Wall Street Breakfast: The Week Ahead

Earnings reports will dominate the conversation around stocks next week with Tesla (NASDAQ:TSLA), Microsoft (MSFT), Visa (V), Mastercard (MA), Johnson & Johnson (JNJ), and Boeing (BA) some of the heavyweights due to report. Federal Reserve speakers will be in a blackout period ahead of the February FOMC meeting, but economic reports will still pour in. Updates on the S&P Case-Shiller Home Price Index, new home sales, durable goods orders, and consumer sentiment could reinforce the expectation for a recession in the U.S. and set the table for a 25-point rate increase from the Fed, instead of a 50-point hike.

Earnings spotlight: Monday, January 23 – Baker Hughes (BKR) and Synchrony Financial (SYF).

Earnings spotlight: Tuesday, January 24 – 3M (MMM), Johnson & Johnson (JNJ), Verizon (VZ), Lockheed Martin (LMT), General Electric (NYSE:GE), F5 (FFIV), Texas Instruments (TXN), and Microsoft (MSFT).

Earnings spotlight: Wednesday, January 25 – AT&T (T), Abbott Labs (ABT), Boeing (BA), IBM (IBM), and Tesla (TSLA).

Earnings spotlight: Thursday, January 26 – Comcast (CMCSA), American Airlines (AAL), Dow (DOW), Intel (INTC), Comcast (CMCSA), Mastercard (MA), Tractor Supply (TSCO), and Visa (V).

Earnings spotlight: Friday, January 27 – Chevron (CVX), American Express (AXP), and Colgate-Palmolive (CL).

Volatility watch: Grom Social Enterprises (NASDAQ:GROM) and PaxMedica (NASDAQ:PXMD) are positioned for a volatile week with short interest at a very high level. Avaya Holdings Corp. (AVYA) is on the list of stocks with the highest implied volatility based on options trading. Also watch Rocket Lab USA (RKLB) with the company set for the launch of Electron from Virginia after six separate delays in December.

IPO watch: The IPO market could be more active next week. Companies that could price their IPOs and start trading include Genelux (GNLX), Elate Group (ELGP), MorningStar Partners (TXO), and Syla Technologies (SYT).

Intel earnings preview: Intel (INTC) heads into its earnings day with a weak Q1 and sluggish 2023 guidance already highly anticipated. Analysts think the focus from the chip giant will be the outlook for a second half recovery, as well as updates on potential benefits from the China reopening and Sapphire Rapids server CPU launch. On the conference call, watch for Intel management try to redirect attention back to the positive long-term outlook on the PC total addressable market. The company has stated that secular tailwinds in education, consumer, and the enterprise/commercial segments will help offset macroeconomic headwinds. Intel management is also likely to reiterate the goal of introducing tiles on both Intel 4 and Intel 20A in 2023, as well as reaching 5 node transition within four years.

Microsoft earnings preview: Microsoft (MSFT) will report earnings on January 24 after the closing bell. Consensus estimates the tech giant to report revenue of $53.2B and EPS of $2.34. Shares of Microsoft are down 3% year-to-date with an Azure miss said to already be reflected in shares. Heading into the report, Morgan Stanley thinks the potential for accelerating EPS growth in CY23 and CY24 are not yet reflected in the share price. “While indicators that Microsoft is not immune to the weaker IT spending environment aren’t hard to find, the preponderance of evidence in our survey work suggests favorable near-term consolidation trends and further improvement in the longer-term positioning against core secular growth initiatives,” updated analyst Keith Weiss. With a hiring pause or potential headcount reduction in place, opex growth is forecast to decelerate significantly into the second half of Microsoft’s fiscal year, while a recent weakening of the U.S. dollar shifts FX impacts to benefit reported results since last guidance. Morgan Stanley is also comfortable on valuation with MSFT trading at ~20X the firm’s 2024 EPS or ~1.2X 2-years PEG. Within the tech sector, Microsoft is noted to trade at a discount to its historical trading range, other large cap software peers, as well as other megacap tech names. MS is not the only firm recommending investors snap up shares of MSFT if there is a post-earnings dip. Wedbush Securities sees the jobs cuts announced by Redmond as a rip the Band-Aid off moment. Microsoft is expected to continue to strategically spend on cloud, M&A (Activision), key innovation bets (ChatGPT), and stay in the left lane of innovation while trimming non-strategic areas such as hardware.

Tesla earnings preview: Tesla (TSLA) will report earnings with investors looking for the electric vehicle maker’s outlook for deliveries and automotive margins. Oppenheimer noted that expectations on Tesla are shifting quickly following the price drops on some key models. Analyst Colin Rusch thinks the electric vehicle maker is making a proactive move to capture incentives, as well as reset prices on EVs in key markets to help protect the company’s market position and apply pressure on competition from a cash flow. However, the reality is that auto manufacturing margins are likely to fall in the near term. Oppenheimer believes if TSLA is able to maintain automotive gross margin in the mid-20s through the first half of the year and move incrementally higher during the year, shares are likely to trade higher on earnings leverage potential. Another key pullout from the earnings report and conference call will be the outlook for 2023 deliveries. The consensus deliveries estimate has dropped to 1.9M vehicles for the year after sitting at 2.0M just a few weeks ago. Other wildcards to watch are the CapEx spending guidance, FSD commentary, and color on run rates out of Shanghai, Austin, and Berlin. Tesla’s earnings report has frequently led to tandem moves within the electric vehicle sector. Some auto stocks that correlate very tightly with the EV mother ship on earnings day include Rivian Automotive (RIVN), Nikola (NKLA), Lucid Group (LCID), Lordstown Motors (RIDE), Sono Group (SEV), and Canoo (NASDAQ:GOEV). Look for some share price jolts depending upon the read-through from Elon Musk and company.

Healthcare catalysts to watch: Bank of America highlighted some healthcare companies with catalysts on the near-term horizon that could send shares higher. Alnylam (NASDAQ:ALNY) is waiting for FDA’s acceptance of sNDA submitted in December and potential PDUFA date in Q4 under standard review. Annexon (NASDAQ:ANNX) is noted to be approaching an inflection point with its phase 2 topline data for ANX007 in GA in mid-23. Apellis (NASDAQ:APLS) made the list due to potential approval of pegcetacoplan in GA by the PDUFA action date of February 26. Meanwhile, argenx (ARGX) has the expansion of Vyvgart into several new geographies in 2023 as a potential catalyst and Ascendis (ASND) has the potential approval of TransCon PTH in HPT with PDUFA action date in the mix. BioNTech (NASDAQ:BNTX) could see a share price boost when COVID revenue guidance is discussed on the upcoming Q4 earnings call, while Neurocrine (NASDAQ:NBIX) the potential approval of valbenazine and registrational phase 3 data of crinercerfont in CAH both in the hopper. Finally, Sarepta (SRPT) is called out with the company awaiting FDA’s approval decision by the PDUFA action date of May 29. All the healthcare stocks mentioned above are rated at Buy at Bank of America due to the upside potential in play.

Corporate events: Shareholders with Decarbonization Plus Acquisition Corporation IV (NASDAQ:DCRD) will vote on January 24 on the deal to take energy firm Hammerhead Resources public in a SPAC deal. Albemarle Corporation (NYSE:ALB) will host a webcast to provide an update on corporate strategy, including 2023 guidance and a five-year outlook for the company. On January 25, Kinder Morgan (KMI) plans to post an investor presentation update to its investor relation website. Shares rallied the last two times the company posted a similar update. The sports betting sector will be on alert on January 26 when BetMGM releases an update. The sports betting property is jointly owned by MGM Resorts (MGM) and Entain (OTCPK:GMVHF). The BetMGM update takes place with reports circulating that MGM is looking to renew its acquisition bid for Entain. Charles Schwab (SCHW) will hold a winter business update call on January 27 for institutional investors. Check out Seeking Alpha’s Catalyst Watch for more events scheduled for next week.

Notable conferences: The Jefferies Winter Restaurant, Foodservice, Gaming, Lodging & Leisure Summit runs next week with appearances expected from Chuy’s Holdings (CHUY), First Watch Restaurant Group (NASDAQ:FWRG), Endeavor Group (EDR), BJ’s Restaurants (BJRI), Dutch Bros, (NYSE:BROS) and ONE Group Hospitality (STKS).

Barron’s mentions: Ferrari (RACE) is singled out by the publication as the top automobile stock for 2023. The bull pitch is centered on Ferrari’s luxury model, which means wider profit margins, less cyclicality, and faster growth than mass-market automakers. While valuation is high compared to most automakers, Ferrari is noted to trade for less than luxury sector peers when factoring in EBIT estimates through 2030. A global recession is not anticipated to cut deep into Ferrari’s results, consensus estimates show an expectation for revenue growth of 11% and EPS growth of 22%.

Sources: EDGAR, Bloomberg, CNBC, Reuters