NASDAQ at Highs but Watch for a Retracement

The US100 – NASDAQ has been trading in an upper range indicating a strong uptrend. This is the case partially to Yen getting weaker.

We can spot 2 POC zones. The first zone 13495-13600 is a shallow retracement, usually seen in strong trends. 38.2 Fib is making a confluence with W L4. On the other hand, we can see POC2 at 88.6/M L3 at 12794.Watch for rejections in any of the zones towards 14050 followed by 14109 and 14300. Breakout will happen above 14050. W H5 is 14366 which is the weekly target after a breakout.

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

Cheers and safe trading,

Nenad

 

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – In Position to Post Closing Price Reversal Top

June E-mini NASDAQ-100 Index futures are getting pounded late in the session, putting the technology-based index in a position to post a potentially bearish closing price reversal top. The plunge in tech stocks is offsetting the first batch of corporate earnings from banks that largely exceeded expectations.

Tesla, a NASDAQ component, fell more than 3%. Big Tech stocks including Amazon, Facebook, Netflix and Apple all traded at least 1% lower.

At 19:50 GMT, June E-mini NASDAQ-100 Index futures are trading 13801.25, down 174.50 or -1.25%.

Daily June E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, late in the session, the index is trading lower which could be a sign that momentum is getting ready to shift to the downside.

A trade through 14029 will signal a resumption of the uptrend. A trade through 12609.75 will change the main trend to down.

The minor trend is also up. A move through 13512.50 will change the minor trend to down. This will also shift momentum to the downside.

The minor range is 13512.50 to 14029.00. Its 50% level at 13770.75 is currently being tested.

The short-term range is 12609.75 to 14029.00. Its retracement zone at 13319.25 to 13152.00 is the primary downside target and support area.

Daily Swing Chart Technical Forecast

The direction of the June E-mini NASDAQ-100 Index into the close will be determined by trader reaction to 13975.75.

Bullish Scenario

A sustained move over 13975.75 will indicate the presence of buyers. If this creates enough upside momentum then look for the late rally to possibly extend into 14029.00.

Bearish Scenario

A sustained move under 13975.75 will signal the presence of sellers. The first target is the minor pivot at 13770.75. This price is a potential trigger point for an acceleration to the downside with the first target coming in at 13512.50.

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

Wells Fargo Q1 Earnings Blow Past Estimates on Release of Loan Loss Reserves; Target Price $47

San Francisco, California-based multinational financial services company Wells Fargo reported better-than-expected earnings in the first quarter, largely driven by the release of $1.6 billion in its reserves for credit losses.

The fourth-largest lender in the U.S. reported adjusted earnings per share $1.05, beating analysts’ expectations of $0.69 per share. With $18.06 billion in revenue, Wells Fargo surpassed Wall Street’s consensus estimates of $17.5 billion.

“Our results for the quarter, which included a $1.6 billion pre-tax reduction in the allowance for credit losses, reflected an improving U.S. economy, continued focus on our strategic priorities, and ongoing support for our customers and our communities. Charge-offs are at historic lows and we are making changes to improve our operations and efficiency, but low-interest rates and tepid loan demand continued to be a headwind for us in the quarter,” said Chief Executive Officer Charlie Scharf.

Wells Fargo shares, which slumped more than 40% in 2020, rebounded over 31% so far this year.

Wells Fargo Stock Price Forecast

Sixteen analysts who offered stock ratings for Wells Fargo in the last three months forecast the average price in 12 months of $39.64 with a high forecast of $47.00 and a low forecast of $32.00.

The average price target represents a -0.38% decrease from the last price of $39.79. Of those 16 analysts, nine rated “Buy”, seven rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $47 with a high of $67 under a bull scenario and $21 under the worst-case scenario. The firm gave an “Overweight” rating on the financial services company’s stock.

Several other analysts have also updated their stock outlook. BofA raised the price objective to $44 from $43. Wells Fargo & Company had its price target lifted by Barclays to $42 from $36. They currently have an equal weight rating on the financial services provider’s stock. Seaport Global Securities raised to a buy rating from a neutral and set a $42 target price. Oppenheimer reaffirmed a hold rating on shares.

Analyst Comments

Wells Fargo (WFC) appears to be beginning to take action to restructure its business mix as it works to exit the Fed consent order/asset cap and reduce its expense base. While uncertainty remains around the impact of business exits and timing of consent order/asset cap exit, we believe risk more than accounted for in the stock at 9x our 2022e EPS,” noted Betsy Graseck, equity analyst at Morgan Stanley.

WFC benefit to EPS from rising long end rates is the highest in the group, with each ~50bps increase in the 10yr driving ~4% to NII and as much as ~8% to EPS. We model WFC driving their expense ratio down to 64% by 2023 on reduced risk and compliance spend, operational efficiencies, and branch optimization. Lower expense ratio possible.”

Check out FX Empire’s earnings calendar

Investors’ Appetite for Risk Tames U.S Dollar Bulls

The greenback experienced intense selling pressures in the past few hours over recent reports revealing inflation rate at the U.S economy posted record gains yet failed to change the U.S Federal Reserve’s stance on keeping interest rates at rock-bottom levels.

Data revealed that March inflation readings surpassed the U.S Federal Reserve target by 1.0%, largely attributed to the ongoing quantitative easing programs and strong rebound of economic activities as U.S. consumer prices rallied by the most in more than 8-1/2 years.

The DXY index used in tracking the U.S dollar strength against major currencies was navigating below the 92.00 resistance area with investors shunning the greenback for Crypto assets and long-awaited listing of Coinbase, the world’s most valuable crypto exchange makes its debut on the Nasdaq today.

Dollar bears are pushing the greenback to a three-week low with recent data pointing to a well-telegraphed pattern on rising inflation, yet failed to change the US Federal Reserve’s status quo, and growing appetite for risk weighed deeply on the safe-haven currency.

Consequently, recent price actions suggest currency traders are deferring the Fed’s call on a delay in tightening monetary supply rather than sooner, hinting DXY bulls face an enormous task breaking above 92.0 in the near term as inflation fears assuages and treasury yields plunge.

However, currency traders remain upbeat about the world’s biggest economy thanks to the fast pace of COVID-19 vaccination rollouts which has helped in boosting social mobility, thereby pointing that DXY Bulls will hold comfortably hold the baseline around its yearly lows of 89.165 index points, without much difficulty.

Dollar bears will also keep an eye on the US exceptionalism theme that has helped the greenbacks upsides in early 2021 after some Fed officials indicated more of such data surprises could lead to bond tapering later in the year.

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

Morgan Stanley Lifts Magna International’s Target Price to $96, Upgrades to Equal-weight

Morgan Stanley raised their stock price forecast on Magna International to $96 from $61 and upgraded the mobility technology company’s stock to an “Equal-weight” rating.

“We upgrade Magna International (MGA) to Equal-weight from Underweight as we have greater confidence that management’s strategy can drive higher share/content on high growth BEV platforms. We double our revenue CAGR to 4% and raise our price target to $96,” noted Adam Jonas, equity analyst at Morgan Stanley.

“Raised exit EBITDA margin forecast to 8.9% vs. 8.2% previously as our higher growth drives operating leverage, primarily in the BEV-exposed businesses (BEV Power & Vision, Body & Exterior, Complete Seating and Complete BEV vehicle assembly). This change adds approximately $5 to our price target.”

The company is set to announce its next earnings report on Thursday, May 6. According to ZACKS Research, Magna International is expected to post $9.75 billion in sales for the current fiscal quarter.

The U.S. listed Magna International’s shares, which surged over 25% in 2020, rose 4.6% to $93.64 on Monday.

Eleven analysts who offered stock ratings for Magna International in the last three months forecast the average price in 12 months at $92.18 with a high forecast of $100.00 and a low forecast of $61.00.

The average price target represents a -1.56% decrease from the last price of $93.64. Of those 11 equity analysts, seven rated “Buy”, three rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the bull-case scenario target price of $135 and the worst-case scenario forecast of $55.

MGA is the third-largest global auto supplier, with leadership in many product segments, strong balance sheet, and attractive valuation vs. peers. We believe Magna has an ability to grow its EV and AV-related business lines in a way that can more than compensate for the run-out of ICE/legacy OEM product lines,” Morgan Stanley’s Jonas added.

“The net result is modest growth over market, balanced by a starting point of peak cycle and margins. We see the stock as largely fairly valued with a mostly even risk-reward skew.”

Other equity analysts also recently updated their stock outlook. Magna International had its price target upped by KeyCorp to $98 from $86. They currently have an overweight rating on the stock. Barclays upped their target price to $87 from $75 and gave the company an equal weight rating.

Check out FX Empire’s earnings calendar

PepsiCo Q1 Earnings to Rise about 4%; Target Price $150

Harrison, New York-based global food and beverage leader PepsiCo is expected to report its first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 4% from $1.07 per share seen in the same quarter a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of over 5% to about $14.6 billion. In the last four consecutive quarters, on average, the company which holds approximately a 32% share of the U.S. soft drink industry has delivered an earnings surprise of nearly 6%.

PepsiCo’s better-than-expected results, which will be announced on Thursday, April 15, would help the stock to recoup this year’s losses. PepsiCo shares, which rose over 8% in 2020, slumped about 4% so far this year.

PepsiCo Stock Price Forecast

Seven analysts who offered stock ratings for PepsiCo in the last three months forecast the average price in 12 months of $150.67 with a high forecast of $161.00 and a low forecast of $136.00.

The average price target represents a 5.49% increase from the last price of $142.83. Of those seven analysts, three rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $158 with a high of $185 under a bull scenario and $102 under the worst-case scenario. The firm gave an “Overweight” rating on the beverage company’s stock.

Several other analysts have also updated their stock outlook. Zacks Investment Research raised shares of PepsiCo from a “hold” rating to a “buy” rating and set a $142price target. Sanford C. Bernstein issued an “underperform” rating and a $136 target price. Deutsche Bank increased their target price to $148 from $143 and gave the company a “hold” rating. Wells Fargo issued an “equal weight” rating and a $157 target price.

Analyst Comments

“We are OW PEP. We forecast Pepsi will post superior topline growth relative to peers driven by exposure to the higher growth/higher margin snacks category (2/3 of PEP’s profit). Snacks is a higher growth category given: (1) shift to snacking vs. sit-down meals; (2) less pressure from health/wellness vs. beverages, and (3) PEP’s leading share in snacks vs. fragmented competition, driving share gains, and higher margins/ROIC,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“We also see more structural Pepsi market share benefits post-COVID, as PEP uses its DSD distribution advantage, to gain shelf space and share in snacks, and in beverages, where PEP is advantaged vs competition with a much lower mix in away-from-home.”

Check out FX Empire’s earnings calendar

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Hits New Record High as ‘Stay at Home’ Shares Rise

June E-mini NASDAQ-100 Index futures are trading higher after hitting a record high shortly before the opening on Tuesday. Despite weakness in the S&P 500 and Dow due to the possible impact of a halt to the rollout of Johnson & Johnson vaccines, the technology-based NASDAQ rose as trader bought several so-called “stay at home” stocks.

At 13:23 GMT, June E-mini NASDAQ-100 Index futures are at 13879.50, up 70.75 or +0.51%.

In other news, traders showed a muted reaction to the news that the consumer price index, one of Wall Street’s most-popular inflation gauges, rose 0.6% in March and increased 2.6% from the same period a year ago. Economists polled by Dow Jones were projecting the headline index to rise by 0.5% month over month and 2.5% year over year.

The early price action indicates investors may have priced in the CPI data, but the J&J news came as a total surprise.

Daily June E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed when buyers took out the February 26 main top at 13888.00.

A trade through 12609.75 will change the main trend to down. This is highly unlikely, but due to the prolonged move up in terms of price and time, today’s session begins with the index inside the window of time for a potentially bearish closing price reversal top.

A closing price reversal top won’t change the trend to down, but it indicates the selling is greater than the buying at current price levels.

The minor trend is also up. A trade through 13512.50 will change the minor trend to down. This will also shift momentum to the downside.

Daily Swing Chart Technical Forecast

The direction of the June E-mini NASDAQ-100 Index futures contract on Tuesday is likely to be determined by trader reaction to 13808.75.

Bullish Scenario

A sustained move over 13808.75 will indicate the presence of buyers. Taking out the intraday high at 13896.00 will indicate the buying is getting stronger. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 13808.75 will signal the presence of sellers. The first potential downside target is a minor pivot at 13704.25. This level will continue to move up as the market moves higher. If it fails as support then look for the selling to possibly extend into the minor bottom at 13512.50.

Side Notes

A close under 13808.75 will form a closing price reversal top on the daily chart. If confirmed on Wednesday, this could trigger the start of a 2 to 3 day correction.

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

NVIDIA at Cusp of Major Breakout

NVIDIA Inc. (NVDA) is testing February’s all-time high after raising Q1 2021 revenue estimates above consensus during Monday’s Analyst Day, predicting “good visibility” and “another strong year”. In addition to rising Data Center income, the company raised estimates for a new industrial-scale cryptocurrency mining product from $50 million to $150 million, highlighting intense demand for digital assets. It topped off the bullish guidance by insisting that demand will “exceed supply for much of this year”.

Cutting Edge Product Line

The graphics giant announced a flurry of new high tech computing products at the event, including BlueField-3, a next generation data processing unit that “delivers the equivalent data center services of up to 300 CPU cores”, and the NVIDIA DRIVE Atlan system-on-a-chip for autonomous vehicles. The company also revealed a host of partnerships and collaborations for Arm computing, AI-capable supercomputers, and AI-on-5G solutions.

Cowen analyst Matthew Ramsay raised his target to $675 on Tuesday, noting “NVIDIA’s Analyst Day discussed its expanding accelerated compute portfolio, as well as a broadening set of business models to extract value in gaming, autos and datacenter. The announcement of the Project Grace CPU was the surprise of the day given the ARM acquisition is still under review. An $8B auto funnel and Q1 pre-announcement were also positives.”

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating after 2020’s outstanding 122% return, based upon 26 ‘Buy’, 5 ‘Overweight’, 5 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $380 to a Street-high $800 while the stock is set to open Tuesday’s session about $55 below the median $662 target. New highs are likely between now and the May earnings release, given this modest placement.

NVIDIA broke out above 2018 resistance in the 290s in May 2020 and took off in a powerful trend advance that topped out near 600 in September. November and February 2021 breakout attempts failed while downturns have held rectangular support near 460. The stock traded within 80 cents of range resistance on Monday while accumulation readings have lifted to new highs, setting the stage for a breakout that could reach 800 in the next two to three months.

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

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

US Stock Index Futures Turn Lower after FDA Recommends Pausing J&J Covid Vaccine

The major U.S. stock indexes are trading lower shortly before the cash market open on reports that U.S. regulators are calling for a pause in the use of the Johnson and Johnson vaccine due to clotting issues. This is breaking news so watch for updates as the market approaches its opening at 12:30 GMT.

At 11:09 GMT, June E-mini S&P 500 Index futures are trading 4106.00, down 14.25 or -0.35%. The June E-mini Dow Jones Industrial Average futures contract is at 33505, down 126 or -0.37% and the June E-mini NASDAQ Composite is at 13789.00, down 19.75 or -0.14%.

Investors Bracing for US Consumer Inflation Data

Ahead of the breaking news, U.S. stock futures were mostly flat ahead of a highly anticipated inflation report set for release before Tuesday’s opening bell on Wall Street.

The pace of consumer inflation is likely to have returned to pre-pandemic levels in March, and it is expected to heat up even more in the next couple of months.

Rising inflation is one of the biggest fears in the market, and if it gets too hot, it could corrode asset values, limit buying power and eat away at corporate margins.

It is inevitable the reopening economy will generate some pick-up in inflation, with demand up sharply and supply chain issues resulting in shortages. Newly vaccinated consumers are also expected to resume traveling and other activities outside the home, which could create a temporary surge in services inflation.

But the Fed and some economists argue this inflationary pick up will be temporary, meaning it should not derail the recovery or result in Fed rate hikes. That makes every new inflation report very important to markets, and that is the case with Tuesday’s 12:30 GMT release of March CPI.

CPI Report Expectations

The March consumer price index is expected to show a moderate 0.2% increase in core inflation, excluding food and energy prices, according to economists polled by Dow Jones. On a year-over-year basis, that is a 1.5% pace, compared to 1.3% in February.

March headline inflation is expected to increase by 0.5% or 2.5% year-over-year, up from 1.7% in February. By May, some economists expect headline inflation could be running at a year-over-year rate of 3.5% or more. The headline rate was last at 2.5% in January, 2020.

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

UnitedHealth Could Hit New All-Time High on Strong Q1 Earnings; Target Price $393

Minnesota-based health insurer UnitedHealth is expected to report its first-quarter earnings of $4.38 per share, which represents year-over-year growth of about 18% from $3.72 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 13%. The largest insurance company by Net Premiums would post revenue growth of over 7% of around $68.9 billion.

UnitedHealth’s better-than-expected results, which will be announced on Thursday, April 15, would help the stock hit new all-time highs.

UnitedHealth shares, which surged more than 19% in 2020, rose over 7% so far this year.

UnitedHealth Stock Price Forecast

Nine analysts who offered stock ratings for UnitedHealth in the last three months forecast the average price in 12 months of $393.78 with a high forecast of $415.00 and a low forecast of $370.00.

The average price target represents a 4.65% increase from the last price of $376.28. Of those nine analysts, eight rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $462 with a high of $529 under a bull scenario and $261 under the worst-case scenario. The firm gave an “Overweight” rating on the health care company’s stock.

Several other analysts have also updated their stock outlook. Mizuho raised the stock price forecast to $394 from $380. UBS lifted the price target to $362 from $355. Deutsche Bank upped the target price to $409 from $404. Bernstein lowered the target price to $409 from $413. Citigroup increased the price objective to $408 from $390. Stephens lifted the target price to $390 from $380.

Analyst Comments

UnitedHealth Group is the number one Medicare Advantage player with ~28% market share, the number two Medicare PDP player with ~20% market share, and the number two commercial player with ~15% market share. United’s model is enhanced via vertical integration with its OptumRx PBM platform, which is one of the three largest PBMs in the country,” noted Ricky Goldwasser, equity analyst at Morgan Stanley.

“With a large lead in breadth of services offerings and considerable exposure to government businesses, UnitedHealth is well-positioned for any potential changes in the US healthcare system. A strong balance sheet and continued solid cash generation give flexibility for continued M&A.”

Check out FX Empire’s earnings calendar

United Airlines Shares Slump Over 4% as Q1 Revenue Outlook Disappoints

United Airlines Holdings, one of the largest airlines in the world, in its filing with the U.S. Securities and Exchange Commission (SEC), said it expects revenue to slump 66% to $3.2 billion in the first quarter of 2021, sending its shares down over 4% on Monday.

Following this, United Airlines shares, which rose over 29% so far this year, slumped over 4% to $55.98 on Monday. The stock declined more than 50% last year.

In March 2021, the Chicago, Illinois-based airline said it observed a forward acceleration in customer demand for travel and new bookings, resulting in positive average daily core cash flow and expected positive average daily core cash flow moving forward. The average daily core cash flow (or core cash burn) for the first quarter of 2021 is expected to be nearly negative $9 million per day, an improvement of about $10 million from the last quarter of 2020.

The airline which operates a large domestic and international route network is scheduled to report first-quarter 2021 earnings on Monday, April 19.

United Airlines would post a loss for the fifth consecutive time of $6.76 in the first quarter of 2021 as the airlines continue to be negatively impacted by the ongoing COVID-19 pandemic and travel restrictions. That would represent a year-over-year decline of over 160% from -$2.57 per share seen in the same quarter a year ago.

United Airlines Stock Price Forecast

Twelve analysts who offered stock ratings for United Airlines in the last three months forecast the average price in 12 months of $60.27 with a high forecast of $74.00 and a low forecast of $40.00.

The average price target represents a 7.68% increase from the last price of $55.97. Of those 12 analysts, six rated “Buy”, six rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $65 with a high of $96 under a bull scenario and $30 under the worst-case scenario. The firm gave an “Equal-weight” rating on the airline’s stock.

“Why Equal-weight? We like UAL’s confidence in providing a 2023 cost guide which includes a goal to permanently reduce $2 bn of cost and at least match 2019 margins. The market is also very keen to see UAL’s go-to-market strategy on the revenue side as travelers return,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“However, the legacy network footprint is a slightly bigger overhang than its network peers and the cap structure will likely take years to normalize, which could remain overhangs on the stock.”

Several other analysts have also updated their stock outlook. Citigroup raised the stock price forecast to $67 from $54. Jefferies lifted the target price to $60 from $55. Bernstein upped the target price to $67 from $61. UBS increased the target price to $67 from $58. Deutsche Bank raised the target price to $60 from $56. Berenberg lifted the target price to $38 from $32.

Analyst Comments

UAL pre-announced revenues of ~$3.2BB (vs. our prev est./cons. of $3.4BB/3.3BB), down 66% vs. 2019 levels. This compares to UAL’s previous guidance of down 65-70% for the quarter. We adjust our revenue estimate down another 5% to account for the slightly weaker demand environment,” noted Sheila Kahyaoglu, equity analyst at Jefferies.

“However, in March 2021 UAL observed a forward acceleration in customer demand for travel and new bookings. For Q2, we estimate the declines moderate slightly with revenue down 60% vs. 2019 levels and accelerates in the back half, exiting the year at down 30%.”

Check out FX Empire’s earnings calendar

Chipotle Mexican Grill Could Hit New All-Time High on Strong Q1 Earnings

US restaurant chain Chipotle Mexican Grill is expected to report its first-quarter earnings of $4.79 per share, which represents year-over-year growth of over 55% from $3.08 per share seen in the same quarter a year ago.

Chipotle Mexican Grill to announce its first-quarter 2021 results on Wednesday, April 21, 2021. The California-based company would post revenue growth of over 20% to around $1.7 billion. According to ZACKS Research, equity analysts on average forecasts full-year sales of $7.24 billion for 2021, with estimates ranging from $7.11 billion to $7.51 billion. For 2022, analysts expect sales to reach $8.12 billion, with estimates ranging from $7.89 billion to $8.40 billion.

Chipotle Mexican Grill’s shares, which surged more than 65% in 2020, rose over 10% so far this year.

Analyst Comments

“Our 1Q comp forecast of 16% (unchanged here) compares to Street 16.8% and guidance of mid-to-high teens with January closer to 11%, weather impacting February and an easier lap in March. Pricing increases are another driver; cauliflower rice was launched early in the quarter, and quesadillas were launched nationally in early March. We model store margins of 20.9% vs Street 21.1% and EPS of $4.84 vs Street $4.80, unchanged here,” noted John Glass, equity analyst at Morgan Stanley.

“Annual comments still not likely to be provided aside from development (already provided at ~200), comp estimates were provided last quarter however for the current quarter. 2Q will lap the most material COVID-19 disruption and we forecast close to +30% SSS accordingly, which obscures some of the impacts of discrete items like new products or stimulus.”

Chipotle Mexican Grill Stock Price Forecast

Twenty-three analysts who offered stock ratings for Chipotle Mexican Grill in the last three months forecast the average price in 12 months of $1,649.95 with a high forecast of $2,000.00 and a low forecast of $1,165.00.

The average price target represents a 7.74% increase from the last price of $1,531.42. Of those 23 analysts, 14 rated “Buy”, nine rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $1,476 with a high of $1,895 under a bull scenario and $844 under the worst-case scenario. The firm gave an “Equal-weight” rating on the restaurant’s stock.

“Better sales, mainly off-premise, will be a key driver of margins, but we see other underappreciated opportunities, including labor efficiencies from the ‘second make line’, and supply chain improvements. The new management team actively focused on improving the top-line through a variety of initiatives (digital, delivery, throughput, new products, marketing, etc.); we think there is a potential runway for many of these to support comps in a tougher environment,” Morgan Stanley’s Glass added.

“Brand and cultural refresh, further unit growth runway, and revamped marketing are also key parts of the story. Current challenges weighed against high expectations reflected in current stock price, in our view, drives our Equal-weight rating.”

Several other analysts have also updated their stock outlook. Chipotle Mexican Grill had its price objective raised by Truist Securities to $1,750 from $1,700. They currently have a buy rating on the restaurant operator’s stock. BTIG Research lifted their price objective to $1,600 from $1,450 and gave the company a buy rating.

Moreover, KeyCorp lifted their price objective to $1,625 from $1,475 and gave the company an overweight rating. Loop Capital lifted their price objective to $1,800 from $1,600 and gave the company a buy rating. Wells Fargo & Company lifted their price objective to $1,775 from $1,677 and gave the company an overweight rating.

Check out FX Empire’s earnings calendar

Major U.S. Stock Indexes Plow Higher with S&P 500, Dow Closing at Records

The S&P 500 index and the Dow Jones Industrial Average rose on Friday to close at record highs, getting their lift from growth stocks and optimism ahead of quarterly earnings season next week. Meanwhile, data showed U.S. producer prices increased more than expected in March, bringing the largest annual gain in 9-1/2 years.

Cash Market Performance

In the cash market, the benchmark S&P 500 Index settled at 4128.80, up 31.63 or +0.77%, the blue chip Dow Jones Industrial Average finished at 33800.60, up 297.03 or +0.88% and the technology-based NASDAQ Composite closed at 13900.19, up 70.88 or +0.51%.

Growth Stocks Moved Back to Forefront

Growth names have found their footing over the past two weeks after being outperformed by value stocks for most of the year. A pullback in the 10-year U.S. Treasury yield from a 14-month high hit in late March encouraged buying in growth.

Megacap names such as Apple, Amazon and Microsoft, which are in the growth index, advanced to pace the S&P 500. Amazon shares rose as warehouse workers in Alabama rejected an attempt to form a union.

The Russell 1000 growth index, made up largely of technology stocks, outperformed its value counterpart, made up mostly of cyclical stocks such as financials and energy names, for a second week following the pullback in longer-dated Treasury yields.

US Factory Gate Prices Surge

On the data front, the producer price index, which measures wholesale price inflation, jumped in March. The March PPI data showed a rise of 1.0%, compared with a projected increase of 0.4% from economists surveyed by Dow Jones.

Year over year, the PPI surged 4.2%, which marks the largest annual gain in more than nine years.

Many investors now expect higher inflation as vaccine rollouts help the U.S. economy rebound from coronavirus-fueled lockdowns, yet stocks showed little concern as the Federal Reserve has maintained it will allow inflation to overshoot its target.

Stocks in the News

Stocks linked to the recovering economy led the gains again amid the accelerating vaccine rollout. Carnival Corp rose 2.6% after getting two upgrades on Wall Street amid pent-up demand and potential summer restart. General Electric climbed more than 1%. JP Morgan added 0.8%.

Gains in Honeywell helped lift the Dow as Jefferies and J.P. Morgan raised their price targets on the U.S. aero parts maker’s shares.

Earnings Season Begins Next Wednesday

The banks will kick off first-quarter earnings season this week with Goldman Sachs, JPMorgan and Wells Fargo scheduled to report on Wednesday. Analysts expect profits for S&P 500 firms to show a 25% jump from a year earlier.

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

Delta Airlines to Report Loss in 2021, Unless There is Significant Recovery in Traffic: Cowen

Cowen and company in their latest report said they continue to believe that Delta Airlines will report a loss this year unless there is a significant recovery of international and corporate traffic in the second half, which seems highly unlikely amid the fourth wave of coronavirus infections.

The Airline company which provides scheduled air transportation for passengers and cargo throughout the United States and across the world is expected to report its first-quarter earnings on Thursday, April 15.

Delta Airlines would report a loss for the fifth consecutive time of $2.84 in the first quarter of 2021 as the airlines continue to be negatively impacted by the ongoing COVID-19 pandemic and renewed travel restrictions.  That would represent a year-over-year decline of over 450% from -$0.51 per share seen in the same quarter a year ago.

The Atlanta-based airline’s revenue would decline more than 50% to around $3.9 billion.

In 2020, Delta Airlines reported a full-year loss for the first time in 11 years as COVID-19 travel restrictions significantly dented air travel demand, but CEO Ed Bastian said he expects 2021 to be the year of recovery.

Delta Airlines’ shares, which slumped more than 40% last year, rose about 22% to $49.27 on Friday.

“We are reiterating our Market Perform rating on the common shares of Delta Air Lines. We are increasing our price target to $53 from $44, which is based on 8.2x 2023E EPS. These shares are currently selling at ~8.2x the 2023 consensus EPS estimate, a discount to peers with higher exposure to domestic leisure traffic and a slight premium to its own historical trading range. The shares are ~20% below their pre-pandemic highs, but 2021 revenues are forecast to be ~42% below 2019 levels suggesting these shares may take a break before heading higher,” noted Helane Becker, Cowen and Company.

“We do not expect revenues to get back to 2019 levels until 2023 at the earliest. Exposure to corporate and international travel will continue to weigh on near-term results. Jet fuel pricing has recovered faster than anticipated, weighing on bottom-line forecasts in the near-term vs previous estimates. We continue to expect Delta will not recover revenue to pre-pandemic levels before 2023, unless corporate and international traffic recovers sooner than anticipated.”

Delta Airlines Stock Price Forecast

Seventeen analysts who offered stock ratings for Delta Airlines in the last three months forecast the average price in 12 months of $53.94 with a high forecast of $72.00 and a low forecast of $42.00.

The average price target represents a 9.48% increase from the last price of $49.27. Of those 17 analysts, ten rated “Buy”, seven rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $72 with a high of $96 under a bull scenario and $35 under the worst-case scenario. The firm gave an “Overweight” rating on the airlines’ stock.

“We remain Overweight Delta Airlines (DAL) and are raising our price target from $55 to $72. DAL remains our top Legacy airline pick. We believe DAL’s strong franchise/customer loyalty and historical margin superiority can continue on the other side of the pandemic. On the other hand, DAL cannot wave away Legacy challenges, including delayed corporate/international travel and increased pressure on the balance sheet,”

“Nevertheless, we believe DAL is well positioned for the recovery as we see it – our estimates are 39% above consensus for FY22 and 49% for FY23. Our DCF-backed PT of $72 is about 20% above where the stock was trading in 2018-19 with a 2023 estimated EPS about 20% higher than 2019 as well.”

Several other analysts have also updated their stock outlook. Evercore ISI raised their price objective to $55 from $51 and gave the stock an overweight rating. Jefferies Financial Group raised their price objective to $50 from $40 and gave the stock a hold rating. Susquehanna Bancshares cut shares of Delta Air Lines from a positive rating to a neutral rating and raised their price objective to $45 from $42.

Check out FX Empire’s earnings calendar

Earnings to Watch Next Week: JPMorgan, Goldman, PepsiCo, BofA, Citigroup and Delta Airlines in Focus

Earnings Calendar For The Week Of April 12

Monday (April 12)

Ticker Company EPS Forecast
HDS HD Supply Holdings $0.39

Tuesday (April 13)

Ticker Company EPS Forecast
FAST Fastenal $0.37
HCSG Healthcare Services $0.28

Wednesday (April 14)

IN THE SPOTLIGHT: JPMORGAN CHASE, GOLDMAN SACHS

JPMORGAN CHASE: The leading global financial services firm with assets over $2 trillion is expected to report its first-quarter earnings of $2.06 per share, which represents year-over-year growth of over 290% from $0.78 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 6%.

The New York City-based investment bank would post revenue growth of about 6% to around $29.8 billion.

“We expect JPMorgan to likely beat the consensus estimates for revenues and earnings. The bank has outperformed the consensus estimates in each of the last three quarters, primarily driven by a jump in the Corporate & Investment Banking segment led by higher sales & trading and investment banking revenues. However, the above growth was partially offset by some weakness in the Consumer & Community Banking segment due to the lower interest rates environment. We expect the sales & trading and investment banking revenues to drive the first-quarter FY2021 results as well,” noted analysts at TREFIS.

“Further, recovery in bond yields over the recent months is likely to benefit core-banking revenues. Additionally, JPM released $2.9 billion from its loan-loss-reserve in the fourth quarter, suggesting some improvement in the perceived loan default risk. We expect the same momentum to continue in the first quarter. Our forecast indicates that JPMorgan’s valuation is around $143 per share, which is 7% lower than the current market price of around $154.”

GOLDMAN SACHS: The leading global investment bank is expected to report its first-quarter earnings of $10.10 per share, which represents year-over-year growth of about 225% from $3.11 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of nearly 50%.

The New York City-based bank would post revenue growth of over 31% to around $11.5 billion.

“We expect Goldman Sachs to outperform the consensus estimates for revenues and earnings. The bank has reported better than expected results in each of the last three quarters, mainly due to its strength in sales & trading and the investment banking space,” noted equity analysts at TREFIS.

“Despite the economic slowdown and the COVID-19 crisis, the company reported strong revenue growth in 2020 driven by a 43% y-o-y jump in global markets division (sales & trading) and a 24% rise in the investment banking unit. We expect the same trend to drive the first-quarter FY2021 results as well. Our forecast indicates that Goldman Sachs’ valuation is around $366 per share, which is 12% more than the current market price of around $327.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE APRIL 14

Ticker Company EPS Forecast
TSCO Tesco £8.15
INFY Infosys $0.16
JPM JPMorgan Chase $3.06
GS Goldman Sachs $10.12
BBBY Bed Bath & Beyond Inc. $0.31
FRC First Republic Bank $1.54
SJR Shaw Communications USA $0.26
WFC Wells Fargo $0.69
ACI AltaGas Canada $0.51

 Thursday (April 15)

IN THE SPOTLIGHT: PEPSICO, BANK OF AMERICA, CITIGROUP, BLACKROCK, DELTA AIR LINES

PEPSICO: The company which holds approximately a 32% share of the U.S. soft drink industry is expected to report its first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 4% from $1.07 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of nearly 6%.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of over 5% to about $14.6 billion.

“Based on the 2020 performance and evolving business conditions, the company provided guidance for 2021. It expects organic revenue growth in the mid-single digits, with core constant currency EPS growth in high-single digits. It expects a core effective tax rate of 21%. Additionally, the company expects currency tailwinds to aid its revenues and core EPS by 1 percentage point in 2021, based on the current rates,” noted analysts at ZACKS Research.

“Further, it remains committed to rewarding its shareholders through dividends and share buybacks. It anticipates total cash returns to shareholders of $5.9 million, including $5.8 million of cash dividends and $100 million of share repurchases. The company recently completed its share-repurchase authorization and expects no more share repurchases through the rest of 2021.”

BANK OF AMERICA: The Charlotte, North Carolina-based investment bank is expected to report its first-quarter earnings of $0.66 per share, which represents year-over-year growth of over 60% from $0.40 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 9%.

However, the United States’ second-largest bank would see a revenue decline of more than 4% to around $21.7 billion.

CITIGROUP: The New York City-based investment bank is expected to report its first-quarter earnings of $2.52 per share, which represents year-over-year growth of 140% from $1.05 per share seen in the same quarter a year ago. But Citigroup’s revenue would decline about 12% to around $18.3 billion.

BLACKROCK: The world’s largest asset manager with $8.67 trillion in assets under management is expected to report its first-quarter earnings of $7.87 per share, which represents year-over-year growth of over 19% from $6.60 per share seen in the same quarter a year ago. The New York City-based bank would post revenue growth of about 16% to around $4.3 billion.

DELTA AIR LINES: The Airline company which provides scheduled air transportation for passengers and cargo throughout the United States and across the world is expected to report a loss for the fifth consecutive time of $2.84 in the first quarter of 2021 as the airlines continue to be negatively impacted by the ongoing COVID-19 pandemic and travel restrictions. That would represent a year-over-year decline of over 450% from -$0.51 per share seen in the same quarter a year ago.

The Atlanta-based airline’s revenue would decline more than 50% to around $3.9 billion.

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

Ticker Company EPS Forecast
CBSH Commerce Bancshares $0.94
PEP PepsiCo $1.12
WIT Wipro $0.07
BAC Bank Of America $0.66
C Citigroup $2.52
UNH UnitedHealth $4.38
HOMB Home Bancshares $0.43
USB US Bancorp $0.95
SCHW Charles Schwab $0.79
TFC Truist Financial Corp $0.93
BLK BlackRock $7.87
JBHT J B Hunt Transport Services $1.22
AA Alcoa $0.41
PPG PPG Industries $1.57
WAL Western Alliance Bancorporation $1.47
TSM Taiwan Semiconductor Mfg $0.93
DAL Delta Air Lines -$2.84
WAFD Washington Federal $0.48

Friday (April 16)

Ticker Company EPS Forecast
CFG Citizens Financial $0.96
BK Bank Of New York Mellon $0.87
PNC PNC $2.70
ALLY Ally Financial $1.13
STT State Street $1.35
MS Morgan Stanley $1.72
KSU Kansas City Southern $1.97

 

The Week Ahead – Economic Data, COVID-19, and Corporate Earnings in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 63 stats in focus in the week ending 16th April. In the week prior, 36 stats had been in focus.

For the Dollar:

After a quiet Monday, March inflation figures will get things going on Tuesday. In spite of the FED’s assurances of unwavering support, a pickup in inflationary pressure will be a test for the markets.

The focus will then shift to a particularly busy day on the economic calendar.

Key stats include March retail sales, jobless claims, and Philly FED Manufacturing PMI numbers.

Business inventory and industrial production figures are also due out but will likely have limited impact.

At the end of the week, prelim consumer sentiment figures for April will also draw attention on Friday.

In the week ending 9th April, the Dollar Spot Index slid by 0.92% to 92.163.

For the EUR:

It’s a relatively busy week ahead on the economic data front.

Early in the week, Eurozone retail sales and economic sentiment figures for Germany and the Eurozone will be in focus.

Expect Germany’s ZEW economic sentiment figures to have the greatest impact.

Mid-week, industrial production figures for the Eurozone.

Wrapping up the week, March inflation and trade data for the Eurozone will draw attention.

Other stats in the week include inflation figures for France, Germany, Italy, and Spain. We don’t expect the numbers to have an impact on the EUR, however.

The EUR ended the week up by 1.19% to $1.1899.

For the Pound:

It’s a relatively busy week ahead on the economic calendar.

Retail sales figures are due out early Tuesday ahead of industrial and manufacturing production figures later in the day.

February trade figures will also be in focus on Tuesday. Expect more interest in the numbers, as the markets look for the effects of Brexit on trade terms.

The Pound ended the week down by 0.90% to $1.3707.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

The markets will have to wait until Thursday for manufacturing sales figures. With little else to consider, the numbers will draw attention ahead of wholesale sales numbers on Friday.

Mid-week, OPEC and the IEA’s monthly report, crude oil inventory numbers will also influence.

From the Bank of Canada, the Business Outlook Survey will provide direction at the start of the week.

Away from the economic calendar, expect economic data from China to also influence…

The Loonie ended the week up 0.38% to C$1.2530 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a busier week ahead.

Key stats include business and consumer confidence figures in the 1st half of the week.

In the 2nd half of the week, March employment numbers are also due out.

Expect plenty of Aussie Dollar sensitivity to the numbers. Business investment and consumer spending are both key to the economic recovery. Any weakening in consumer or business confidence will test support for the Aussie Dollar.

Improving labor market conditions will also be a must.

The Aussie Dollar ended the week up by 0.17% to $0.7623.

For the Kiwi Dollar:

It’s a relatively quiet week ahead.

Key stats include electronic card retail sales and business PMI numbers.

While we can expect the numbers to influence, the RBNZ monetary policy decision is the main event of the week.

With the markets expecting the RBNZ to stand pat, the focus will be on the RBNZ Rate Statement.

The Kiwi Dollar ended the week up by 0.01% to $0.7033.

For the Japanese Yen:

It is a quiet week ahead.

There are no material stats to provide the Yen with direction. The lack of stats will leave the Yen in the hands of market risk sentiment in the week.

The Japanese Yen rose by 0.92% to ¥109.67 against the U.S Dollar.

Out of China

It’s a relatively busy week ahead.

Early in the week trade data for March will be in focus. Expect plenty of interest in the numbers. The markets will be looking for a sustained improvement in trade terms.

At the end of the week, 1st quarter GDP numbers and March industrial production figures will be in focus.

Other stats include retail sales, fixed asset investment, and unemployment figures. While the numbers tend to draw attention, 1st quarter GDP numbers will overshadow these stats at the end of the week.

The Chinese Yuan ended the week up by 0.22% to CNY6.5526 against the U.S Dollar.

Geo-Politics and COVID-19

U.S foreign policy will remain the main area of focus for the markets, with U.S – China relations key.

For the Eurozone, vaccination roll-outs and COVID-19 news updates will also be in focus in the week ahead.

Corporate Earnings

Earning season also kicks off in the week ahead.

Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo are big names delivering results in the week

The Weekly Wrap – A Dovish FED Pegs Back the Greenback

The Stats

It was a relatively quiet week on the economic calendar, in the week ending 9th April.

A total of 36 stats were monitored, following 60 stats from the week prior.

Of the 36 stats, 23 came in ahead forecasts, with 11 economic indicators coming up short of forecasts. There were 2 stats that were in line with forecasts in the week.

Looking at the numbers, 24 of the stats reflected an upward trend from previous figures. Of the remaining 12 stats, 11 reflected a deterioration from previous.

For the Greenback, it was a first weekly loss in 4-weeks. In the week ending 9th April, the Dollar Spot Index fell by 0.92% to 92.163. In the previous week, the Dollar had risen by 0.28% to 93.022.

A dovish FED left the Dollar in the red for the week.

Out of the U.S

It was a quieter week on the economic data front.

Key stats included service sector PMI, factory orders, and weekly jobless claim figures.

It was a mixed set of numbers for the Greenback.

The market’s preferred ISM Non-Manufacturing PMI rose from 55.3 to 63.7 in March. It was the only positive, however.

In February, factory orders fell by 0.8%, partially reversing a 2.7% rise from January.

Jobless claims figures were also disappointing, with initial jobless claims rising from 728k to 744k in the week ending 2nd April. Economists had forecast a fall to 680k.

Other stats in the week included JOLTs job openings, trade data, wholesale inflation, and Markit service PMIs.

These stats had a relatively muted impact on the Dollar and the broader markets, however.

On the monetary policy front, the FOMC meeting minutes reaffirmed FED Chair Powell’s stance on low for longer. Late in the week, Powell also delivered a speech talking of the need for unwavering monetary policy support.

In the equity markets, the NASDAQ rallied by 3.12%, with the Dow and the S&P500 gaining 1.95% and 2.71% respectively.

Out of the UK

It was a quiet week on the economic data front.

Finalized service and composite PMI numbers for March were in focus.

Downward revisions from prelim figures had a relatively muted impact on the Pound, however. Service sector and the broader private sector returned to growth in March, delivering Pound support.

Government plans on easing COVID-19 containment measures thanks to progress on the vaccination front also remained Pound positive.

In the week, the Pound fell by 0.90% to end the week at $1.3707. In the week prior, the Pound had risen by 0.31% to $1.3832.

The FTSE100 ended the week up by 2.65%, reversing a 0.05% loss from the previous week.

Out of the Eurozone

It was another particularly busy week on the economic data front.

Mid-week, service sector PMIs for March were in focus after impressive manufacturing numbers from the week prior.

The stats were skewed to the positive, with only Italy reporting a decline in its services PMI.

For the Eurozone, the composite PMI increased from 48.8 to 53.2, which was up from a prelim 52.5. A return to growth across the private sector came in spite of containment measures across a number of Eurozone member states.

From Germany, factory orders, industrial production, and trade data were also in focus.

Orders rose for a 2nd consecutive month, albeit at a slower pace, driven by domestic demand.

Industrial production and trade data disappointed, however.

Industrial production fell by 1.6% in February, month-on-month, following a revised 2% decline in January. Economists had forecast a 1.5% rise.

In February, Germany’s trade surplus narrowed from €22.2bn to €19.1bn, versus a forecasted narrowing to €20.0bn.

On the monetary policy front, the ECB meeting minutes were also in focus. While highlighting downside risks to the economy near-term, optimism was evident over the medium-term outlook.

In line with Lagarde’s assurances from the press conference, the minutes revealed a plan to ramp up bond purchases in the near-term. The minutes did discussed a quarterly review, however…

For the week, the EUR rose by 1.19% to $1.1899. In the week prior, the EUR had fallen by 0.30% to $1.1759.

The DAX30 rose by 0.84%, with the CAC40 and EuroStoxx600 ended the week with gains of 1.09% and 1.16% respectively.

For the Loonie

It was a busier week.

Trade data for February and March Ivey PMI numbers were in focus mid-week.

The stats were mixed. While the Ivey PMI jumped from 60.0 to 72.9, the trade surplus narrowed from C$1.21bn to C$1.04bn.

At the end of the week, employment figures for March were more significant, however.

Employment surged by 303.1K at the end of the quarter, following an impressive 259.2k jump in February.

The unemployment rate fell from 8.2% to 7.5% as a result of the surge in hiring.

In the week ending 9th April, the Loonie rose by 0.38% to C$1.2530. In the week prior, the Loonie had fallen by 0.01% to C$1.2578.

Elsewhere

It was a relatively bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 9th April, the Aussie Dollar rose by 0.17% to $0.7623, with the Kiwi Dollar ending the week up by 0.01% to $0.7033.

For the Aussie Dollar

It was a particularly quiet week.

There were no material stats to provide the Aussie with direction.

While there were no stats, the RBA was in action early in the week.

In line with market expectations, the RBA stood pat on policy.

The Rate Statement talked of a hold on the cash rate until wage growth is substantially higher and inflation is sustainably within the 2% to 3% target range. According to the statement, the Board does not expect these conditions to be met until 2024 at the earliest.

For the Kiwi Dollar

It was also a particularly quiet week.

There were no material stats in the week to provide the Kiwi with direction.

For the Japanese Yen

It was a relatively quiet week.

At the start of the week, finalized service PMI figures were in focus. In March, the services PMI increased from 46.3 to 48.3, its highest reading since 2020.

In spite of the continued contraction, optimism hit its highest level since 2013 on vaccine hopes.

Household spending figures for February also provided some hope. Month-on-month, spending increased by 2.4%, partially reversing a 7.3% slump from January.

The Japanese Yen rose by 0.92% to ¥109.67 against the U.S Dollar. In the week prior, the Yen had fallen by 0.96% to ¥110.69.

Out of China

It was a relatively quiet week on the data front.

The Caixin Services PMI for March was in focus early in the week.

Following softer growth across the manufacturing sector, service sector activity picked up in March.

The Services PMI rose from 51.5 to 54.3.

At the end of the week, inflation figures also drew attention, with the PMI surveys highlighting a marked increase in input price.

In March, consumer prices fell by 0.5%, reversing a 0.6% increase in February. In spite of the fall in March, inflationary pressure returned. The annual rate of inflation accelerated from -0.2% to 0.4%. Economists had forecast consumer prices to fall by 0.4%, month-on-month, and to rise by 0.3% year-on-year.

Wholesale inflationary pressures surged at the end of the 1st quarter. The producer price index increased by 4.40%, year-on-year, which was well above a forecasted 3.5% increase. The PPI had risen by 1.7% in February.

In the week ending 9th April, the Chinese Yuan rose by 0.22% to CNY6.5526. In the week prior, the Yuan had fallen by 0.40% to CNY6.5670.

The CSI300 slid by 2.45%, with the Hang Seng ending the week down by 0.83%.

Royal Caribbean’s Q1 Earnings to Look Similar to Q4, Says Morgan Stanley

The Miami-based global cruise vacation company Royal Caribbean’s first-quarter earnings is expected to look similar to the previous quarter given it was another quarter of close to zero sailings, but remain upbeat on booking trends and sailing resumption, according to analysts at Morgan Stanley.

Royal Caribbean is set to report its first-quarter earnings in late April.

“We estimate EBITDA of $(475)m, a monthly opex burn of ~$160m, in-line with guidance of $150-170m, and the same as the Q4 rate of $162m. This gives adjusted net income of $(1.1)bn and EPS of $(3.93). Consensus is EBITDA of $(502)m and net income of $(1.1)bn. We are not modelling additional impairments or other exceptionals in Q1, which amounted to $(1.6)bn in 2020,” noted Jamie Rollo, equity analyst at Morgan Stanley.

“We are cautious on the cruise lines as we think a return to normal will take longer than expected, leverage is high (9x/7x/5x 2022-24e), and valuations look rich (17x pre-COVID-2019 P/E). We model a phased resumption and estimate EBITDA of $(747)m in 2021 (consensus $(977)m), and see a downside to this, and a return to 2019 levels by 2023.”

Royal Caribbean’s shares, which slumped 44% in 2020, rose over 20% so far this year.

Eight analysts who offered stock ratings for Royal Caribbean in the last three months forecast the average price in 12 months at $92.14 with a high forecast of $117.00 and a low forecast of $55.00.

The average price target represents a 2.57% increase from the last price of $89.83. Of those eight equity analysts, four rated “Buy”, two rated “Hold” and two rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $50 with a high of $134 under a bull scenario and $20 under the worst-case scenario. The firm gave an “Underweight” rating on the cruise company’s stock.

Other equity analysts also recently updated their stock outlook. Deutsche Bank raised their price objective to $79 from $62 and gave the stock a “hold” rating. Berenberg Bank lowered to a “sell” rating from a “hold” and set a $55 price target. JPMorgan increased their target price to $110 from $100 and gave the stock an “overweight” rating. Credit Suisse Group boosted their price target to $117 from $76 and gave the company an “outperform” rating.

“We think the cruise industry will be one of the slowest sub-sectors to recover from COVID-19. Cruising needs not just international travel to return, but ports to reopen, authorities to permit cruising, and the return of customer confidence,” Morgan Stanley’s Rollo added.

“We expect cruising to resume in Q2 2021 and expect FY19 EBITDA to return in FY23 given FY22 will be the first normal year, and pricing will likely come under pressure. FY19 EBITDA implies EPS 50% lower given share issue dilution and higher interest expense. We see debt doubling in FY21 vs FY19 due to operating losses and high capex commitments, and leverage looks high at 6x even in FY23e, so we see risk more equity might need to be raised.”

Check out FX Empire’s earnings calendar

Levi Strauss Shares Rise About 5% on Strong Q1 Earnings, Upbeat Outlook

Levi Strauss & Co, an American clothing company known for its Levi’s brand of denim jeans, reported better-than-expected earnings and revenue in the first quarter of 2021 and raised its half-year revenue growth guidance on assumption that there will be no significant worsening of the COVID-19 pandemic or dramatic incremental closure of global economies.

The world’s largest maker of pants said net revenues fell 13% year-over-year to $1.3 billion but beat Wall Street consensus estimates of $1.25 billion. Adjusted Diluted EPS came in at $0.34, beating analysts’ estimates of $0.25 per share.

Levi Strauss raised its fiscal first-half 2021 reported net revenues outlook to 24-to-25 percent growth compared to the first half of 2020 and raised its first-half adjusted EPS forecast to 41-to-42 cents.

The company also declared and paid a dividend of $0.04 per share in the first quarter totaling nearly $16 million. In April 2021, the company increased the dividend to $0.06 per share for the second quarter totaling about $24 million.

Following this, Levi Strauss’ shares, which surged more than 4% in 2020, rose about 5% to $26.22 on Friday.

Analyst Comments

“We come away from 1Q21’s beat incrementally positive as Levi Strauss (LEVI) appears on track to deliver its 12%+ adj. EBIT margin target by 2022. Raising 1H21 estimates even with ongoing COVID-19-related headwinds as underlying business momentum prevails. Raising price target to $28 from $25 & reiterate Overweight,” noted Kimberly C Greenberger, equity analyst at Morgan Stanley.

“1Q21’s significant beat and raise and encouraging 2QTD trends prove management’s key strategic priorities are working, in our view. In fact, 1Q21’s outsized 13.3% adj. EBIT margin result, or 12.6% excluding 70 bps of transitory FX tailwinds, confirms that management’s 12% adj. EBIT margin target is not only attainable on normalized revenue levels, but beatable. As such, we leave the print incrementally positive on LEVI’s long-term revenue and margin expansion opportunity. With the stock trading at a discount to peers (11.5x FY22 EV/EBITDA vs. 14x peer average), we see an opportunity for the stock to re-rate further.”

Levi Strauss Stock Price Forecast

Five analysts who offered stock ratings for Levi Strauss in the last three months forecast the average price in 12 months of $30.00 with a high forecast of $34.00 and a low forecast of $25.00.

The average price target represents a 14.55% increase from the last price of $26.19. All of those five analysts rated “Buy”, according to Tipranks.

Morgan Stanley gave the base target price of $84 with a high of $96 under a bull scenario and $56 under the worst-case scenario. The firm gave an “Equal-weight” rating on the medical technology company’s stock.

Several other analysts have also updated their stock outlook. UBS raised the stock price forecast to $34 from $29. Evercore ISI lifted the target price to $30 from $26. Guggenheim increased the price target to $29 from $26. Citigroup upped the price objective to $29 from $25. JP Morgan raised the price target to $29 from $24. Telsey Advisory Group lifted the price target to $27 from $24.

Check out FX Empire’s earnings calendar

Stocks are Heating Up

In keeping with its historical performance, April has started off white-hot. We ended March, and Q1 for that matter, with more questions than answers.

But April 2021 started with a blowout jobs report, and the indices haven’t looked back since. Right now, the S&P 500 is at yet another record, the Dow is just about at a record, and we’ve seen a furious comeback for Big Tech and growth stocks.

The sentiment is certainly better now than it was just a couple of weeks ago. However, I implore you to remember that every month in 2021 thus far has started off hot and saw a pullback/volatility occur in the second half of the month.

Think about it. In January, we had the GameStop trade spooking investors. In February and March, we had surging bond yields, inflation fears, or Jay Powell comments that rubbed people the wrong way. These concerns won’t just disappear because we want them to. If we could make things magically disappear, COVID would’ve been over yesterday.

But, as I mentioned before, April historically is a strong month for stocks. According to Ryan Detrick , chief market strategist at LPL Financial, “Other than my Cincinnati Bengals breaking my heart, few things are more consistent than stocks higher in April.”

During April, the S&P 500 has gained in 14 of the past 15 years. April has also been the strongest month for stocks over the past 20 years.

The market concerns, though, are still intact. We still have to worry about inflation, bond yields, and stocks peaking. According to Binky Chadha , Deutsche Bank’s chief U.S. equity strategist, we could see a significant pullback between 6% and 10% over the next three months.

Another thing I’m a bit concerned about is the $2 trillion infrastructure plan. While this is great for America’s crumbling infrastructure, do we really need to spend any more trillions?

Plus, how do you think this will be paid for? Hiking taxes- namely corporate taxes . Those gains that high growth stocks saw after Trump cut corporate taxes in 2017 could very well go away. While President Biden has indicated a willingness to negotiate his 28% corporate tax proposal, it’s still a tax hike.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

We’re hot right now.

However, we could see more volatility and more muted gains than what we’ve come to know over the last year.

April is historically strong, but please continue to monitor inflation, yields, and potential tax hikes. Be optimistic but realistic. A decline above ~20%, leading to a bear market, appears unlikely. Yet, we could eventually see a minor pullback by the summer, as Deutsche Bank said.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Russell 2000- Still Buyable?

Figure 1- iShares Russell 2000 ETF (IWM)

I proudly switched my call on the iShares Russell 2000 ETF (IWM) to a BUY on March 24. I kicked myself for not calling BUY on the Russell after seeing a minor downturn during the second half of February and swore I wouldn’t make that mistake again.

We’re up to over 5% since then.

The climate right now supports the Russell 2000. The current economic policy is tailor-made for small-caps. The best part, though? The Russell is still very buyable.

The RSI is still hovering around 50. I also checked out the chart and noticed that almost every time the IWM touched or minorly declined below its 50-day moving average, it reversed.

Excluding the recovery in April from last year’s crash, 5 out of the previous 6 times the Russell did this with its 50-day, it saw a sharp reversal. The only time it didn’t was in October 2020, when the distance between its 50-day and its 200-day moving average was a lot more narrow.

Fast forward to now. The Russell 2000, despite its gains since tanking on March 23, remains right at about its 50-day moving average.

Aggressive stimulus, friendly policies, and a reopening world bode well for small-caps in 2021. I think this is something you have to consider for the Russell 2000 and maybe overpay for.

According to the chart, we may have found double-bottom support too.

Based on the chart and macro-level tailwinds, I feel that you can still BUY this index. In fact, it may be the most buyable of them all.

For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.

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

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

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All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be 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, Matthew Levy, CFA, 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. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’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. Matthew Levy, CFA, 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.