A better-than-expected October jobs appeared to have revived investor optimism amid volatile trading activity on Friday with all three major averages experiencing multiple swings between positive and negative territory. Although all three averages were in positive territory at the close, they still suffered weekly losses after experiencing four straight losing sessions heading into Friday.
The jobs report wasn’t the only data point weighing on stocks. The market was also anticipating where the Federal Reserve will pivot to next and where (and when) Fed funds rates might peak in the next few quarters. No one really knows for sure at this point. What we do know is that the positive jobs will be one more item that may keep the Fed on its hawkish path towards monetary policy. Friday’s employment report showed the U.S. economy added 261,000 jobs in October, surpassing expectations for 205,000 new jobs.
The sustained strength in the economy continues to surprise many analysts, particularly as the Fed maintains its aggressive posture to get soaring cost of living under control with successive 75-basis point rate increases. Usually, a strong jobs report would send the markets lower, but stocks moved higher partly due the fact that the rate of jobs growth has declined for three straight months, sending the unemployment rate slightly higher to 3.7% in October, from 3.5%.
The good, not great, jobs report was enough to send the Dow Jones Industrial Average 403.55 points higher, or 1.26%, to end the session at 32,404.80. The S&P 500 added 50.7 points, or 1.36%, finishing at 3,770.59. Meanwhile, with strong gains in tech heavyweights Nvidia (NVDA), Microsoft (MSFT), Intel (INTC) and Alphabet (GOOG , GOOGL) the technology-heavy Nasdaq Composite index gained 132.31 points, or 1.28%, to close at 10,475.25.
All three major benchmarks suffered weekly losses though, with the Nasdaq leading the way lower with a 5.7% loss, marking its worst weekly decline since January. The S&P 500 Index declined 3.4% for the week, while the Dow suffered a decline of 1.4%. It remains to be seen where stocks end up next week. In the meantime, evidenced by the solid Q3 earnings reports we have seen so far, companies are controlling the things they can. Here are the earnings I’ll be watching this week.
Lyft (LYFT) – Reports after the close, Monday, Nov. 7
Wall Street expects Lyft to earn 8 cents per share on revenue of $1.06 billion. This compares to the year-ago quarter when earnings were 5 cents per share on revenue of $862.68 million.
What to watch: Despite the stock’s recent struggles, Lyft’s business continues to operate well. Currently commanding 29% market share in the U.S., Lyft is the second-largest ride-sharing company after Uber (UBER). While questions remain regarding the company’s international expansion initiatives as well as driver incentives, there are still tons of catalysts to propel Lyft higher and sustain growth over the long term. The company continues to enjoy a strong rebound in rider demand, which was reflected in both the first quarter and second quarter results. Lyft ended the second quarter with 19.86 million active riders. The company generated an average revenue per active rider of $49.89, slightly topping estimates. The boost in riders lead to Q2 adjusted earnings of 13 cents per share on $990.7 million in revenue. Analysts expected for the company to lose an adjusted 4 cents per share on $988.14 million in revenue. The company continues to benefit from the rebound in corporate travel, which help generate $79.1 million in adjusted EBITDA during the quarter, the highest in its history. With the stock down 68% year to date, including a 55% decline over the past six months, value investors should see this as an opportunity to add. Still, for the stock to rebound from current levels, Lyft not only must deliver a top- and bottom-line beat Monday, it also needs upside guidance that lays out a path towards stronger profitability.
Disney (DIS) – Reports after the close, Tuesday, Nov. 8
Wall Street expects Disney to earn 57 cents per share on revenue of $21.62 billion. This compares to the year-ago quarter when earnings came to 33 cents per share on revenue of $16.31 billion.
What to watch: Driven by fears over consumer spending weakness and broader macro uncertainties, Disney stock has been a massive under-performer, with shares down more than 44% from their 52-week high. The company’s streaming platform Disney+ has been a key focus area given the downbeat subscriber results the market has witnessed from Netflix (NFLX). However, Netflix’s strong Q3 results has sparked optimism within the streaming landscape, suggesting Disney+ may remain a strong growth opportunity for Disney moving forward. The company’s management has targeted Disney+ global subscriber gains to be between 230 million and 260 million by the end of 2024. The market wants to know if these targets are still attainable. While that subscriber goal would be impressive, if achieved, it will require significant investments which may impact profits. On the positive side, when the company last reported its results, Q3 revenue rose 26% year over year and beat expectations by half a billion dollars, while adjusted EPS of $1.09 beat estimates by 10 cents. The company added 14.4 million Disney+ subscribers, a 31% year-over-year jump and beating expectations for 10 million new subscribers. The company now has 152.1 million Disney+ subscribers, meaning it has already reached 66% of its total goal for 2024. On Wednesday investors will want additional details about the company’s long-term growth strategy.
Beyond Meat (BYND) – Reports after the close, Wednesday, Nov. 9
Wall Street expects Beyond Meat to lose $1.14 per share on revenue of $98.11 million. This compares to the year-ago quarter when the loss came to 87 cents per share on revenue of $106.43 million.
What to watch: Aside from wage inflation, the company is dealing with supply chain shortages, which has impacted its once-torrid growth pace. It also appears that commercial traction is fading, which has resulted in steepening losses. As a result, the stock has lost close to 80% of its value so far this year, including a 63% decline in the past six months. In the most recent quarter, the company not only missed revenue estimates, but it also announced a large quarterly loss. On the bright side, the company posted almost $150 million in total revenue, though it was offset by downbeat gross margin. The management has guided for continued revenue growth, but the market wants to know when the company can start growing its gross margins and achieve profitability. The valuation is more appealing at current levels. And assuming that the company doesn’t lower its revenue and profit guidance, the stock could stabilize and start moving higher from here.
Nio Limited (NIO) – Before the open, Thursday, Nov. 10
Wall Street expects Nio to report a per-share loss of 16 cents on revenue of $1.8 billion. This compares to the year-ago quarter when it reported a per-share loss of 28 cents on revenue of $1.47 billion.
What to watch: Thanks to better-than-expected delivery totals for Nio, the stock has begun to drive upward. The Chinese electric vehicle maker recently reported its October delivery numbers that reveled 10,059 vehicles delivered, representing more than 174% year-over-year growth. While skeptics will point out that the company benefited from having two more vehicles available for sale this year, Nio has had to consistently overcome production headwinds that have impeded its growth story, namely “supply chain volatilities due to the COVID-19 situations in certain regions in China,” per the company statement. Nevertheless, October deliveries had a strong mix of premium models, which consisted of 5,979 premium smart electric SUVs and 4,080 premium smart electric sedans. On a year-to-date basis, the company has now delivered 92,493 vehicles, marking a 32% year-over-year increase. Cumulative deliveries reached 259,563 as of October 31, 2022. However, entering this year, expectations for vehicle sales and total revenues were much higher, given that the company was ramping up additional production capacity as well as launching of new models. With the stock down some 70% year to date, the company on Thursday can make a strong case for its value by delivering a top- and bottom line beat, along with strong delivery guidance for the next quarter and full year.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.