Investors walking around with a strut in their step to start this week get a free pass.
After all, tech absolutely exploded for them thanks to a slew of Street-pleasing earnings reports from the sector’s bluest of blue chips. And it wasn’t just Amazon.com (ticker: AMZN) and Facebook (FB), which have spoiled investors with fantastic beats of late. Even Apple (AAPL) got into the game, surging 6 percent despite all its woes.
But don’t worry, mopey Mollies. The smiles could very well turn down into frowns thanks to a number of big-name earnings reports on the schedule this week.
[See: The 10 Best Ways to Buy Tech Stocks.]
Here’s a look at five stocks to watch, including a couple potential land mines.
Pfizer (PFE). While Pfizer’s roots go back to the same year gold prospectors were rushing San Francisco, you wouldn’t know it by this year’s spry performance — PFE shares are up 15 percent versus just 4 percent for the broader Health Care Select Sector SPDR exchange-traded fund (XLV).
The fountain of youth extends to expectations for the company’s second-quarter earnings, due out early Tuesday. Wall Street analysts see Pfizer earning 62 cents per share on revenues of $13.01 billion — that’s year-over-year growth of roughly 11 percent and 10 percent, respectively.
You can thank the 2015 acquisition of injectable drug outfit Hospira for that. PFE paid $17 billion last year to bring a stable of some 200 generic drugs, as well as some biosimilars in a deal that was expected to be accretive to earnings this year. So far, so good, as Pfizer’s first-quarter earnings leapt 31 percent in large part because of Hospira’s new contributions. Hospira should do the same this quarter.
What’s more in the air is whether Pfizer can continue to gain traction on its Prevnar immunizations, as well as anti-epileptic drug Lyrica, which brought in $1.2 billion in revenues on its own last quarter. Pfizer also needs now-off-patent drugs like Lipitor and Viagra to not bleed onto the rug.
Tesla Motors (TSLA). Tesla’s second-quarter earnings report, out Wednesday after the bell, is a pivotal moment in a year chock full of pivotal moments.
Just look at the past few months: Tesla dealt with the first fatal crash involving one of its vehicles in self-driving mode. Not only is Tesla’s Autopilot feature being investigated in connection with the death, but the SEC is investigating just how “material” the seemingly late disclosure of the crash was in the context of a TSLA share sale held just a couple weeks afterward. Elon Musk boldly hiked Tesla’s 500,000-annual-units target to 2018. Tesla announced a controversial move to merge with another Musk brain child, struggling solar installation firm SolarCity Corp. (SCTY) — that $2.6 billion deal is expected to close in the fourth quarter. Just a couple of weeks ago, Musk unveiled his company’s second “Master Plan.” And Tesla missed its quarterly delivery goals.
[See: Artificial Intelligence Stocks: 10 Companies Using AI Extensively.]
With all that as background, and knowing expectations for deep losses are par for the course, Tesla’s earnings report is a relatively simple affair. Watch revenues. Wall Street expects TSLA revenue growth of 36 percent to $1.63 billion, which would be its strongest figure in nearly two years. The sales figure will make or break this report, and determine the path that gut-punishingly volatile Tesla shares will take next.
Square (SQ). Also reporting in Wednesday’s after-hours period is electronic payments and point-of-sale device company Square, which has suffered a couple of implosions that have shares off nearly 25 percent for the year.
The big crack came in early May, where shares lost all the ground they’d recovered after February’s broad-market collapse, thanks to a disappointing first quarter. While revenues grew a robust 51 percent — exceeding estimates — on gross payment volume that improved 45 percent, Square logged a net loss of $96.7 million that was nearly double the year-ago period. Particularly troubling was that this came despite a $2 million gross profit from its deal with Starbucks Corp. (SBUX) — an arrangement that overall has been so awful that Square opted to end it as of the third quarter, and renegotiated rates until the relationship concludes.
Watch the bottom line again this quarter. Square is expected to lose 11 cents per share — 2 more cents than what Wall Street expected SQ to lose before the disastrous first-quarter report. If the deficits continue to pile higher, that could mean another victory for the shorts, who hold a simply breathtaking 68 percent of the float.
Fitbit (FIT). The market really hates 2015 initial public offerings, if Square and Fitbit are any indication. The latter also is being shorted into the ground, with some 35 percent of its float sold short — and that’s after a 50 percent hemorrhaging in FIT shares year-to-date.
Growth isn’t the problem here. Expectations are.
FIT sales in the first quarter grew 50 percent from the previous year to beat estimates, and they are expected to improve by 45 percent in the second quarter. Fitbit also beat on earnings and raised guidance on both the top and bottom lines for the full year when it reported first-quarter earnings. However, based on the revenue beat it posted, the estimate for $2.5 billion to $2.6 billion in revenues would actually represent lower guidance for the remaining nine months of the year. And keep in mind that the first-quarter beat came after Fitbit lowered its first-quarter outlook when it reported fourth-quarter 2015 earnings.
Fitbit already is being dogged by legal hassles with Jawbone and questions about how accurately it measures users’ health — you know, that thing Fitbit is designed to do. It simply can’t afford to miss expectations when it reports late Tuesday … and in fact, it can’t afford to not blow them away.
Berkshire Hathaway (BRK.A, BRK.B). Berkshire Hathaway will irk every financial journalist this Friday when it reports earnings after the bell, delaying the weekend for many.
Berkshire is sitting on a nice 10 percent gain so far in 2016, though much of that was logged early on, and shares have essentially plateaued since early April. Investors shouldn’t expect much of a positive catalyst out of earnings, either.
Berkshire’s biggest businesses include insurance, as well as railroads/utilities/energy, and both should continue to be under pressure — the former from natural disasters and continued low interest rates, and the latter from collapsed coal prices. None of those drivers have changed.
[See: Warren Buffett’s 10 Biggest Deals.]
Meanwhile, Berkshire is expected to post earnings of $1.86 per share — up 18 percent year-over-year — but that estimate has trickled down by a penny over the past month.
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5 Stocks Wall Street Is Watching This Week: PFE TSLA SQ FIT BRK.B originally appeared on usnews.com
