• Fed speakers and Nvidia earnings will be in focus this week.
• Nvidia is a buy with another huge beat-and-raise quarter on deck.
• Target is a sell amid declining sales, downbeat outlook expected.
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U.S. stocks finished lower on Friday, with the S&P 500 and Nasdaq notching their biggest one-day losses in two weeks, as a post-election rally ran out of steam and investors worried over the path of interest rates.
For the week, the S&P 500 fell 2.1%, while the tech-heavy Nasdaq Composite declined 3.1%. The blue-chip Dow Jones Industrial Average lost 1.2% during the period.
The week ahead is expected to be an eventful one as investors continue to assess the outlook for the economy, inflation, interest rates and corporate earnings.
On the economic calendar, flash PMI readings on manufacturing and the services sector will grab attention on Friday, along with updates on the housing market.
That will be accompanied by a heavy slate of Fed speakers, with the likes of district governors Jeffrey Schmid, Lisa Cook, Michelle Bowman, and Beth Hammack all set to make public appearances.
Expectations for a 25-basis point rate cut at the Fed's December meeting stood at 63% on Sunday morning, according to the Investing.com Fed Monitor Tool.
Elsewhere, in corporate earnings, Nvidia (NASDAQ:NVDA)'s results will be the key update of the week as the Q3 reporting season quiets down. Other notable names lined up to report earnings include Walmart (NYSE:WMT), Target (NYSE:TGT), TJX Companies (NYSE:TJX), Ross Stores (NASDAQ:ROST), Lowe’s (NYSE:LOW), Palo Alto Networks (NASDAQ:PANW), and Snowflake (NYSE:SNOW).
Regardless of which direction the market goes, below I highlight one stock likely to be in demand and another which could see fresh downside. Remember though, my timeframe is just for the week ahead, Monday, November 18 - Friday, November 22.
Stock to Buy: Nvidia
Nvidia is poised for significant gains this week, as the tech giant prepares to deliver another beat-and-raise quarterly earnings report amid surging demand for its AI chips.
The Santa Clara-based company is set to release its Q3 earnings after the market closes on Wednesday at 4:20PM ET, with expectations running high for another record-breaking performance. A call with CEO Jensen Huang is set for 5:00PM ET.
Market participants expect a sizable swing in NVDA shares following the print, as per the options market, with a possible implied move of 9.8% in either direction.
Investor sentiment is overwhelmingly bullish, as evidenced by 30 upward earnings revisions in the past 90 days, according to InvestingPro. Nvidia has consistently outperformed expectations, becoming a bellwether for the tech sector as growth prospects in artificial intelligence remain strong.
Consensus expectations call for Nvidia to post earnings per share of $0.74, rising 85% from EPS of $0.40 in the year-ago period. Meanwhile, revenue is forecast to surge 82% annually to $33.1 billion, underscoring the company’s unmatched dominance in the AI chip market.
Of particular interest will be guidance for the current quarter, marking the debut of Nvidia’s next-generation Blackwell AI processor. CEO Jensen Huang has described demand for Blackwell as "insane," setting the stage for better-than-expected forecasts.
NVDA stock ended Friday’s session at $141.98, just below its record high of $149.65 reached on November 12. Shares have soared 186.7% in 2024, making Nvidia one of the top-performing S&P 500 stocks of the year. At current levels, Nvidia has a market cap of $3.48 trillion, making it the most valuable company trading on the U.S. stock exchange.
It is worth mentioning that InvestingPro's AI-powered quantitative models rate Nvidia with a solid ‘Financial Health Score’ of 3.7 out of 5.0, highlighting its solid profitability and promising growth trajectory.
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Stock to Sell: Target
In stark contrast, Target is facing a much more challenging outlook. The big-box retailer is grappling with high operating costs, shrinking margins, and stiff competition from rivals like Walmart.
Volatile traffic trends, seasonal weather challenges, and election impact uncertainties compound the retail giant’s struggles.
Target - which is the seventh largest brick-and-mortar retailer in the U.S. - is scheduled to release its third-quarter earnings report ahead of the opening bell on Wednesday at 6:30AM ET.
According to the options market, traders are pricing in a swing of around 9% in either direction for TGT stock following the print.
Wall Street projects earnings of $2.30 per share, marking a 9.5% increase from $2.10 a year earlier. Revenue is anticipated to grow marginally by 2% to $25.9 billion, highlighting weak consumer demand for discretionary goods like home furnishings and apparel.
Looking ahead, CEO Brian Cornell is likely to deliver cautious guidance for the all-important holiday quarter due to a difficult operating environment, competitive landscape, and ongoing discounting activity. External headwinds, such as weather disruptions and broader economic uncertainty, have further complicated the outlook.
With disappointing Q3 results and a cautious holiday outlook on the horizon, the stock's downside risks outweigh potential rewards. Investors should avoid Target amid this challenging retail landscape.
TGT stock closed at $152.13 on Friday. Shares have underperformed the S&P 500 by a wide margin this year, gaining 6.8%. At current valuations, the Minneapolis-based retailer has a market cap of $70 billion.
It should be noted that Target currently has a below average InvestingPro ‘Financial Health Score’ of 2.6 out of 5.0 due to lingering concerns over weakening profit margins and spotty sales growth.
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Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF, and the Invesco QQQ Trust ETF. I am also long on the Technology Select Sector SPDR ETF (NYSE:XLK).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.
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