 8 ‘Hold’ ratings. No research firm currently recommends selling the shares. Twelve-month price targets range from as high as $54 to as low as $29, with an average consensus at $43.31. This indicates a modest upside gain of nearly 3% from Wednesday’s $42.10 close.

Technical Outlook and Trading Tactics

Southwest shares climbed to a five-month high Wednesday, closing comfortably above the 200-day simple moving average (SMA) on above-average volume. Given that the relative strength index (RSI) has recently moved into overbought levels, the stock may consolidate over the short-term before trying to push higher. Those who buy here should look to book profits near $48, where the price is likely to find overhead resistance from the August 2019 swing low. Protect capital by placing a stop-loss order somewhere beneath the 200-day SMA.

Lennar Beats Earnings Expectations – Shares Slide

Lennar Corporation (LEN) shares plunged 4.24% in extended-hours trading Monday despite the nation’s largest homebuilder surpassing Wall Street’s quarterly earnings estimates.

The Miami-based home construction company disclosed a third quarter (Q3) adjusted profit of $2.12 per share, hammering past analysts estimate of $1.51 a share. Moreover, the bottom line grew 33% from a year ago and has surpassed analyst EPS forecasts for five consecutive quarters. Meanwhile, sales of $5.87 billion topped the consensus forecast by 10.10% and came in slightly ahead of the $5.86 billion figure reported a year earlier.

As of Sept. 15, 2020, Lennar stock has a market capitalization of $24 billion, issues a modest 0.65% dividend yield, and is up 33.54% over the last three months. Year to date (YTD), the shares trade over 40% higher.

Home Construction Boom

The homebuilder’s executive chairman Stuart Miller credited the better-than-expected results on record low interest rates and tight supply in the housing market. What’s more, Miller sees these macro trends continuing. “Given strong demand and limited new and existing home inventory, we expect home sales to remain strong for the foreseeable future,” he said in a statement accompanying the earnings call, per Barron’s.

Management expects new orders for the current quarter of 13,800 to 14,300 and deliveries of between 15,500 to 16,000. This compares to 13,054 new orders and 16,391 deliveries in the same quarter last year.

Wall Street View

Analysts remain overwhelmingly bullish on Lennar based on favorable industry tailwinds such as low borrowing costs and changing lifestyle trends brought about by the pandemic. The stock receives 9 ‘Buy’ ratings, 1 ‘Overweight’ rating, and 10 ‘Hold’ ratings. Currently, no research firms recommend selling the shares. Price targets range from as high as $95 to as low as $62, with the average target pegged at $79.97. This implies a slight 1.2% premium to Monday’s $79 close.

Technical Outlook and Trading Tactics

Since the 50-day simple moving average (SMA) crossed above the 200-day SMA in early July to indicate a new uptrend, the stock has continued rising. Therefore, active traders should view any profit taking as a buying opportunity. Look for entries at the $71 level, where the price has flipped previous resistance into support. Those who take a position should protect capital with an initial stop-loss order placed somewhere beneath this month’s low at $71.34 and trail it under each successive higher swing low.

GameStop Tumbles as Earnings Fall Short of Expectations

GameStop Corp. (GME) shares plunged 10.88% in extended-hours trading Wednesday after the video game retailer missed Wall Street’s quarterly earnings projections as gamers pivoted to digital downloads and cloud gaming subscription plans.

The company reported a second-quarter (Q2) loss of $1.40 per share, more than the $1.27 loss analysts had expected. Revenues of $942 million came in above the consensus estimate by 0.48% but fell $358 million from a year earlier. Moreover, same-store sales declined around 13%, even when adjusted for reduced stores operating during the quarter due to the pandemic. However, online sales jumped 800% as consumers accelerated their shift to digital purchases.

Through Wednesday’s close, GameStop stock has a market capitalization pushing toward $500 million and trades 21% higher year to date (YTD). Since early June, the shares are up 48%, outpacing the industry average over the same period by more than 30% as of Sept. 10, 2020.

Cost and Inventory Reductions

Management told investors the firm slashed expenses by $133.7 million during the quarter and reduced inventory by 50% on a year-over-year (YoY) basis to free up cash flow for navigating the current environment and launching new products.

“We believe the actions we are taking to optimize the core operations of our business by increasing efficiencies and creating a frictionless digital ecosystem to serve our customers, wherever and whenever they choose to shop, are enabling us to navigate the COVID-19 environment while positioning us well for the launch of the next generation of consoles,” CEO George Sherman said, per Barron’s.

Wall Street View

Despite GameStop’s share price gaining considerably since early August, analysts remain mostly bearish on the bricks-and-mortar video gamer seller as consumers move away from physical discs. The stock receives 6 ‘Hold’ ratings, 1 ‘Underweight’ rating, and 2 ‘Sell’ ratings. The Street has a 12-month average price target on the shares at $4.79 – 35% below Wednesday’s $7.35 closing price.

Technical Outlook and Trading Tactics

GameStop shares broke out from a multi-month trading range in late August on above-average volume after an SEC filing revealed that between Aug. 13 and Aug. 28, RC Ventures purchased nearly 6 million shares in the company, giving it a 9.6% stake in video gamer retailer. Furthermore, the 50-day simple moving average (SMA) recently crossed above the 200-day SMA to generate a golden cross buy signal.

After-hours trading indicates the stock will open Thursday’s session around $6.55 – placing price back at the trading range’s top trendline, where previous resistance now becomes support. Those who buy the stock should consider setting a stop-loss order under the Aug. 31 wide-ranging day at $5.69 and targeting a move to crucial overhead resistance at $12.15.

DocuSign Slumps Despite Impressive Earnings Beat

DocuSign, Inc. (DOCU) shares plunged 10.64% Friday despite the electronic-signature company sailing past earnings forecasts and lifting its second-half outlook on the back of companies requiring more digital signatures from a growing number of remote workers.

For the quarter ended July 2020, the firm reported adjusted earnings of 17 cents per share, crushing analysts’ estimate by a dime, and improving from 1 cent a share in the year-ago quarter. Revenues of $342.21 million also came in ahead of expectations and grew 45% year over year (YoY).

As of Sept. 8, 2020, DocuSign shares have a market capitalization of nearly $40 billion and trade 191.81% higher on the year. Gains have accelerated in recent months, with the stock adding more than 50%.

Looking Ahead

The company raised its guidance for the full fiscal year, saying it now expects sales of $1.384 billion to $1.388 billion, up from its previous forecast range of $1.313 billion to $1.317 billion. Meanwhile, it projects billings growth of around 40% in the second half, easing from a record 60% in the first half. “Customers have pulled projects forward. Whether that will continue will depend on whether everyone is still working from home. But we’re very bullish about the growth prospects for this business going forward,” CEO Dan Springer told Barron’s.

The company continues to move into other digital contract management areas, such as analytical tools that help businesses sort a repository of digitized documents. It’s also developing video-based notary solutions. The firm expects that 45 states could allow remote notaries as early as next year.

Wall Street View

Despite the stock’s sizable year-to-date (YTD) gain, analysts remain mostly bullish on the stock. It receives 9 ‘Buy’ ratings, 8 ‘Hold’ ratings, and just 1 ‘Sell’ rating. Twelve-month price targets range from as high as $300 to as low as $158, with the average price pegged at $250.26 – implying a 16% premium to Friday’s $216.26 close.

Technical Outlook and Trading Tactics

DocuSign’s share price staged a breakaway gap above crucial overhead resistance at $230 on Sept. 1 before promptly reversing below that level on heavy volume in subsequent trading sessions. The move indicates a possible head-fake trade that may give way to further profit-taking in the weeks ahead.

Those looking to buy the stock should look for entries near $136, where price finds support from a previous horizontal trendline and the rising 200-day simple moving average (SMA). Traders who expect a deeper retracement should monitor the $92.50 level, which is likely to encounter significant support from the February swing high.

CrowdStrike Shares Fall Despite Earnings Beat and Lifted Guidance

CrowdStrike Holdings, Inc. (CRWD) shares retreated 6.42% in after-hours trade Wednesday despite the cloud-based security software company reporting better-than-expected quarterly results and lifting its outlook for the current quarter amid businesses rushing to secure their systems as more staff work remotely during the pandemic.

The Sunnyvale, California-based technology firm reported second-quarter (Q2) adjusted earnings of 3 cents per share, with the figure topping the consensus forecast by 200% and improving from EPS of -18 cents in the year-ago quarter. Revenues of $198.97 million also came in ahead of Wall Street forecasts and grew 84% from a year earlier.

The company’s CEO George Kurtz told investors that recurring subscriptions and ongoing demand for security software underpinned recent growth. “CrowdStrike’s strong momentum continued into the second quarter with net new ARR reaching a new record and exceeding $100 million. A favorable competitive environment and strong secular tailwinds are fueling our growth,” he said in a statement accompanying the earnings call.

Through Wednesday’s close, CrowdStrike stock has a market capitalization of $30.69 billion and trades up a massive 185% year to date (YTD). In the past three months alone, the shares have added over 50%.

Raised Outlook

The company also lifted its fiscal 2021 top- and bottom-line outlook. It now expects to earn between 2 and 8 cents a share, up from its previous forecast of a projected loss between 5 and 8 cents per share. On the revenue front, CrowdStrike sees sales of $809.1 million to $826.7 million, higher than its previous expected range of $761.2 million to $772.6 million.

Management sees increasing demand for its products in the quarters ahead, believing that security breaches will impact businesses more severely in the current environment due to economic vulnerability caused by the pandemic.

Wall Street Outlook

Before the company disclosed its Q2 earnings, Barclays analyst Saket Kalia raised the bank’s price target on Crowdstrike Holdings to $130 from $114, while maintaining his Overweight rating based on reoccurring revenue upside potential. Analysts elsewhere also remain bullish on the stock. It receives 17 ‘Buy’ ratings and 5 ‘Hold’ ratings. No research firm currently recommends selling the shares.

Technical Outlook and Trading Tactics

CrowdStrike shares rose to a new all-time high (ATH) yesterday before closing the session lower as profit-takers moved in. Selling looks like continuing on Thursday, with after-hours trade indicating a fall to around $133 on the open.

Traders should consider buying deeper pullbacks to the $120 level, where previous resistance should now act as support. Before committing capital, consider waiting for signs of a reversal in this area, such as the formation of a hammer candlestick pattern, to confirm the uptrend has resumed. Limit downside by placing a stop-loss order somewhere below the 50-day simple moving average (SMA).

Zoom Video Shares Stream Higher After Knockout Earnings

Zoom Video Communications, Inc. (ZM) added 22.74% in after-hours trade Monday after the video conferencing company reported blowout quarterly results as people and businesses rushed to the platform to stay connected while staying closer to home during the pandemic.

The firm posted adjusted earnings of 92 cents per share on revenues of $663.52 million. Analysts had expected a profit of 45 cents a share and sales of $500.5 million. Moreover, top- and bottom-line growth increased by 355% and 1050%, respectively, from the year-ago period.

Management cited an accelerated shift to remote working, distance learning, and socializing for the better-than-expected quarter. “Organizations are shifting from addressing their immediate business continuity needs to supporting a future of working anywhere, learning anywhere, and connecting anywhere on Zoom’s video-first platform,” CEO Eric Yuan said in a statement cited by Barron’s.

As of Sept. 1, 2020, Zoom stock has a market capitalization of $91.71 billion and trades a whopping 378% higher on the year. In the past three months alone, the shares are up 80%. However, the stock comes with a lofty valuation, trading at over 200 times projected earnings.

Looking Ahead

The company substantially hiked its guidance for the current quarter, now expecting earnings per share (EPS) of 73- to 74 cents and revenues of $2.37 million to $2.39 million. It had previously forecast EPS of 35 cents on sales of $493 million.

Wall Street Outlook

Analysts remain bullish on Zoom Video stock on the back of more users signing up for paid plans after trialing a free account earlier in the pandemic. Research firms are also impressed with the company’s ability to grow its market share. “Zoom has captured the biggest portion of market share, increasing from 34% of total MAU’s back in March, to over 48% as of July 24th,” JP Morgan analysts wrote in a recent note to clients. The stock currently receives 11 ‘Buy’ ratings, 3 ‘Overweight’ ratings, 13 ‘Hold’ ratings, and 5 ‘Sell’ ratings.

Wall Street Outlook and Trading Tactics

While most stocks plunged to multiyear lows during the coronavirus sell-off, Zoom Video shares flipped previous resistance into support at the $105 level. Since then, the price has continued to trend sharply higher, with only minor pullbacks to the 50-day simple moving average (SMA). Given that the relative strength index (RSI) indicates short-term overbought conditions, traders should look to buy pullbacks to major support areas, namely at $280 and $175, rather than chasing recent gains.

Dick’s Sporting Goods Knocks Quarterly Earnings Out of Ballpark

DICK’S Sporting Goods, Inc. (DKS) jumped 15.68% Wednesday after the sport’s equipment and apparel retailer smashed Wall Street’s earnings and revenues forecasts on the back of surging digital sales.

The company reported second-quarter (Q2) adjusted earnings of $3.21 per share, with the figure coming in well above analysts’ expectation of $1.30 a share and increasing 155% from last year’s profit of $1.24 per share. Sales of $2.71 billion ballooned  20% from a year ago and came in 8.21% ahead of the Street expectation.

As of Aug. 27, 2020, DICK’s stock has a market capitalization of $4.82 billion, issues a 2.68% dividend yield, and is up a whopping 57% over the last three months.

Steep Hike in Online Sales

The company’s digital sales, including curbside pickup orders, grew 194% during the quarter as consumers visited the website to purchase hiking apparel, kayaks, weights, and activewear gear to stay fit during the pandemic. “During this pandemic, the importance of health and fitness has accelerated and participation in socially distant, outdoor activities has increased,” CEO Ed Stack told investors during the conference call, per CNBC. “There has also been a greater shift toward athletic and active lifestyle products with people spending more time working and exercising at home,” he added.

Wall Street View

Analysts remain mostly bullish on the stock as stay-at-home fitness trends look likely to continue into the fall. There’s also a consensus the sporting goods retail giant could gain market share, given that many of its major brick-and-mortar competitors have filed for bankruptcy. The stock receives 10 ‘Buy’ ratings, 14 ‘Hold’ ratings, and 1 ‘Sell’ rating. Price targets range from $71 to $34, with the median Street target sitting at $52. Currently, the shares trade at $53.99.

Technical Outlook and Trading Tactics

The DICK’s share price broke above key resistance at $48 on heavy volume Wednesday, indicating institutional buying interest behind the move. Furthermore, earlier this week, the moving average convergence divergence (MACD) indicator crossed above its trigger line to generate a buy signal. Additionally, a golden cross signal last month suggests further upside.

Those who play the breakout should look for a retest the all-time high (ATH) at $62.88, with a stop-loss order placed underneath yesterday’s low at $50.47. The trade offers a risk/reward ratio of around 1:2.5, assuming a fill at Wednesday’s $53.99 closing price. ($8.89 profit per share vs. $3.51 risk per share)

Intuit Climbs After KeyBanc Ups Price Target

Intuit Inc. (INTU) shares jumped 3.38% Monday after KeyBanc reiterated its ‘Overweight’ rating on the accounting software maker’s stock and lifted its 12-month price target to $350 from $315. The upgrade implies a 5% premium to Monday’s $333.12 close.

Analyst Josh Beck says his analysis of Key First and IRS data prompts a more positive bias on TurboTax fundamentals. Beck also argues the company has synergy opportunities through its recent acquisition of Credit Karma – a fintech startup with more than 37 million active users. In February, Intuit announced that it had bought the firm for $7.1 billion to bolster its personal finance offerings.

As of Aug. 25, 2020, Intuit’s shares have an $86.87 billion market capitalization, offer a modest 0.66% dividend yield and trade 28% higher on the year. Over the past three months, they have gained 16%. From a valuation standpoint, the stock trades at about 40 times future earnings, above its longer-term multiple of 30 times.

Upbeat Earnings Expected

Analysts expect Intuit to post fiscal Q4 earnings of $1.20 per share when the company reports its quarterly results after the closing bell on Tuesday. This compares to a loss of 9 cents a share in the year-ago quarter. Meanwhile, the Street tips revenues to come in at $1.55 billion, indicating year-over-year (YoY) top-line growth of 55.8%. The postponement of IRS tax filing from the third quarter to the fourth is likely to have provided a considerable tailwind during the period.

Wall Street Ratings

Analysts remain bullish, impressed by financial software company’s opportunity to grow its QuickBooks Online subscriber base. Currently, the stock receives 12 ‘Buy’ ratings, 6 ‘Hold ratings, and just 2 ‘Sell’ ratings. Price targets range from as high as $350 to as low as $220, with the median consensus pegged at $308.

Technical Outlook and Trading Tactics

Intuit shares broke above an ascending triangle pattern last week, with gains accelerating on above-average volume yesterday after the KeyBanc price upgrade. Given the relative strength index (RSI) sits in overbought territory, traders should consider waiting for a pullback entry instead of chasing recent gains.

Look for buying opportunities near $313.50, where the stock finds support from the triangle’s upper trendline. Traders who enter at this level should consider placing a stop-loss order below the 50-day simple moving average (SMA). Set a profit target that is at least twice the amount risked. For instance, if using a $15 stop, consider targeting a move of at least $30.

Target Shares Soar After Blowout Quarterly Earnings

Target Corporation (TGT) soared 12.65% Wednesday after the big-box retailer smashed Wall Street’s quarterly earnings and revenue forecasts. The company reported Q2 adjusted earnings of $3.38 per share, more than double analysts’ estimates of $1.64 a share. The top line grew 86% from a year earlier due to customers continuing to shop close to home during the coronavirus pandemic.

Sales of $22.98 billion topped expectations by 13.54% and grew 25% from the year-ago period as the company benefited from its designation as an essential retailer during U.S. lockdowns that forced some of its smaller rivals to close. “In the current environment, each of our categories is operating very well,”  CEO Brian Cornell said during the earnings call, per MarketWatch. He added that the company picked up $5 billion in market share in the quarter as several competitors filed for bankruptcy and laid off staff.

Through Wednesday’s close, Target stock has a market capitalization of $77.11 billion, offers a 1.99% dividend yield, and trades 25.76% over the past three months as of Aug. 20, 2020. Year to date (YTD), the shares have gained nearly 22%.

Digit Sales Growth

Target’s e-commerce sales registered a 195% increase during the quarter, propelled by more than 700% growth in its curbside pickup service. Meanwhile, the company’s Shipt online delivery service rocketed by 350% year over year (YoY). The retailer also said it added 10 million new digital customers in the first half of the year.

Wall Street View

Most analysts remain bullish as sales continue to show strength in the fragmented retail space. The stock receives 15 ‘Buy’ ratings, 2 ‘Overweight’ ratings, 9 ‘Hold’ ratings, and just 2 ‘Sell’ ratings. Price targets range from as high as $180 to as low as $105, with the median price pegged at $152 – 1.4% below Wednesday’s $154.22 close.

Technical Outlook and Trading Tactics

Target shares catapulted above the psychological $150 level after the company delivered its better-than-expected results. The move was accompanied by the largest volume in twelve months, indicating buyer conviction. Active traders who enter the stock at these levels should consider using a trailing bar stop to book profits. To use this strategy, remain in the position until the price closes beneath the current day’s low or the prior day’s low – whichever is lower. Conservative traders may opt to wait for a retracement to previous resistance at $130, which has now flipped to support.

JD.com Nudges Toward All-Time High After Earnings Beat

JD.com, Inc. (JD) jumped 7.93% Monday to trade just below its all-time high after the Chinese e-commerce giant delivered better-than-expected quarterly results. The company reported second-quarter (Q2) adjusted earnings of 50 cents per share, easily surpassing analysts’ expectations of 39 cents a share.

The company did not offer guidance for the current quarter, due to restrictions relating to its recent listing on the Hong Kong stock exchange.

The Beijing-based online retailer grew its active customer accounts by an impressive 30% to 417.4 million over the past year ended June 30. Moreover, mobile daily active users grew by 40% in June. As of Aug. 18, 2020, the Nasdaq-listed JD.com ADR has a market capitalization of $105.24 billion and trades over 90% higher on the year. In the past three months alone, the shares have gained 31.72%.

Supply Chain Focus

The company continues to invest heavily in supply chain management for future growth. In July, the firm bought a stake in established supply chain manager Li & Fung to leverage private-label initiatives for the Chinese domestic market. “Our strong financial and operating performance form the basis for JD’s continued investment in innovative supply chain capabilities and a superior customer experience to support our long-term growth,” said Sandy Xu, the company’s chief financial officer.

Wall Street Outlook

Goldman Sachs analyst Ronald Keung upgraded JD.com to a ‘Conviction Buy’ after the results and raised his price target to $85 from $73, implying a 27% premium from Monday’s $66.98 close. The analyst argues the company’s strong Q2 should sustain the stock’s uptrend amid the ongoing retail scale expansion from discretionary to staple goods. Elsewhere, analysts overwhelmingly believe the shares have further upside. The stock receives 1 ‘Strong Buy’ rating, 17 ‘Buy’ ratings, and 3 ‘Hold’ ratings. At this time, no analyst recommends selling the shares.

Technical Outlook and Trading Tactics

After trading within an ascending triangle for the better part of six weeks, JD.com shares finally broke through the pattern’s top trendline on above-average volume after the upbeat earnings report. Furthermore, the moving average convergence divergence (MACD) indicator crossed above its trigger line in Monday’s session to generate a buy signal.

Traders who anticipate a continuation move higher should consider using the 50-day simple moving average (SMA) average as a trailing stop. To implement this strategy, stay in the trade until price closes below the indicator.

Cisco Tumbles After Soft Q1 Earnings Guidance

Cisco Systems, Inc. (CSCO) plunged 6.44% in after-hours trade Wednesday on the back of declining fiscal Q4 revenues and downbeat guidance for the current quarter. The company, which manufactures networking hardware and security software, reported quarterly sales of $12.15 billion, down from year-ago revenues of $13.43 billion.

Meanwhile, adjusted earnings for the period came in at 80 cents per share compared to 83 a share in the quarter ended July 2019. However, the San Jose-based company’s top- and bottom-line figures surpassed Wall Street expectations by 0.50% and 8%, respectively.

Through Wednesday’s close, Cisco stock has a market capitalization of $203 billion, yields an enticing 3.05%, and trades just 2.52% higher on the year. Performance has improved over the past three months, with the shares gaining around 12%.

Soft Forward Guidance

Management forecast Q1 adjusted earnings guidance of 69 cents to 71 cents and a revenue decline of 7% to 9%.  Analysts had projected earnings of 76 cents and $12.25 billion in sales for the quarter, representing about a 7% decline.

Software Focus

The company said it plans to acquire network intelligence company ThousandEyes in the quarter for $1 billion to provide a range of remote work and learning solutions. In recent years, Cisco has made a strategic shift to generate more revenue from software and service solutions to compete with cloud offerings from tech heavyweights Amazon.com, Inc. (AMZN), Microsoft Corporation (MSFT), and Alphabet Inc. (GOOGL).

“By the end of fiscal 2020, we achieved our goal of more than half of our revenue coming from software and services, and this strategy continues to resonate with customers as they digitize their organizations,” Cisco Chief Executive Chuck Robbins said in a statement accompanying the quarterly results, per MarketWatch.

Wall Street Outlook

Despite the stock’s lackluster performance relative to the technology sector, analysts remain modestly bullish. The stock receives 13 ‘Buy’ ratings, 1 ‘Overweight’ rating, and 13 ‘Hold’ ratings. Price targets range from as high as $60 to as low as $41, with a consensus of $50.05. This represents a 4% premium to Wednesday’s $48.10 close.

Technical Outlook and Trading Tactics

Since testing the low 30s in mid-March, Cisco shares have made a Nike swoosh-like recovery. Over the past two months, the price looks to be carving out the right shoulder of an inverse head and shoulders pattern – a formation that typically signals a market bottom. Furthermore, the 50-day simple moving average (SMA) crossed above the 200-day SMA last month to indicate a new uptrend. Traders should use any weakness as a buying opportunity, providing the stock remains above the June 11 low at $43.64. Look for a move up to the $57.50 level, where price funds overhead resistance from a horizontal trendline.

MGM Surges Over 13% Amid IAC’s $1 Billion Stake

MGM Resorts International (MGM) shares rose 13.77% Monday after IAC/InterActiveCorp. (IAC) announced that it has taken a 12% stake in the  Las Vegas-based casino and resort operator worth about $1 billion.

IAC, an internet media company with over 150 brands, sees the investment in MGM as a “once in a decade opportunity” to grow its online gaming business with a preeminent brand. “What initially attracted us to MGM, besides its leadership in leisure, hospitality, and gaming, was an area that currently comprises a tiny portion of its revenue – online gaming,” IAC Chairman Barry Diller said in a statement, per MarketWatch.

Online gaming has increased in popularity in recent years due to the easing of state regulations and the takeup of E-Sports betting. According to IAC, the online gaming market represents a $450 billion global opportunity, with less than 10% penetration.

As of Aug. 11, 2020, MGM stock has a market value of $10.68 billion, yields 0.05%, and trades 34.47% lower on the year. However, the shares have recovered over 30% in the past three months as leisure travel began to slowly recommence.

Second-Quarter Earnings Beat Estimates

Although the owner of MGM Grand and Mandalay Bay reported a second-quarter loss of $1.52 per share, it was narrow than the $1.65 analysts had expected. Moreover, the company said that demand across its properties had been better than expected since they started reopening from early June.

Wall Street View

Analysts have taken the “wait and see” approach to MGM, especially after a second wave of COVID-19 infections swept across many states throughout late June and early July. The stock receives 13 ‘Hold’ ratings, 5 ‘Buy’ ratings, and 1 ‘Sell’ rating. Wall Street has a 12-month median price target on the shares at $18. This implies a 17% downside from Monday’s $21.65 close.

Technical Outlook and Trading Tactics

MGM shares gapped above the top trendline of a broad symmetrical triangle on heavy trading volume yesterday, indicating institutional buying interest behind the move. However, the stock may consolidate before attempting further gains, given the relative strength index (RSI) sits in overbought territory. If the stock closes above the 200-day simple moving average (SMA) and June peak in subsequent trading sessions, look for a possible test of the 2020 high at $34.38. Conversely, a reversal at these levels may see price revisit crucial support at $12.50.

WW International Tumbles on Slim Earnings Miss

WW International, Inc. (WW) slumped nearly 8% Wednesday after the company formally known as Weight Watchers reported quarterly results that fell short of Wall Street expectations.

The firm disclosed second-quarter (Q2) adjusted earnings of 67 cents a share, missing analysts’ forecast of 72 cents a share. On the sales front, revenues for the period of $333.64 million came in 1.67% below consensus and declined from the year-ago figure of $369.02 million. Studio closures resulting from the health crisis weighed down the company’s top line.

Through Wednesday’s close, WW International stock has a market capitalization of $1.65 billion and is down 36.12% so far in 2020. However, over the past three months, the shares have recovered about 7%.

Adding Subscribers

The weight-loss program operator grew its subscriber base during the quarter by 23% to 5 million members thanks to a record level of digital subscribers. Moreover, management believes the transition to online fitness sessions will continue to benefit the company amid the ongoing coronavirus pandemic.

“Creating exciting new coaching experiences, adding new digital features and producing creative content that is insightful, interactive and engaging will greatly increase our ability to attract new members to WW, retain them longer, help them achieve their weight loss and wellness goals, and deliver on our mission to democratize wellness for all,” the firm’s CEO Mindy Grossman said, per Barron’s.

Wall Street View

Riley Securities analyst Kara Anderson expects the company’s digital offerings to continue performing, given they meet consumers’ shift to online participation. The brokerage reiterated its ‘Buy’ rating after the Q2 result and bumped its price target to $36 from $30 – indicating a 47% gain from Wednesday’s $24.41 close. Elsewhere on Wall Street, the stock receives 6 ‘Buy’ recommendations, 1 ‘Overweight’ recommendation, and 6 ‘Hold’ recommendations. Currently, only one analyst has an “Underweight” rating on WW International shares.

Technical Outlook and Trading Tactics

Although the stock has trended steadily higher since plumbing its March low, it trades beneath the 200-day simple moving average (SMA), indicating price remains in a longer-term downtrend. Yesterday’s earnings-induced breakdown on above-average volume below a symmetrical triangle could drive further falls in the coming days. Those who want to buy the stock should look for entries between $17.50 and $20, where the shares find a zone of support from two key horizontal trendlines extending back over the past 12 months.

Take-Two Interactive Sets All-Time High After Earnings Top Estimates

Take-Two Interactive Software, Inc. (TTWO) surged 5.44% in after-hours trade Monday on the back of better-than-expected quarterly results. The videogame publisher behind “Grand Theft Auto” and “NBA 2K” titles reported fiscal first-quarter (Q1) adjusted earnings of $2.68 a share, up from 27 cents in the year-ago period and easily outpacing analysts’ forecasts of $1.58 a share.

Net bookings of $996.20 million also exceeded Street projections and grew 136% from the June 2019 quarter. The company credited the blowout results to more people staying at home playing video games during the pandemic and the absence of a costly Q1 blockbuster title launch. As of Aug. 4, Take-Two Interactive stock has a market value nearing $20 billion and trades 37% higher year to date (YTD). Despite the strong gains, the shares lag the electronic gaming and multimedia industry average over the same period by 36.98%.

Looking Ahead

Management also raised its full-year guidance in which it now expects a profit of $3.04 to $3.30 per share and bookings of $2.8 billion to $2.9 billion. It had previously forecast a profit range of $2.60 to $2.85 a share on net bookings of $2.55 billion to $2.65 billion. “As a result of our better-than-expected first-quarter operating results and increased forecast for the balance of the year, we are raising our fiscal 2021 outlook, which is poised to be another great year for Take-Two,” CEO Strauss Zelnick told investors during the conference call, per Barron’s.

Wall Street View

Analysts remain in the bull camp as the trend of people staying closer to home looks like continuing for the foreseeable future. The stock currently receives 18 ‘Buy’ ratings, 2 ‘Overweight’ ratings, and 9 ‘Hold’ ratings. Price targets range from as high as $189 to as low as $137, with a median consensus of $167. This implies an upside potential of just 1.8%. Moreover, Take-Two Interactive shares appear fully priced from a valuation standpoint, given they trade at around 45 times forward earnings – well above their five-year average multiple of 30 times.

Technical Outlook and Trading Tactics

The video game maker’s share price has trended sharply higher since the March low, with only one steep pullback to the 50-day simple moving average (SMA). Yesterday’s earnings result propelled the stock to an all-time time (ATH) on above-average volume. Given the relative strength index (RSI) sits above the 70 overbought threshold, active traders should consider waiting for a retracement entry. Look for “buy the dip” opportunities at the $144 level, where price finds support from a horizontal trendline and the 50-day SMA. In terms of trade management, consider placing a stop-loss order somewhere below $160 and using a short-period moving average as a trailing stop.

PayPal Registers 52-Week High As Earnings Top Forecasts

PayPal Holdings, Inc. (PYPL) jumped 4.73% Wednesday after the San Jose digital payments company reported better-than-expected second-quarter (Q2) results amid surging e-commerce transactions during the pandemic. Adjusted earnings came in at $1.07 a share, up from 71 cents a year earlier and well ahead of the analysts forecast of 87 cents a share. Revenues also impressed, registering $5.26 billion in the quarter compared to Street expectations of $4.99 billion.

Chief Executive Officer Dan Schulman believes the company will continue to benefit from changing consumer preferences brought about by pandemic. “Simply put, our business has never been more relevant and important in the midst of the Covid pandemic. We have seen substantial macro changes that we believe will have a lasting and profoundly positive impact on our business,” he told investors during the earnings call, per Barron’s.

Through Wednesday’s close, PayPal stock has a market capitalization of $216.72 billion and trades 70% higher on the year. In the past three months alone, the shares have gained nearly 50% as of July 30, 2020.

Transaction and User Growth

Total Q2 transactional volume through the platform climbed to $222 billion, $12 billion above what analysts had expected and up from $172 billion in the year-ago quarter. The company added 1.7 million new merchant users during the quarter as businesses moved to accommodate a shift to contactless payments. Meanwhile, PayPal’s person-to-person payment service Venmo processed $37 billion in payments. Looking ahead, the company expects total payment volume to grow 30% in the third quarter.

Wall Street View

Analysts remain overwhelmingly bullish, despite the stock trading 71% above its five-year average projected earnings multiple. Currently, it receives 32 ‘Buy’ ratings, 4 ‘Overweight’ ratings, and 7 ‘Hold ratings. Just one analyst recommends selling PayPal shares. Wall Street has placed a 12-month price target on the stock at $186.36, indicating a 6% premium to Wednesday’s $184.60 close.

Technical Outlook & Trading Strategy

Since bottoming out in the low 80s at the height of the pandemic selloff, PayPal shares have remained in a steady uptrend. Gains accelerated after the stock gapped up by more than 14% in mid-May when the accompany announced it saw a record day of transactions earlier that month. Yesterday’s blowout earnings report added fuel to the fire, propelling the price to a new 52-week / all-time high on above-average volume.

Active traders who want to play the bullish momentum should consider using a 15-day simple moving average (SMA) to ride the trend as far as possible. To implement this strategy, stay in the position until the stock closes below the indicator. If the PayPal reverses at these levels, look for a possible decline to major support at $124, where price finds a confluence of support from the February swing high and 200-day SMA.

Hasbro Breaks Down After Earnings Miss

Hasbro, Inc. (HAS) shares plunged 7.41% Monday after the toy and boardgames maker missed Wall Street’s top- and bottom-line expectations. The Rhode Island-based company reported second-quarter (Q2) adjusted earnings of 2 cents per share, falling well short of analysts’ forecast of 19 cents per share. The figure also contracted 96% from the year-ago quarter. Meanwhile, revenue of $860.3 million in the period came in below the consensus mark of $983 million and declined 29% year-over-year (YoY).

CEO Brian Goldner cited COVID-19-related disruptions to the company’s supply chain and the closures of retailers selling its toys as contributing factors to the disappointing quarterly result. Still, he sees things improving in the second half. “We believe the outlook improves from here,” Goldner told investors during the conference call, per Barron’s. The CEO also believes the reopening of the television, film, and entertainment industries position the company for a good holiday season.

As of July 28, the company has a market capitalization of $9.84 billion, offers an enticing 3.51% dividend yield, and is down 30.69% on the year. From a valuation standpoint, the stock trades at 22.37 times projected earnings, 14% above its five-year average multiple of 19.58 times.

Balance Sheet Position

Even though Hasbro’s cash position has decreased slightly from a year ago, it still has a stockpile of $1.04 billion and access to a $1.5 billion credit facility to help navigate challenges in the months ahead. The company’s long-term debt has risen to $4.8 billion from $1.7 billion, with $300 million due in May 2021.

Wall Street View

Wells Fargo analyst Timothy Conder told clients Monday that he believes the earnings and revenue miss will erase some of the stock’s recent gains. However, Street ratings indicate further upside. The stock receives 10 ‘Buy’ recommendations, 1 ‘Overweight’ recommendation, and 6 ‘Hold’ recommendations. Moreover, analysts have placed an $86.69 12-month price target on the stock, indicating a 12% upside from Monday’s $77.59 close.

Technical Outlook

After making an impressive recovery throughout March and April, Hasbro shares have oscillated within a symmetrical triangle. Yesterday’s earnings miss saw sellers rush for the gates, with price breaking down below the pattern’s lower trendline on above-average volume. Furthermore, the moving average convergence divergence (MACD) indicator crossed below its trigger line to generate a sell signal. In the weeks ahead, look for a possible test of $62.50, where price finds support from the mid-May swing low. Conversely, a reversal back to the upside could drive a move back to significant overhead resistance around $94.

Whirlpool Gains As Earnings Top Estimates

Whirlpool Corporation (WHR) shares edged 2.18% higher Wednesday after the home appliance maker delivered better-than-expected quarterly results.

The company posted second-quarter adjusted earnings of $2.15 a share, easily surpassing analysts’ forecast of 96 cents a share. Meanwhile, revenues of $4 billion topped the Street expectation by 11%. Both figures declined from the year-ago quarter due to disruptions caused by the pandemic.

The company’s North American business saw EBIT margins grow 20 basis points to 12.6%, while all geographic regions experienced a significant recovery in June. CEO Marc Bitzer said he pleased with the results. “While we recognize the uncertainty and volatility which lies ahead of us, we are proud of the way in which we managed through the most difficult quarter of this global crisis,” he said.

Through July 22, Whirlpool stock has a market capitalization of $9.13 billion, offers a healthy 3.34% dividend yield and trades flat on the year. However, over the past three months, the shares have surged almost 50%.

Managing the Pandemic

Management’s COVID-19 response plan remains on track, generating cost savings of roughly $100 million and freeing up $124 million in free cash flow in the second quarter. The company also boasts a strong liquidity position, with $5 billion in cash and available credit as of June 30.

“In the quarter, we delivered solid cost takeout globally and strong cash flow improvement through disciplined working capital management,” CFO Jim Peters, said, per Barron’s. “The actions we took earlier this year to sustain our margins and protect our liquidity strengthened our ability to succeed through the ongoing COVID-19 pandemic and have prepared us to withstand current economic uncertainty.”

Wall Street View

Analysts sit mostly on the fence, hesitant to make a call until more retail sales data becomes available in the upcoming quarters. The stock receives 4 ‘Hold’ ratings, 3 ‘Buy’ ratings, and 1 ‘Sell’ rating. The Street has a consensus 12-month price target on the shares at $132.86, representing 12.6% downside from Wednesday’s $152.10 close.

Technical Outlook

Whirlpool shares have staged a remarkable v-shaped recovery over the past four months to trade just 6% below their 2020 high. The company’s upbeat earnings yesterday helped price breakout from a tight pennant sitting above an ascending triangle in a move that could see a test of the multiyear high around $160. Traders should also watch for a golden cross buy signal – when the 50-day simple moving average (SMA) crosses above the 200-day SMA. This often marks the start of a new uptrend. On the other hand, a reversal at current levels could trigger a decline to crucial horizontal support at $122.

Dollar Tree Gains Amid New CEO Appointment

Dollar Tree, Inc. (DLTR) shares climbed 1.74% Monday after the discount variety retailer said it had appointed Michael Witynski as its new chief executive officer. Witynski, will succeed outgoing CEO Gary Philbin, who had been in the role since 2017. He brings comprehensive experience to the top job, having served as the company’s chief operating officer, and most recently as its enterprise president. To facilitate a smooth transition, Philbin will remain as an executive and board member until Sept. 23, 2020.

The timing of the move in the middle of a global pandemic raised eyebrows with some analysts. ‘While past promotions made it fairly obvious that Mr. Witynski was being groomed as the next in line, timing of the news is a bit peculiar, in our view,’ Jefferies analyst Christopher Mandeville wrote in a note to clients cited by Barron’s. However, the analyst believes Witynski’s focus on sales and margins justified the market’s positive reaction.

Dollar Tree stock has a market capitalization of $23 billion and trades 3.26% higher on the year through July 20. Performance has improved over the last three months, with the shares gaining 23%.

Navigating the Pandemic

The retailer told investors in May that it has access to a $1.25 million credit line and holds around $1.9 million in cash and investments to ride out uncertainty caused by the pandemic. Dollar Tree also said it plans to halt its repurchase program for the immediate future, though its current buyback has $800 million remaining. At the store level, the firm has reduced its planned renovations this year to 750 from its original expectation of 1,250.

Wall Street View

The majority of analysts remain neutral on the stock as they wait for further clarity about earnings in the coming quarters. Currently, it receives 13 ‘Hold’ ratings, 1 “Overweight’ rating, and 10 ‘Buy’ ratings. The 12-month Street consensus price target on Dollar Tree shares sits at $105.50. This represents an 8.6% premium to Monday’s $97.12 close.

Technical Outlook

The share price broke above a multi-month downtrend line in mid-May but has traded within a symmetrical triangle since. Price started to climb above the pattern’s top trendline last week, with gains consolidating Monday as traders digested the CEO announcement. In the coming days, watch for a cross of the 50-day simple moving average (SMA) above the 200-day SMA. Technical analysts refer to this as a golden cross – a signal that indicates the formation of a new uptrend. If the upside continues, look for a test of the 52-week high around $120. Alternatively, a breakdown below the triangle could see a test of crucial support at $75.

Western Digital Jumps After Bernstein Outperform Rating

Western Digital Corporation (WDC) gained 4.82% Wednesday after Bernstein initiated coverage of the data storage firm’s stock with an ‘Outperform’ rating and $60 price target. The bullish call indicates a 36% premium to Wednesday’s $44.07 close.

Analyst Mark Newman belies the company’s strategic diversification into NAND flash memory through its 2015 acquisition of SanDisk positions it to take advantage of a shift in data storage management from local storage to data centers. He sees NAND flash memory devices growing 35% a year on average over the next decade.

‘NAND will capture the majority of growth due to its performance, power and form-factor advantages over HDDs,’ Newman wrote in a note to clients cited by Barron’s. ‘Mission-critical data-center storage will shift to 100% NAND by 2024,’ he added.

The analyst argues the current stock price undervalues the company’s NAND business.  He says its implied valuation of $4.4 billion represents just 25% of the $19 billion the company forked out to acquire SanDisk. The firm trades around seven times future earnings, well below its five-year average multiple of nine times earnings. As of July 15, Western Digital stock has a $13.31 billion market capitalization and is down almost 30% this year.

Quarterly Earnings Approach

Analysts expect the company to disclose fiscal fourth-quarter earnings of $1.01 per share when it reports after the closing bell on Wednesday, Aug. 5. In the third quarter, the firm’s data center devices and solutions segment increased 22% year-over-year amid growing demand for enterprise SSDs and double-digit terabyte drives. Traders should watch for continued strength in this business after Bernstein’s bullish outlook on data storage growth.

Wall Street Outlook

Analysts overwhelmingly support the stock, with 18 ‘Buy’ ratings, 2 ‘Overweight’ ratings, and 11 ‘Hold’ ratings. Currently, no research firm advises selling the company’s shares. Price targets fluctuate between $45 and $90, with the consensus coming in at $61.45. Given the favorable Wall Street view, watch for a possible runup into Western Digital’s next earnings report as traders bet on a better-than-expected quarter.

Technical Outlook

Despite sitting under a death cross, the stock has remained in a trading range since late March. More recently, a descending triangle has formed over the past six weeks to establish crucial support and resistance areas. Yesterday’s breakout above the pattern’s upper trendline may see bulls test the downward sloping 200-day SMA around $51. Conversely, a breakdown below the triangle could trigger a decline to the trading range’s lower boundary at $37.5.

WDC Chart

Carnival Stock Sinks After Wedbush Slashes Price Target

Carnival Corporation & Plc (CCL) sank 5.45% Monday after Wedbush cut its price target on the embattled cruise operator’s stock from $29 to $20 while reiterating a ‘Neutral’ rating. However, the revised target still implies a 31% upside from Monday’s $15.28 close.

Despite Carnival announcing last week that several of its AIDA cruises will recommence sailing in August and that it continues to see demand from new bookings next year, analyst James Hardiman sees trouble on the horizon amid increasing COVID-19 cases in the United States.

“While a legitimate target for the restart of the AIDA brand is encouraging, we can’t help but think that we remain a far distance away from operations resuming in the United States given a resurgence in COVID-19 cases as well as halted (in some instances reversed) economic reopenings,” Hardiman said, per MarketWatch.

Through July 13, Carnival stock has a market capitalization of $11.95 billion and trades nearly 70% lower on the year. Although, the shares have fared much better over the past three months, clawing back 30%. Earlier this year, the company suspended its dividend and share buyback programs to improve its liquidity position.

Reducing Fleet Size

Carnival, which operates over 100 vessels across nine brands, said it expects to reduce its fleet by 13 ships, representing nearly 9% of its total capacity. The company sold one of its ships last month and has agreements to offload another five. It also has preliminary sale agreements for three vessels and previously announced transactions for four other ship removals. The move creates a more efficient company to navigate the unchartered waters of the ongoing pandemic.

Wall Street View

Analysts overwhelmingly remain on the sidelines, with the stock receiving 12 ‘Hold’ ratings. This is hardly surprising, given the uncertainty surrounding sailing schedules and passenger demand in 2021 and beyond. The stock also has 7 ‘Buy’ ratings and 4 ‘Sell’ ratings. Street price targets range from as low as $9.93 to as high as $27.

Technical Outlook

Since running into resistance at the 100-day simple moving average (SMA) in early June, Carnival shares have retraced back down to the $14.5 level, where price finds vital support from a horizontal trendline. Providing the stock can hold steady in this area, look for a test of the June 8 high around $25. Alternatively, if a breakdown below $14.5 occurs, anticipate a decline to the next key area of support at $11.50.

CCL Chart