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The Zacks Analyst Blog Highlights: Facebook, Alphabet, Texas Instruments, Dollar General and Kroger

Zacks Equity Research
·7 mins read

For Immediate Release

Chicago, IL – July 28, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Facebook FB, Alphabet GOOGL, Texas Instruments TXN, Dollar General DG and The Kroger Co. KR.

Here are highlights from Monday’s Analyst Blog:

Trading at the Mercy of FAANG Earnings: Global Week Ahead

In the Global Week Ahead, a major wave of Q2 earnings keeps traders on their toes.

In the week’s reports, stock traders can evaluate the massive COVID-19 shock, from the perspective of major company fundamentals: Think revenue growth and profits and their 12M-ahead financial outlooks.

This adds critical depth to a picture drawn solely by Big Bank financials. They reported earlier.

In the USA, no fewer than 180 major S&P 500 firms report Q2 earnings this week.

Major names reporting results include: Apple, Amazon, Facebook, Alphabet, eBay, Pfizer, McDonald’s, Starbucks, GM, Ford, Merck, GE, Boeing, UPS, Caterpillar and 3M.

The Q2 earnings calendar also fills up globally.

Next are Reuters’ five world market themes, reordered for equity traders—

(1) $2 Trillion Market Cap Stocks? Wow!

In 2018, Apple became the first U.S. company with a $1 trillion stock market value. Now the race is on for a $2 trillion market cap.

Microsoft’s disappointing second-quarter earnings shifted the focus to Amazon and Apple, which both report on Thursday and have seen shares soar this year, thanks to strong demand for products and services from people staying at home during the pandemic.

Apple’s +32% surge in 2020 increased its market capitalization to $1.65 trillion, Microsoft is snapping at its heels at $1.56 trillion, while Amazon is at $1.51 trillion.

Two others in the FAANG quintet, Facebook and Google parent Alphabet, also have results coming up. But they are out of the race: the latter just barely squeezes into the trillion-dollar club.

(2) A Two-Day Fed Meeting Ends on Wednesday July 29th

After slashing interest rates to near zero and engaging in huge asset buying, the U.S. Federal Reserve will probably sit on its hands at the July 28-29 meeting.

Markets are seeking clues on its next move. The Fed doesn’t seem keen on yield curve control or negative interest rates. But if it wants to rely on asset purchases and forward guidance only, it might eventually need to expand QE, Fedwatchers reckon.

Also, this QE program has spread purchases of Treasuries pretty evenly across the curve, while the last two rounds focused on the long end. Many predict the Fed will opt to up purchases in the 20- to 30-year bracket; that will keep in check the term premium — the extra return earned from holding long-term bonds.

Yet Fed Governor Lael Brainard recently mentioned the “thick fog of uncertainty” surrounding the U.S. economy. So for now, the Fed might just wait for that fog to dissipate.

(3) What to Make of U.S.-China Tensions… in an Election Year

U.S. diplomats are clearing out of the Chengdu consulate after their Chinese counterparts were ordered to quit Houston, TX in the latest round of tensions. Markets sold the moves, but not too much — because nobody’s mentioned tariffs.

Yet caution is warranted. This represents a big push towards de-coupling with Secretary of State Mike Pompeo saying the “old paradigm of blind engagement” is done.

Currency markets are advising care; the yuan had its steepest three-day selloff since late March and the U.S. dollar is tanking for the fourth straight week.

(1) Euro Gains and U.S. Dollar Woes

The euro suddenly looks unstoppable, hitting 21-month highs above $1.16 after the European Union set aside differences and agreed a COVID-19 recovery fund. This signal of solidarity, combined with monetary and budget stimulus, could propel the currency to $1.20, some predict.

The optimism should take the sting out of upcoming German and Eurozone second-quarter gross domestic product data, expected to show steep contractions amid the coronavirus hit.

Euro gains stem partly from dollar woes; coronavirus outbreaks across the U.S. and tensions with China have set the greenback on track for its worst month since Jan. 2018.

One hitch: In nominal trade-weighted terms, the euro is now above 2018 peaks. If exports take a hit, euro strength won’t sit well with policymakers.

(5) Look at the Loan Loss Provisions on European Banks

In the first quarter, Europe’s top 40 banks set aside 22 billion euros in provisions against loans going sour in the wake of COVID-19. As the second-quarter earnings season kicks off, focus is again on provisioning.

British banks set aside more in the first quarter than any other European country. Four of them — Barclays, Standard Chartered, Lloyds and newly rebranded NatWest Group — will disclose more in the coming days.

Following the U.S. pattern, European investment banks should be cushioned by bumper earnings for their trading arms; Deutsche Bank has already signaled better-than-expected profits.

There are fewer bright spots for retail and corporate-focused names. Spain's Santander and BBVA, with large Latin American arms, also face the double whammy of loan loss provisions and exchange rate impact.

Top Zacks #1 Rank Stocks

A. Texas Instruments: This is a $118B market cap stock at $120 a share. I see a Zacks Value score of D, a Zacks Growth score of B and a Zacks Momentum score of A.

Their Q2 EPS report was a solid one. Can this stock rise still higher? Or is that good news already priced in?

B. Dollar General: This is a $48.2B market cap stock at $191 a share. I see a Zacks Value score of B a Zacks Growth score of A and a Zacks Momentum score of C.

Those are solid long-term metrics. This discount retailer is in the right niche during a job-loss pandemic.

C. The Kroger Co.: This is a $27B market cap stock at around $35 a share. I see a Zacks Value score of A, a Zacks Growth score of A, and a Zacks Momentum score of D.

People are eating more at home now. So, grocers like this have become growth stocks. How long does that trend last, once vaccines get distributed?

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.


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