Wall Street Week Ahead Earnings: Zoom, Salesforce, Domino’s, Dollar Tree and Broadcom in Focus

Traders have been rattled by geopolitical tensions over the Russia-Ukraine crisis, which has caused the global stock market to suffer. The S&P 500 plunged into correction territory. If tensions continue for long, analysts fear that it will be harder for the U.S. Federal Reserve to raise rates after next month’s hike. Due to this, investors sought safe-haven assets and U.S. Treasury yields fell as tensions between Ukraine and Russia increased. In addition, investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks amid surging inflation.

Earnings Calendar For The Week Of February 28

Monday (February 28)

IN THE SPOTLIGHT: ZOOM

The San Jose, California-based communications technology company Zoom is expected to report its fiscal fourth-quarter earnings of $0.67 per share, which represents a year-over-year decline of nearly 24% from $0.88 per share seen in the same period a year ago.

The company, which provides video telephony and online chat services through a cloud-based peer-to-peer software platform, would post revenue growth of 19% to $1.05 billion.

“We have seen a reluctance of investors around Zoom given recent performance of WFH winners. Look to FY23 guide as opportunity to reset Street expectations, giving investors a cleaner path to getting involved. Remain OW on early days company at upselling large installed base with ancillary products,” noted Meta Marshall, equity analyst at Morgan Stanley.

Zoom has established its position as the leader in video conferencing, now a growth market. Company has meaningful competitive moat built on more than just architecture. Position within customers makes an attractive opportunity to expand into broader UC market. Early wins encouraging. Opportunities to expand platform remain. Manageable churn post-COVID as move to hybrid work setups continues.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 28

TICKER COMPANY EPS FORECAST
AMBA Ambarella $-0.04
HPQ HP $1.04
NVAX Novavax $0.36
SBAC SBA Communications $2.62
SDC SmileDirectClub $-0.28
WDAY Workday $-0.19

 

Tuesday (March 1)

IN THE SPOTLIGHT: SALESFORCE.COM, DOMINO’S PIZZA

SALESFORCE.COM: The San Francisco, California-based software company is expected to report its fourth-quarter earnings of $0.75 per share, which represents a year-over-year decline of over 27% from $1.04 per share seen in the same period a year ago.

However, the leading provider of enterprise cloud computing solutions would post revenue growth of nearly 25% to $7.24 billion up from $5.82 billion a year earlier. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

Salesforce.com (CRM) is down 35% since reporting F3Q vs. IGV down 25% due to software selloff, investor fears around demand-pull forward and MuleSoft, and tougher compares in 1HF23. Our survey indicated 88% expect their pipelines to grow with 37% expecting growth of 20%+ in F23. Despite a tough set-up heading into the Q, expectations are low. CRM offers attractive risk-reward as it trades close to trough levels at 5x ’23 rev. vs. comps at 9x (40% discount). Maintain Buy,” noted Brent Thill, equity analyst at Jefferies.

DOMINO’S PIZZA: The world’s largest pizza restaurant by sales is expected to report its fourth-quarter earnings of $4.30 per share, which represents year-over-year growth of about 12% from $3.85 per share seen in the same period a year ago.

The Ann Arbor Michigan-based company has beaten consensus earnings estimates in most of the quarters in the last two years, at least. The largest pizza chain in the world would post revenue growth of 2% to around $1.38 billion from $1.36 billion a year earlier.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 1

TICKER COMPANY EPS FORECAST
AZO AutoZone $16.42
AVID Avid Technology $0.33
BIDU Baidu $1.49
DPZ Domino’s Pizza $4.30
JAZZ Jazz Pharmaceuticals $2.96
JWN Nordstrom $1.05
ROST Ross Stores $0.97
TGT Target $2.85

 

Wednesday (March 2)

IN THE SPOTLIGHT: DOLLAR TREE

The Chesapeake, Virginia-based company Dollar Tree is expected to report earnings of $1.78 per share in the fourth quarter, down over 16% from $2.13 per share seen in the same period a year ago. But the discount variety stores that sells items for $1 or less would post revenue growth of more than 5% to $7.13 billion.

“While supply chain disruptions and associated costs are top of mind given the unexpected magnitude of these costs in 2Q and ongoing impact in 3Q, we believe that Dollar Tree’s price-increase initiative will likely be a focal point for investors. More specifically, we think investors will look to better understand customer receptivity to these price increases, the degree to which these price increases can mitigate the aforementioned supply chain costs, and to what extent the company is utilizing higher price point items to diversify merchandising and sourcing,” noted Randal J. Konik, equity analyst at Jefferies.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 2

TICKER COMPANY EPS FORECAST
ANF Abercrombie & Fitch $1.59
BOX Box Inc. $-0.06
PDCO Patterson Cos. $0.50
SGFY Signify Health $0.02
SPLK Splunk $-1.08
VEEV Veeva Systems $0.59

 

Thursday (March 3)

IN THE SPOTLIGHT: BROADCOM

Chipmaker and software infrastructure supplier Broadcom is expected to report earnings per share of $8.08 in the fiscal first quarter, which represents year-over-year growth of over 22% from $6.61 per share seen in the same period a year ago.

The San Jose, California-based semiconductor manufacturer would post revenue growth of nearly 14% to $7.6 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

Broadcom (AVGO) is a compelling franchise in semis with diversified end-market exposure, product cycle momentum in wireless and networking, and market leadership. Furthermore, we take a more constructive view than investors on the company’s software strategy, particularly its purchase of Symantec,” noted Joseph Moore, equity analyst at Morgan Stanley.

“While sentiment has gradually improved, AVGO is still trading below the SOX on a P/E basis despite superior margins and FCF. We see an increase in 5G $ content, a rebound in enterprise, and reacceleration of cloud as tailwinds through 2021; and with the company’s net leverage reduced meaningfully it should be in the position to continue to execute on tuck-in deals in software.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 3

TICKER COMPANY EPS FORECAST
BBY Best Buy $2.81
BIG Big Lots $2.19
COST Costco Wholesale $2.54
GPS Gap $-0.12
KR Kroger $0.70
WB Weibo $0.75

 

Friday (March 4)

No major earnings are scheduled for release.

Earnings Week Ahead: Lennar, Adobe, FedEx, Darden Restaurants and Fed’s Policy in Focus

Although next week’s earnings are unlikely to have much of an effect on major market movements, it is sufficient to gauge investors’ sentiment. The main event on the market will be the Fed’s policy announcement on Wednesday. After the central bank’s policy-making arm concludes its two-day meeting, all eyes will be on Jerome Powell, the Fed’s chairman, who will hold a press conference.

Earnings Calendar For The Week Of December 13

Monday (December 13)

Ticker Company EPS Forecast
PHX PHX Minerals $0.07

 

Tuesday (December 14)

Ticker Company EPS Forecast
CLSK CleanSpark $20.71

 

Wednesday (December 15)

IN THE SPOTLIGHT: LENNAR, FEDERAL RESERVE POLICY DECISION

LENNAR: The home construction and real estate company, is expected to report earnings per share of $4.15 in the fiscal fourth quarter, which represents year-over-year growth of over 46% from $2.83 per share seen in the same period a year ago.

The Miami, Florida-based company would post year-over-year revenue growth of more than 25% to around $8.5 billion. For four quarters in a row, the company has exceeded expectations on earnings per share.

In the fourth-quarter fiscal 2021, Lennar expects to build 18000 homes with a gross margin of 28%, according to Zacks research. The number of new orders is expected to range from 15,200 to 15,400 units, while the average selling price is forecast to be $445,000. As a percentage of home sales, SG&A expenses are likely to be 6.7%.

In a note to clients, Goldman Sachs analysts raised her price target for Lennar to $140 from $108 and upgraded it from neutral and buy to buy.

FOMC: On Wednesday, the Fed will likely announce an acceleration of its bond-buying program. Fed’s decision may also be influenced by consumer price inflation data, which hit nearly 40 years high in November.

“The concern at the Fed will be that high inflation today can fuel expectations of higher inflation tomorrow and the day after that and so on. This can then feed through into wage demands and in an environment of decent corporate pricing power we see those costs post onto customers,” noted James Knightley, Chief International Economist at ING.

“The Fed will be keen to avoid this (or be seen willing to tolerate it), hence our expectations for a faster taper next week, with the programme concluding in February. We also expect them to signal the prospect of two rate hikes in their “dot plot”, up from the one they currently have.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 15

Ticker Company EPS Forecast
ABM ABM Industries $0.80
HEI Heico $0.59
LEN Lennar $4.15
TTC Toro $0.53
NDSN Nordson $2.10

 

Thursday (December 16)

IN THE SPOTLIGHT: ADOBE, FEDEX

ADOBE: The U.S. multinational computer software company is expected to report its fiscal fourth-quarter earnings of $3.20 per share, which represents year-over-year growth of about 14% from $2.81 per share seen in the same period a year ago.

The San Jose, California-based software company would post year-over-year revenue growth of over 19% to $4.09 billion. In the last two years, the company has beaten earnings per share (EPS) estimates almost all the time.

“Heading into FY22 we favour core franchises at reasonable valuation levels, like Adobe. We see improving DX growth, more so than DM, to pave the route to sustained ~20% growth. The initial FY22 guide likely proves conservative, but establishes a base from which ADBE can grind higher,” noted Keith Weiss, equity analyst at Morgan Stanley.

FEDEX: The Memphis, Tennessee-based multinational delivery services company is expected to report its fiscal second-quarter earnings of $4.24 per share, which represents a year-over-year decline of over 12% from $4.83 per share seen in the same period a year ago.

The delivery firm would post revenue growth of about 9% to 22.41 billion up from $20.6 billion seen a year ago. In the last four quarters, the company has beaten earnings per share estimates (EPS) only twice.

“After several negative catalysts in the Parcel space, momentum has (modestly) reversed in recent weeks. The question is can FedEx’s (FDX) print continue to build momentum or will we return to our prior pattern of disappointing updates? We believe consensus & guidance are still too optimistic,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“We expect F2Q22 to come in below consensus. We are also below cons. for overall EBIT driven by misses in Ground and Express which are only partially offset by a beat in Freight. All in, we continue to believe the FY22 guidance cut from last quarter was not enough and see risk to F2Q and FY22 numbers as pandemic tailwinds die down.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 16

Ticker Company EPS Forecast
ACN Accenture $2.63
JBL Jabil $1.80
SCS Steelcase $0.09
WOR Worthington Industries $1.72

 

Friday (December 17)

IN THE SPOTLIGHT: DARDEN RESTAURANTS

The Orlando-based restaurant operator, Darden Restaurants, is expected to report its fiscal second-quarter earnings of $1.44 per share, which represents year-over-year growth of about 95%, up from $0.74 per share seen in the same period a year ago.

The multi-brand restaurant operator would post year-over-year revenue growth of nearly 35% to $2.2 2 billion. In the last two years, the company has beaten earnings per share (EPS) estimates all the time.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 17

Ticker Company EPS Forecast
WGO Winnebago Industries $2.36

 

Best Stocks, Crypto, and ETFs to Watch – Visa, Shiba Inu and SPDR S&P Retail ETF (XRT) in Focus

Fears of a March 2020 reprise will impact market sentiment and price action in the new trading week, as evidenced by big moves in COVID beneficiaries and casualties during Friday’s holiday-shortened U.S. session. A contrary strategy makes more sense at this point than chasing the fearful crowd, looking for fresh sell signals on pandemic cast-offs that include Peloton Inc. (PTON) and Zoom Video Communications Inc. (ZM) while waiting for tradable lows in travel and digital transaction plays, like United Airlines Holdings Inc. (UAL) and Visa Inc. (V).

Dow component Salesforce Inc. (CRM) is the third strongest performer in the venerable index, gaining nearly 28% year-to-date. The stock broke out earlier this month above the rally peak posted after the company joined the index in August 2020 and pulled back to test new support during Friday’s rout. Tuesday’s post-market earning report should decide whether or not the breakout is sustainable, with the company expected to post a profit of $0.92 per-share on $6.80 billion in revenue.

Crypto assets are under pressure along with growth stocks after the Omicron news, illustrated by Bitcoin 10%+ decline to a 7-week low on Friday. However, lowly Shiba Inu held above Wednesday’s low during that session and has continued to trade above short-term support near $0.00003800 over the weekend. This bullish divergence could come into play because that price level also marks support at the .618 Fibonacci retracement of the powerful uptrend between October 2020 and October 2021.

Brick and mortar retailers got sold aggressively ahead of Black Friday, with popular chains that include Nordstrom Inc. (JWN) and Gap Inc. (GPS) reporting weak margins and issuing cautious outlooks. Taken together with the COVID threat, SPDR S&P Retail ETF (XRT) could offer a low risk short sale opportunity with 10% to 20% short-term downside. Better yet, the fund just failed a breakout above the January peak near 100, potentially signaling a long-term top and significant change in trend.

The Natural Gas futures contract rose 8.48% on Friday while the Crude Oil contract fell more than 13%. This bullish divergence highlights growing shortages across Europe and Asia and the potential for the long-suffering commodity to break out above the 7-year high posted in October. Cheniere Energy Inc. (LNG) looks like an excellent way to play this long-term opportunity, with the stock trading at an all-time high after breaking out above 2014 resistance in the mid-80s in September.

For a look at this week’s economic events, check out our earnings calendar.

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

The 3 Things Investors Have to Know Today

The move eliminates a bit of uncertainty by maintaining the central bank leadership that investors are already familiar with, but it also eliminates the possibility of a more dovish Fed Governor Lael Brainard becoming the next Fed Chair.

Interest rate markets

The interest rate markets have reacted accordingly with odds of three interest rate hikes in 2022 now being the most popular bet. The 10-Year Treasury punched up beyond 1.60% and several of the bigger tech stocks took it on the chin as talks of higher interest rates circulate.

Higher interest rates have many inside the market thinking faster economic growth, where cyclical sectors like Financials tend to benefit. In other words, we might be seeing more “rotation” out of technology and into financials as we move towards year end.

There’s some buzz that tech stock valuations could see some compression if long-term interest rates increase, where as the financials would be a beneficiary. We can potentially see “tax-loss selling” .

Oil market

The oil market is also creating some rotation in capital as the U.S., China, Japan, India, and South Korea prepare for a coordinated release of supplies from strategic stockpiles. Not surprisingly, OPEC is not happy about this as the release of an estimated +35 million barrels from the U.S. alone could change the current supply-demand dynamics.

OPEC claims the release is unjustified and says it may need to reassess the amount of its monthly production increases. Some interpret this as a threat by OPEC to retaliate against global oil importers and not surprisingly is raising concerns about a global energy showdown that could send oil and other energy prices soaring even higher further out on the horizon. OPEC’s next production meeting is December 2.

Biden is expected to make an announcement in regard to the stockpile release today.

Data to watch today

In economic data, investors will be digesting preliminary reads from IHS Market for Manufacturing and Services PMI. Bulls are hoping to see more evidence that supply chain logjams are starting to clear after reports indicating that ports and shippers are starting to make some headway on the backlog along the West Coast. Data yesterday showed Existing Home Sales rose again in October, though total sales were down nearly -6% compared to last year.

At the same time, the median price for single-family homes rose +13.5% year-over-year to $360,800. It’s worth noting that at least part of the increase in the median sales price has been driven by a big jump in “luxury” home sales. By price category, sales of homes priced under $250,000 fell -24% year over year in October, while sales of homes priced between $750,000 and $1 million rose +25%, and sales of million-dollar plus homes were up +31%.

New Home Sales for October are due out on Wednesday followed by Pending Home Sales next Monday. On the earnings front, results are due today from American Eagle, Best Buy, Cracker Barrel, Dell, Dick’s Sporting Goods, Dollar Tree, The Gap, HP, JM Smucker, Medtronic, and Nordstrom. Tomorrow we have John Deere reporting earnings.

Earnings to Watch in Holiday-Shortened Week: Zoom, Medtronic, Best Buy, Dollar Tree and Deere in Focus

Earnings Calendar For The Week Of November 22

Monday (November 22)

IN THE SPOTLIGHT: ZOOM

The San Jose, California-based communications technology company Zoom is expected to report its fiscal third-quarter earnings of $1.09 per share, which represents year-over-year growth of over 10% from $0.99 per share seen in the same period a year ago.

The company, which provides video telephony and online chat services through a cloud-based peer-to-peer software platform, would post revenue growth of over 30% to $1.02 billion. Zoom will report 3Q FY22 earnings after market close on Monday, November 22.

“Investors lean cautious heading into FQ3 print given ongoing concerns around SMB churn, particularly as other WFH names have underperformed. View FQ4 print as having more favourable risk/reward, but given cautious positioning, could see outperformance if SMB churn is better than expected,” noted Meta Marshall, equity analyst at Morgan Stanley.

Zoom has established its position as the leader in video conferencing, now a growth market. The company has a meaningful competitive moat built on more than just architecture. Position within customers makes an attractive opportunity to expand into the broader UC market. Early wins are encouraging. Opportunities to expand the platform remain. Manageable churn post-COVID as a move to hybrid work setups.”

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

Ticker Company EPS Forecast
JKS JinkoSolar Holding Co. Ltd. ADR -$0.07
GRFS Grifolsbarcelona $0.29
JOBS 51job $4.45
GGAL Grupo Financiero Galicia $0.68
ZM Zoom Video Communications $1.09
A Agilent $1.18
KEYS Keysight Technologies $1.64
URBN Urban Outfitters $0.83
BMA Banco Macro $1.22
TLK Telekomunikasi Indns Tbk Prshn Pp Pt $0.46

Tuesday (November 23)

IN THE SPOTLIGHT: MEDTRONIC, BEST BUY, DOLLAR TREE

MEDTRONIC: The medical device company is expected to report its fiscal second-quarter earnings of $1.29 per share, which represents year-over-year growth of over 26% from $1.02 per share seen in the same period a year ago.

The company has beaten earnings per share (EPS) estimates all times in the last four quarters with a surprise of over 13%. The Fridley, Minnesota-based medical company would post revenue growth of nearly 4% to $7.9 billion.

Medtronic (MDT) commentary and guide should act as a barometer for MedTech recovery through the balance of ’21 and into ’22. More muted recovery through October could incrementally pressure 2FQ, with the path to 9% y/y FY22 growth looking increasingly challenging in the face of recent sector headwinds,” noted Cecilia Furlong, equity analyst at Morgan Stanley.

BEST BUY: The Richfield, Minnesota consumer electronics retailer is expected to report its fiscal third-quarter earnings of $1.93 per share, which represents a year-over-year decline of over 6% from $2.06 per share seen in the same period a year ago.

The consumer electronics retailer’s revenue would decline 2.5% to $11.56 billion down from $11.85 billion a year earlier. It is worth noting that in the last two years the company has delivered an earnings share price (EPS) at all times.

“Market looking for a 4-5% comp in Q3 vs cons at -1.5%. We see upside to 2H’21 numbers and expect a raised full-year guide as demand remains strong. That said, momentum is slowing and the category could shrink in ’22/’23. The stock is +15% in the last month, and a Q3 beat and raise seems priced in,” noted Simeon Gutman, equity analyst at Morgan Stanley.

DOLLAR TREE: The Chesapeake, Virginia-based company is expected to report earnings of $0.96 per share in the third quarter, down over 30% from $1.39 per share seen in the same period a year ago. But the discount variety stores that sells items for $1 or less would post revenue growth of nearly 4% to $6.4 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 23

Ticker Company EPS Forecast
CPG Compass Group £17.93
BYG Big Yellow £19.26
MDT Medtronic $1.29
BBY Best Buy $1.93
DLTR Dollar Tree $0.96
J Jacobs Engineering Group Inc $1.57
BURL Burlington Stores $1.24
SJM J.M. Smucker $2.04
DKS Dick’s Sporting Goods $2.03
PLAN Progressive Planet -$0.11
AEO American Eagle Outfitters $0.60
ANF Abercrombie & Fitch $0.65
DY Dycom Industries $0.75
JWN Nordstrom $0.56
NOAH Noah $2.95
VMW VMware $1.54
HPQ HP $0.88
GME GameStop -$0.51
CPB Campbell Soup $0.81
GPS Gap $0.50
SVT Severn Trent £49.79

Wednesday (November 24)

IN THE SPOTLIGHT: DEERE

Deere & Company, the world’s largest maker of farm equipment, is expected to report its fiscal fourth-quarter earnings of $3.92 per share, which represents year-over-year growth of over 64% from $2.39 per share seen in the same period a year ago.

The agricultural, construction and forestry equipment manufacturer would post revenue growth of more than 20% to $10.5 billion. It is worth noting that in the last two years the company has delivered an earnings share price (EPS) at all times.

“Despite positive secular demand fundamentals within both the Ag and Construction businesses we are lowering near-term estimates for Deere (DE) (F4Q21/F1Q22) to better reflect the impact from lost production in the US stemming from supplier bottlenecks and the labour strike,” noted Stephen Volkmann, equity analyst at Jefferies.

“We assume any lost production elongates the cycle, and we maintain our above Consensus estimates for 2023 noting additional upside from the infrastructure bill has yet to be factored into outlooks.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 24

Ticker Company EPS Forecast
UU United Utilities £25.21
JMAT Johnson Matthey £44.57
BVIC Britvic £31.37
DE Deere & Company $3.92
TCOM Trip.com Group Ltd $0.11
KC Kutcho Copper -$1.53

Thursday (November 25)

No major earnings are scheduled for release. The U.S. stock market will be closed for the Thanksgiving holiday.

Friday (November 26)

No major earnings are scheduled for release. The U.S. stock market will be closed for the Thanksgiving holiday.

Nordstrom Post Deeper Loss in Q1, Shares Fall

Seattle-based luxury department store chain Nordstrom reported a deeper-than-expected loss in the first quarter and said its net sales fell 13% over the first quarter of 2019, sending its shares down over 5% on Wednesday.

The company said net sales increased 44% from the same period in fiscal 2020 and decreased 13% from the same period in fiscal 2019, representing a sequential improvement of 720 basis points relative to the fourth quarter of fiscal 2020.

Nordstrom reported a loss of $166 million, or $1.05 per share, worse than the Wall Street consensus estimates for a loss of $0.57 per share, compared to a loss of $521 million, or $3.33 a share, a year ago. But the company said its total revenue rose to $3.01 billion, beating the market expectations of $2.90 billion.

Nordstrom shares slumped over 5% to $34.63 on Wednesday. The stock rose over 10% so far this year.

Analyst Comments

“1Q EPS miss and management’s conservative outlook drove the stock -7% AMC. This suggests investors expected stronger results on the back of significant retailer beat & raise quarters. We flag conservative guidance appears beat-able, but the good news seems largely priced in. Staying EW on $36 price target,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

“Despite the weaker 1Q results relative to peers, we would expect JWN sales & earnings recovery to accelerate through the year. Overall, JWN’s 2021 guidance appears conservative and beatable, which will be necessary to support the shares at this price. All in, we are constructive Nordstrom revenue and margin growth potential for 2021 and into 2022, as it benefits from lagged re-opening tailwinds. But the good news appears priced in.”

Nordstrom Stock Price Forecast

Seven analysts who offered stock ratings for Nordstrom in the last three months forecast the average price in 12 months of $38.57 with a high forecast of $48.00 and a low forecast of $20.00.

The average price target represents an 11.28% increase from the last price of $34.66. Of those seven analysts, two rated “Buy”, four rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley raised the stock price forecast of $36 from $34 with a high of $53 under a bull scenario and $21 under the worst-case scenario. The firm gave an “Equal-weight” rating on the specialty retailer’s stock.

Several other analysts have also updated their stock outlook. Telsey Advisory Group lowered the target price to $36 from $44. Deutsche Bank cut the target price to $40 from $42. JPMorgan slashed the price target to $39 from $42. Barclays raised the target price to $20 from $19.

Check out FX Empire’s earnings calendar

Nordstrom Shares Slump About 3% on Disappointing Holiday Season Sales

Seattle-based luxury department store chain Nordstrom said net sales declined nearly 22% in the nine-week holiday season as shoppers avoided department stores due a fresh spike in COVID-19 cases, sending its shares down about 3% in extended trading on Wednesday.

However, digital sales surge 23% over last year and represented 54% of total sales compared with 34% from the same period in fiscal 2019. The specialty retailer forecasts to deliver positive earnings before interest and taxes (EBIT) and operating cash flow for the fourth quarter.

“We expect the consensus 2020 EPS estimate to fall about 9% on today’s release (about -32c lost on the full year as the 46c Street 4Q estimate likely falls to about 14c as implied by y/y EBIT margin contraction). On the positive side, holiday-related headwinds that impacted the quarter likely abate going forward,” wrote Kimberly Greenberger, equity analyst at Morgan Stanley.

“We slightly lower our 4Qe EBIT margin estimate to be in-line with management’s -500 bps y/y forecast. More specifically, we marginally lower both 4Q gross margin and SG&A rate by 15 bps each due to the aforementioned headwinds, yielding -500 bps y/y EBIT margin (2.3% vs. 2.6% prior).”

Following this announcement, Nordstrom shares fell about 3% to $36.5 in extended trading on Wednesday; the stock plunged over 20% in 2020.

Nordstrom will hold an analyst event on Feb. 4 and report its full earnings on March 2. We expect to update our model and analysis after these events, although we do not anticipate any significant changes to our long-term view or valuation. The firm is likely to report an EPS loss of more than $4.00 for 2020, but we forecast positive EPS in 2021 (our current expectation is $1.57),” said David Swartz, equity analyst at Morningstar.

“In the long term, we forecast revenue growth and operating margins of about 2% and 5%, respectively. We view Nordstrom as fully valued as its shares trade at a slight premium to our per share fair value estimate of $33.50.”

Nordstrom Stock Price Forecast

Eleven analysts who offered stock ratings for Nordstrom (JWN) in the last three months forecast the average price in 12 months at $24.00 with a high forecast of $35.00 and a low forecast of $11.00. The average price target represents a -36.14% decrease from the last price of $37.58. From those 11 analysts, two rated “Buy”, seven rated “Hold” and two rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $19 with a high of $35 under a bull scenario and $10 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the specialty retailer’s stock.

Several other analysts have also recently commented on the stock. Credit Suisse raised the target price to $39 from $26. Keybanc upped the price objective to $42 from $35. Wedbush increased the stock price forecast to $35 from $17. In November, Nordstrom had its target price lifted by Telsey Advisory Group to $28 from $24. Zacks Investment Research upgraded Nordstrom from a sell rating to a hold rating and set a $17 price target.

Analyst Comments

“Secular Challenges Eclipse Nordstrom’s (JWN) Strengths: JWN’s standout service, competitive pricing, coveted product, and seamless multichannel shopping experience differentiate JWN from department store peers and should stay relevant L-T, especially as high-end consumers kick start spending again,” Morgan Stanley’s Greenberger added.

“However, department store margins appear in secular decline, largely driven by channel shift to lower margin eCommerce sales, and JWN is not immune. Although we think JWN can remain highly relevant, its future earnings growth rate appears limited.”

Upside and Downside Risks

Risks to Upside: 1) Strength at the high end causes a meaningful rebound in-store comps and eComm. 2) EBIT margins stabilize after multi-year declines. 3) Capital spending on IT/Tech decelerates, potentially allowing JWN to drive expense leverage on a 1-2% comp. 4) Rack.com proves resilient– highlighted by Morgan Stanley.

Risks to Downside: 1) 2020 COVID-19/recession impact more severe than anticipated. 2) CECL has a greater impact than forecasted to credit revenue.

Check out FX Empire’s earnings calendar