American Express Could Hit 140 in the Fourth Quarter

Dow component American Express Co. (AXP) is trading marginally higher in Thursday’s pre-market after Bank of America Securities upgraded the stock from ‘Underperform’ to ‘Neutral’, posting a $169 price target.  The ratings change matches recent actions by Seaport Global Securities and Credit Suisse Group, highlighting analyst caution after the financial technology provider gained nearly 270% off the March 2020 low.

Delta Variant Stalls Business Travel Plans

The stock is highly levered to business and travel spending that’s been impacted by the COVID-19 pandemic. The growth outlook looked bright at the end of the first quarter but the Delta variant has forced corporations to delay plans to reinstitute airline travel, having a negative impact on airline, hotel, conference, and food transactions. That headwind has also impacted rivals Visa Inc. (V) and Mastercard Inc. (MA), with the trio pulling back from summer peaks.

American Express released solid August card metrics on Wednesday, reporting a U.S. Consumer Card Member net loan write-off rate of 0.6% vs. 0.7% in the prior month, or a -10 bps change. Consumer loans 30 days or more past due stood at 0.6% vs 0.6% in the prior month, marking no change, while the U.S. Small Business Card member loan net write-off rate of 0.5% matched 0.5% in July. Loans that were 30 days or more past due rose slightly to 0.5%, compared to 0.4%.

Wall Street and Technical Outlook

Wall Street consensus now stands at an ‘Overweight’ rating based upon 12 ‘Buy’, 1 ‘Overweight’, 13 ‘Hold’, 2 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $140 to a Street-high $227 while the stock is set to open Thursday’s session about $23 below the median $185 target. This low placement should favor a strong fourth quarter bounce but technical factors are telling a more bearish tale.

American Express topped out at 138 in January 2020 and sold off to a four-year low during the pandemic decline. The subsequent uptick reached the prior peak in February 2021, triggering an immediate breakout that posted an all-time high at 179.67 in July. A steady downtick since that time has flipped weekly and monthly Stochastics into sell cycles, predicting continued weakness that could reach 200-day moving average support near 150 in coming weeks.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held Visa in a family account at the time of publication. 

Today’s Market Wrap Up and a Glimpse Into Friday

Stocks managed to move modestly higher with all three major indices extending recent gains. The S&P 500, Dow Jones Industrial Average and Nasdaq all finished the day with fractional gains. Tech stocks Amazon and Facebook were each up by more than 1% and helped fuel the Nasdaq higher.

At this rate, stocks are on track for weekly gains after a bumpy start on Monday. Weaker than expected jobless claims data weighed on sentiment early on but it wasn’t enough to hold stocks down.

 

Investors have the Delta variant in the back of their minds, but they are feeling emboldened by the strong profits being reported by corporate America.

Stocks to Watch

Domino’s Pizza was one of the biggest winners of the day. The food-delivery chain saw its shares soar by 15% to a fresh all-time high. Domino’s Q2 results exceeded analyst expectations on the top and bottom lines.

The company has enhanced its menu with new items that are resonating with customers, especially as consumers spend more time at home. Domino’s plans to keep the momentum going with a USD 1 billion share buyback program.

The semiconductor sector stayed under pressure all day and the selling isn’t over. Intel is down 1.5% in after-hours trading after the company reported earnings. Investors fled on the heels of Intel’s weak Q3 sales outlook amid heightened competition in the space. Meanwhile, Texas Instruments shaved 5% off its value today due to a similarly weak sales forecast.

Twitter shares are up 5% in after-hours trading after Jack Dorsey’s company reported better than anticipated Q2 results. Among the surprises was Twitter’s revenue of USD 1.19 billion, up 74% YoY. Twitter grew the number of monetizable daily active users 11% YoY to 206 million.

Look Ahead

Dow stocks American Express and Honeywell are on tap to report their quarterly earnings on Friday, as is oil company Schlumberger. Shares of Schlumberger are trading 1% higher in extended-hours ahead of the company’s earnings results, which are expected before the opening bell on Wall Street.

The oil price has been volatile of late and USD 100 oil is looking more and more like a long shot. Barclays analysts say that while USD 100 oil isn’t off the table, it would be a stretch. Instead, they are predicting Brent oil to hover at an average of USD 69 per barrel and WTI at USD 67.

Earnings vs Inflation – What Is The Right Bet?

As investment money will always be looking for a place to roost many stocks still look like the best opportunity for alpha, especially some of your bigger high-tech companies like Microsoft, Google, Facebook, etc… who don’t face the same headwinds created by supply chain dislocations, higher commodity prices, etc.

Fundamental analysis

Bulls are hoping to see more money lured into the market by strong Q2 earnings which have so far failed to ignite a meaningful rally. Analyst expectations for S&P 500 company earnings is still around +65%, something stock bears argue is lofty considering the extreme level of supply chain dislocations and labor shortages.

There is also a lot of debate about whether corporate profit gains are “peaking” in the face of slower growth in the quarters ahead as the reopening boom begins to fade. Remember, investors place bets on the future, not what happened last quarter.

The earnings pace really picks up next week with highlights including IBM on Monday; Chipotle and Netflix on Tuesday; ASML, CocaCola, Novartis, and Verizon on Wednesday; Abbott Labs, AT&T, Biogen, Capital One, Dow Inc., Intel, Snap, Southwest Airlines, Twitter, and Union Pacific on Thursday; and American Express, Honeywell, and Nextera on Friday.

Inflation

One of the biggest factors that seem to be weighing on investor sentiment continues to be inflation. The latest indication of rising costs was reflected last week in U.S. Import Prices, which climbed for an eighth straight month in June.

However, the year-on-year increase slid to +11.2%, down from +11.6% in May is an encouraging sign that some inflationary pressures might be starting to ease. Federal Reserve Chairman Jerome Powell, testifying before the Senate Banking Committee yesterday, repeated the script he’s stuck with for months, saying inflation will likely remain elevated in the coming weeks and months before moderating.

Powell also told lawmakers that the Fed is not in a hurry to start paring its monthly asset purchases but he stressed that the central bank is prepared to adjust policy if they see signs of inflation moving “materially and persistently beyond levels consistent with our goal.” Wall Street increasingly expects the Fed to start trimming asset purchases later this year and even start lifting rates as soon as Q4 2022.

The Fed meets next on July 27-28 but most analysts think Powell will wait to make any big policy change announcements at either the annual Jackson Hole symposium at the end of August or possibly the FOMC’s September policy meeting. Central banks in Canada and New Zealand this week scaled back their asset purchase schemes which some worry could start to put pressure on central bankers in other developed countries to also tighten.

The European Central Bank releases its latest policy decision next Thursday. Bulls still largely believe that U.S. growth will be able to outpace “transitory” inflation pressures but the outlook for some companies could dim if the Fed starts reining in its “easy money” policies sooner than investors have been anticipating.

sp500 analysis forecast 18 july 2020

SP500 technical analysis

SP500 pulled back last week after another attempt to break out. There is no surprise we see such choppiness in the middle of summer. Moreover, very likely this price activity will stay for a few more weeks. We are still in a bull market. However, the risk of deep pullback is rising. If that happens, SP500 will target to close the gap near 4000.

On the other hand, if the price sustains above Gann resistance 4400, bulls will target 4500 at least. Two of my favourite indicators are giving opposite signals now. So, I don’t have any strong bias at the moment. Advance Decline Line remains bearish. At the same time, Insider Accumulation is bullish. In general, swing traders have to focus on daily support and resistance. Likely it will take few more weeks to see a real direction. Short-term traders can use Gann levels and Cycles on 4h charts to find trading opportunities.

Earnings to Watch Next Week: IBM, Netflix, Coca-Cola, Twitter, Intel and American Express in Focus

Earnings Calendar For The Week Of July 19

Monday (July 19)

IN THE SPOTLIGHT: IBM

The Armonk, New York-based technology company is expected to report its second-quarter earnings of $2.32 per share, which represents year-over-year growth of over 6% from $2.18 per share seen in the same quarter a year ago.

The world’s largest computer firm would post revenue growth of about 1% to $18.24 billion. In the last four consecutive quarters, on average, the company has delivered earnings of over 5%.

The better-than-expected results, which will be announced on Monday, July 19, would help the stock recover its last year’s losses. IBM shares rose about 12% so far this year.

“We expect IBM to marginally beat the consensus estimates for revenues and earnings. The company has reported better than expected earnings figures in each of the last four quarters while revenue beat consensus in three of the last four quarters,” noted analysts at Trefis.

“In the past year the company has increased its investment in R&D and capex and since October has acquired seven companies focused on hybrid cloud and AI. As the pace of vaccination increases and countries are opening up, we expect the momentum to continue in the second-quarter FY2021 results as well. Our forecast indicates that IBM’s valuation is around $140 per share, which is in line with the current market price of $140.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 19

Ticker Company EPS Forecast
TSCO Tractor Supply $2.97
PPG PPG Industries $2.20
JBHT J B Hunt Transport Services $1.57
CCK Crown $1.78
STLD Steel Dynamics $3.38
PACW Pacwest Bancorp $0.99
WTFC Wintrust Financial $1.59
FNB FNB $0.28
SFBS ServisFirst Bancshares $0.93
IBM IBM $2.32
PLD ProLogis $0.45
ACI AltaGas Canada $0.68
ZION Zions Bancorporation $1.29
NVR NVR $72.35
ELS Equity Lifestyle Properties $0.28
AN AutoNation $2.67

Tuesday (July 20)

IN THE SPOTLIGHT: NETFLIX, UNITED AIRLINES HOLDINGS

NETFLIX: The California-based global internet entertainment service company is expected to report its second-quarter earnings of $3.18 per share, which represents year-over-year growth of 100% from $1.59 per share seen in the same quarter a year ago.

The streaming video pioneer would post revenue growth of about 19% to around $7.3 billion. In the last four consecutive quarters, on average, the company has delivered earnings of over 5%.

“Areopening consumer and the lingering effects of 2020’s production delays suggest risk to consensus 2Q/3Q estimates. However, more content is on the way, supporting an increase in net additions in 4Q21/’22. In this cross-asset report, we reiterate OW on shares and reiterate our recommendation to buy 10Y bonds in credit,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“We believe share performance is highly dependent on increasing global membership scale. Proven success in the US and initial international markets provides a roadmap to success in emerging markets, and scale should allow NFLX to leverage content investments and drive margins. Higher global broadband penetration should increase the NFLX addressable market, driving member growth and providing further opportunity given NFLX’s global presence. Longer-term, we see the ability to drive ARPU growth, particularly given increased original programming traction.”

UNITED AIRLINES HOLDINGS: One of the largest airlines in the world is expected to report a loss for the sixth consecutive time of $4.21 in the second quarter of 2021 on July 20 as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and renewed travel restrictions.

However, that would represent a year-over-year improvement of about 55% from -$9.31 per share seen in the same quarter a year ago.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 20

Ticker Company EPS Forecast
DOV Dover $1.82
OMC Omnicom $1.38
SBNY Signature Bank $3.14
PM Philip Morris International $1.54
HCA HCA $3.16
SYF Synchrony Financial $1.38
KEY KEY $0.54
ALLY Ally Financial $1.50
MAN ManpowerGroup $1.41
GATX GATX Corp $1.03
BMI Badger Meter $0.46
ONB Old National Bancorp $0.40
FMBI First Midwest Bancorp $0.38
NFLX Netflix $3.18
CNI Canadian National Railway USA $1.49
CMG Chipotle Mexican Grill $6.50
IBKR Interactive Brokers $1.03
UAL United Airlines Holdings -$4.21
PNFP Pinnacle Financial Partners $1.44
RXN Rexnord $0.50
UCBI United Community Banks $0.62
SNBR Scs Group Plc $1.07
FULT Fulton Financial $0.33
RUSHA Rush Enterprises $0.79
ISRG Intuitive Surgical $3.07
UBS UBS Group $0.42
TRV Travelers Companies $2.38
HAL Halliburton $0.22
CFG Citizens Financial $1.10
SNV Synovus Financial $1.03
IRDM Iridium Communications -$0.06
NEOG Neogen $0.14
EXPO Exponent $0.42
RNST Renasant $0.77

Wednesday (July 21)

IN THE SPOTLIGHT: COCA-COLA

The world’s largest soft drink manufacturer is expected to report its second-quarter earnings of $0.56 per share, which represents year-over-year growth of over 30% from $0.42 per share seen in the same quarter a year ago. The company’s revenue would grow over 30% to $9.4 billion.

“We are Overweight Coca-Cola (KO) after significant stock underperformance given COVID impacts on KO’s on-premise eating / drinking out business (~40% of sales) and gas & convenience (~10%) with gov’t mandated restaurant closures and reduced foot traffic. COVID impacts drove a large -9% organic sales decline in 2020, but we forecast a recovery to ~8% organic growth in 2021/2022 with a post-COVID recovery in away-from-home,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“We believe Coke’s LT topline growth outlook is above peers, with strong pricing power, and favorable strategy tweaks under Coke’s CEO, including increased innovation and a cultural shift towards a total beverage company.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 21

Ticker Company EPS Forecast
JNJ Johnson & Johnson $2.29
ASML ASML $2.98
KO Coca-Cola $0.56
ANTM Anthem $6.34
NDAQ Nasdaq Omx $1.72
RCI Rogers Communications USA $0.62
NTRS Northern $1.71
BKR Baker Hughes Co $0.16
MTB M&T Bank $3.65
MKTX MarketAxess $1.72
LAD Lithia Motors $6.01
HOG Harley Davidson $1.21
BOKF BOK Financial $1.83
STX Seagate Technology $1.84
KNX Knight Transportation $0.88
CCI Crown Castle International $0.68
CSX CSX $0.37
DFS Discover Financial Services $4.01
EFX Equifax $1.71
GL Globe Life Inc $1.83
LVS Las Vegas Sands -$0.15
SEIC SEI Investments $0.91
WHR Whirlpool $5.95
GGG Graco $0.61
REXR Rexford Industrial Realty $0.09
OMF OneMain Holdings $2.12
THC Tenet Healthcare $1.07
FR First Industrial Realty $0.22
SLM SLM $0.37
LSTR Landstar System $2.33
SLG SL Green Realty $0.17
VMI Valmont Industries $2.50
RLI RLI $0.75
UFPI Universal Forest Products $1.56
STL Sterling Bancorp $0.50
UMPQ Umpqua $0.45
FTI FMC Technologies -$0.01
CNS Cohen & Steers $0.82
MC Moelis & Company $0.83
TCBI Texas Capital Bancshares $1.24
BXS BancorpSouth $0.67
PLXS Plexus $0.91
NVS Novartis $1.54
SAP SAP $1.44
TXN Texas Instruments $1.83
EBAY eBay $0.95
KMI Kinder Morgan $0.19
URI United Rentals $4.90
IPG Interpublic Of Companies $0.43
FNF Fidelity National Financial $1.41
CMA Comerica $1.60
MTG MGIC Investment $0.42
FCFS FirstCash $0.60
CVBF CVB Financial $0.35
PTC PTC $0.63
PPERY PT Bank Mandiri Persero TBK $0.18

Thursday (July 22)

IN THE SPOTLIGHT: TWITTER, INTEL

TWITTER: The online social media company that enables users to send and read short 140-character messages called “tweets”, is expected to report its second-quarter earnings of $0.07 per share, which represents year-over-year growth of over 105% from a loss of -$0.16 per share seen in the same quarter a year ago.

The San Francisco, California-based company would post revenue growth of about 55% to $1.06 billion.

“Lack of Negative Revisions and Relative Valuation: Valuation continues to be expensive, but we think investors are likely to continue to pay a premium for TWTR given 1) continued turnaround progress and 2) platform scarcity,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Execution Risk Remains Around Driving Advertiser ROI: Advertiser ROI has clearly improved on Twitter, but the company needs to improve ad targeting and measurability to compete with the larger players. To do that it will have to further personalize the content that users see and use its data more effectively, both of which remain key strategic challenges (and priorities) for management.”

INTEL: The California-based multinational corporation and technology company is expected to report its second-quarter earnings of $1.07 per share, which represents a year-over-year decline of about 14% from $1.23 per share seen in the same quarter a year ago. The company’s revenue would fall over 10% to $17.73 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 22

Ticker Company EPS Forecast
ULVR Unilever £1.29
PSON Pearson £8.40
ABB ABB $0.36
CBSH Commerce Bancshares $1.02
DOW Dow Chemical $2.36
DHR Danaher $2.05
FITB Fifth Third Bancorp $0.81
FAF First American Financial $1.70
RS Reliance Steel & Aluminum $4.73
T AT&T $0.79
WBS Webster Financial $0.99
UNP Union Pacific $2.54
BKU BankUnited $0.86
SNA Snap-On $3.21
ABT Abbott $1.02
NEM Newmont Mining $0.81
MMC Marsh & McLennan Companies $1.42
BIIB Biogen $4.60
TRN Trinity Industries $0.09
DGX Quest Diagnostics $2.86
ALLE Allegion $1.30
CLF Cliffs Natural Resources $1.52
TPH Tri Pointe Homes $0.81
VLY Valley National Bancorp $0.29
EWBC East West Bancorp $1.39
DHI DR Horton $2.82
SON Sonoco Products $0.86
POOL Pool $5.49
WSO Watsco $3.01
SAFE 3 Sixty Risk $0.33
CSL Carlisle Companies $2.22
WRB W.R. Berkley $0.98
SAM Boston Beer $6.69
SIVB SVB Financial $6.42
CE Celanese $4.34
RNR Renaissancere $4.62
TWTR Twitter $0.07
INTC Intel $1.07
WSFS Wsfs Financial $0.90
GBCI Glacier Bancorp $0.72
ABCB Ameris Bancorp $1.20
OZK Bank Ozk $0.92
ASB Associated Banc $0.47
FFBC First Financial Bancorp $0.52
VICR Vicor $0.33
VRSN Verisign $1.36
COF Capital One Financial $4.57
INDB Independent Bank $1.08
ASR Grupo Aeroportuario Del Sureste $36.49
SKX Skechers USA $0.51
RHI Robert Half International $1.05
FE FirstEnergy $0.57
SNAP Snap -$0.18
AEP American Electric Power $1.12
LUV Southwest Airlines -$0.27
AAL American Airlines -$2.12
DPZ Dominos Pizza $2.86
ALK Alaska Air -$0.62
NUE Nucor $4.76
BX Blackstone $0.78
FCX Freeport-McMoran $0.75
SASR Sandy Spring Bancorp $1.20
GPC Genuine Parts $1.52
ORI Old Republic International $0.53
HTH Hilltop $1.03
CROX Crocs $1.54
BCO Brinks $0.98
FFIN First Financial Bankshares $0.38
CNA Centrica £1.80

Friday (July 23)

Ticker Company EPS Forecast
HON Honeywell International $1.94
SLB Schlumberger $0.26
AXP American Express $1.63
KMB Kimberly Clark $1.74
NEP Nextera Energy Partners $0.61
ROP Roper Industries $3.67
RF Regions Financial $0.53
NEE NextEra Energy $0.69
AIMC Altra Industrial Motion $0.81
GNTX Gentex $0.44
FBP First Bancorp FBP $0.22
VTR Ventas -$0.08
GT Goodyear Tire & Rubber $0.16
ACKAY Arcelik ADR $0.48
MGLN Magellan Health $0.60
SXT Sensient Technologies $0.78

 

Stock Pick Update: Jan. 13 – Jan. 19, 2021

In the last five trading days (January 6 – January 12) the broad stock market has extended its record-breaking run-up. The S&P 500 index has reached new record high of 3,826.69 on Friday following new stimulus package hopes.

The S&P 500 has gained 2.40% between January 6 open and January 12 close. In the same period of time our five long and five short stock picks have gained 1.59%. Stock picks were relatively weaker than the broad stock market’s performance last week. However, our long stock picks have gained 3.35% outperforming the index . Short stock picks have resulted in a loss of 0.17%.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

Our last week’s portfolio result:

Long Picks (January 6 open – January 12 close % change): ECL (+1.65%), CE (+3.80%), KMI (+7.87%), VLO (+1.45%), NVDA (+1.98%)
Short Picks (January 6 open – January 12 close % change): PLD (-1.43%), SPG (+1.70%), DUK (-1.13%), PEG (+1.97%), HON (-0.27%)

Average long result: +3.35%, average short result: -0.17%
Total profit (average): +1.59%

Stock Pick Update performance chart since Nov 18, 2020:

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, January 13 – Tuesday, January 19 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (January 13) and sold or bought back on the closing of the next Tuesday’s trading session (January 19).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s .

Based on the above, we decided to choose our stock picks for the next week. We will choose our 5 long and 5 short candidates using trend-following approach:

  • buys: 2 x Financials, 2 x Materials, 1 x Consumer Discretionary
  • sells: 2 x Real Estate, 2 x Communication Services, 1 x Consumer Staples

Buy Candidates

AXP American Express Co. – Financials

  • Stock remains above its medium- and short-term upward trend lines
  • Possible breakout above the previous high
  • The resistance level is at $124 and support level is at $113

SPGI S&P Global Inc. – Financials

  • Possible upward reversal from the support level of $212-213
  • The resistance level is at $325 – short-term upside profit target level

SHW Sherwin Williams Co. – Materials

  • Stock broke above the short-term downward trend line – uptrend continuation play
  • The support level is at $710 and resistance level is at $740-750

Summing up , the above trend-following long stock picks are just a part of our whole Stock Pick Update . The Financials and Materials sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today .

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Stock Pick Update: November 25 – December 1, 2020

In the last five trading days (November 18 – November 24) the broad stock market has been fluctuating along 3,600 level. Yesterday it broke above short-term consolidation, as it got close to November 9 record high of 3,645.99 again. Is this a medium-term topping pattern or just some month-long consolidation before breaking to new record highs? The market is very hot right now .

The S&P 500 index has gained 0.65% between November 18 and November 24. In the same period of time our five long and five short stock picks have gained 6.57%. Stock picks were relatively much stronger than the broad stock market . Our long stock picks have gained a stunning 10.97% as they’ve outpaced the S&P 500 index on the long side. And short stock picks have resulted in a gain of 2.17%.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

Last week, we modified our stock-picking strategy . Its year-long performance record shows that non-contrarian stock picks were outperforming contrarian stock picks by a large margin. Non-contrarian stock picks have gained 8.8% since Nov 19, 2019, and contrarian stock picks have lost 10.6% in the same period of time. Take a look at our Stock Pick Update performance chart. We included non-contrarian along with contrarian stock picks and the S&P 500 index performance (Tuesday’s open – Wednesday’s close):

Therefore we stopped picking stocks on a contrarian basis. Our 5 long and 5 short stocks portfolio is based solely on the trend-following approach.

Our last week’s Stock Pick portfolio result:

November 24, 2020

Long Picks (November 18 open – November 24 close % change): WMB (+5.02%), PXD (+15.29%), WFC (+16.63%), C (+11.69%), ROK (+6.22%)
Short Picks (November 18 open – November 24 close % change): TXN (+2.32%), QCOM (-2.22%), DG (+1.94%), BBY (-4.67%), HRL (-8.24%)

Average long result: +10.97%, average short result: +2.17%
Total profit (average): +6.57%

The new Stock Pick Update performance chart:

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, November 25 – Tuesday, December 1 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (November 25) and sold or bought back on the closing of the next Tuesday’s trading session (December 1).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s .

Based on the above, we decided to choose our stock picks for the next week. We will choose our 5 long and 5 short candidates using trend-following approach:

  • buys: 2 x Energy, 2 x Financials, 1 x Industrials
  • sells: 2 x Utilities, 2 x Health Care, 1 x Consumer Staples

Buy Candidates

PXD Pioneer Natural Resources Co. – Energy

  • Stock accelerated its uptrend after breaking above the resistance level of $98
  • Uptrend continuation play
  • The next resistance level is at $116
  • Risk of a downward reversal

WMB Williams Cos., Inc. – Energy

  • Uptrend continuation play
  • The support level is at $21.50
  • Risk of a downward reversal

AXP American Express Co. – Financials

  • Bullish flag pattern breakout play
  • The support level is at $110

Summing up , the above trend-following long stock picks are just a part of our whole Stock Pick Update . The Energy and Financials sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today .

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

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Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

American Express Posts Lower-Than-Expected Earnings For Q3 as COVID-19 Slowdown Bites

American Express, an American multinational financial services corporation, reported a lower-than-expected profit in the third quarter as people cut on their spending given the income and job uncertainty due to the COVID-19 led economic recession, sending its shares down about 3% on Friday.

American Express Company reported third-quarter net income of $1.1 billion, or $1.30 per share, compared with net income of $1.8 billion, or $2.08 per share, a year ago. That was lower than the market consensus of $1.35 per share. Total revenue, excluding interest expense, plunged 20% to $8.8 billion.

Global consumer services group reported third-quarter net income of $855 million, compared with $991 million a year ago.

“Overall, 3Q had some puts and takes, as AXP missed on PPNR (given 8% higher expenses), although beat on EPS due to better revs/provision. NCOs were ahead of forecast, while DQs came in better. The billed business was in-line in the qtr, and improving from trough levels seen earlier this year, although at a slower rate vs. peers (-20% YoY on an FXN basis),” said John Hecht, equity analyst at Jefferies.

“We look to the call for further outlook on N-T billed business growth, updates on credit performance, as well as commentary on expenses for the balance of the year.”

American Express shares plunged about 3% to $101.75 in the pre-market trading on Friday; the stock is down nearly 15% so far this year.

Executive comments

“While our business continues to be significantly affected by the impacts of the pandemic, our third-quarter results have increased our confidence that our strategy for managing through the current environment is the right one,” said Stephen J. Squeri, Chairman and Chief Executive Officer.

“Since the lows of mid-April, we have seen a steady recovery in our overall spending volumes. In fact, we had positive year-over-year growth in non-T&E spending, which has long accounted for the large majority of our overall volumes. While credit remains strong, with delinquencies and net write-offs at the lowest levels we have seen in a few years, we remain cautious about the direction of the pandemic and its impacts on the economy, which is reflected in our reserve levels.”

American Express Stock Price Forecast

Thirteen equity analysts forecast the average price in 12 months at $105.46 with a high forecast of $127.00 and a low forecast of $88.00. The average price target represents a 0.64% increase from the last price of $104.79. From those 13 equity analysts, three rated “Buy”, six rated “Hold” and four rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $115 with a high of $157 under a bull scenario and $55 under the worst-case scenario. The firm currently has an “overweight” rating on the payment services company’s stock. Oppenheimer raised their stock price forecast of American Express to $115 from $100 and Stephens upped their target price to $106 from $101.

Several other analysts have also recently commented on the stock. Bank of America lowered shares of American Express from a “neutral” rating to an “underperform” rating and cut their price target to $95 from $106 in Sept. In July, Deutsche Bank lowered their price objective to $106 from $108 and set a “buy” rating. Daiwa Capital Markets restated a “neutral” rating and set a $100.00 price objective.

Analyst Comments

“Revenue growth takes a near-term hit, down 16% in FY20 driven by a sharp slowdown in T&E spend. We see T&E declining 60% y/y in 2020, driving a 19% y/y decline in total card spend in FY20. While T&E will likely take at least a few years to recover, the key to the American Express (AXP) story is a bottoming of trends which we expect happens in 2H20; return to work sets the stage for a near 20% rebound in card spend in ’21, driving revenue growth of 11% in ’21,” said Betsy Graseck, equity analyst at Morgan Stanley.

“Credit quality best among card issuers on super-prime focus, though AXP exposure to small business (~25% of loans + charge card receivables) is a risk in the near-term,” Graseck added.

Check out FX Empire’s earnings calendar

American Express Could Sell Off To March Low

Dow component American Express Co. (AXP) reported mixed Q2 2020 results last week, with $0.29 per-share (EPS) beating profit estimates, while revenue of $7.67 billion fell well short of $8.25 billion expectations. Revenue contracted a staggering 29.2% year-over-year, undermined by the ongoing impact of the COVID-19 pandemic. The release triggered a modest sell-the-news reaction, dropping the stock 1.4% to a 2-week low.

American Express Heavily Exposed To Business Travel

The travel services giant has been pummeled by the pandemic, losing significant income since corporations worldwide stopped business travel in the first quarter and sent employees home to work through virtual meeting spaces. Many industry experts now believe that many of Amex’s blue chip customers will remain sidelined well after the infection runs its course, addicted to the lower costs of conducting business digitally, rather than in person.

Executives summed up the tough quarter, noting “while our second quarter results reflect the challenges of the current environment, we remain confident that our strategy for navigating this period of uncertainty is the right one. Our customers continue to be engaged with our products and services; we have a productive and dedicated workforce; our capital and liquidity levels remain strong; and we continue to focus on those areas most critical to our long-term growth.”

Wall Street And Technical Outlook

Wall Street consensus has grown increasing cautious on American Express in the last two months, unlike Mastercard Inc. (MA) and Visa Inc. (V), who have continued to book significant income through high volumes of digital transactions. It’s currently rated as a ‘Hold’, based upon 6 ‘Buy’ and 9 ‘Hold’ recommendations. Three analysts are now telling shareholders it makes sense to sell positions and move to the sidelines. Price targets range from a low of $85 to a street high $119 while the stock is trading about $6 below the median $101 target.

Technically-speaking, there’s little to love about American Express, which looks like a better short sale opportunity than long-term investment through the second half of 2020. It posted an all-time high in January, fell more than 50% into March, and reversed at the 200-day moving average in June, settling in the lower half of the 6-month range. Ominously, accumulation readings have dropped to depressed March levels, predicting that price may soon follow.