- Fed rate expectations, U.S. jobs report, more earnings in focus
- Occidental Petroleum stock is a buy ahead of Q2 results
- Robinhood set to struggle amid shrinking revenue, fewer MAUs
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Stocks on Wall Street rallied on Friday, driven by a combination of strong earnings as well as mounting speculation the Federal Reserve may not need to be as aggressive with interest rate hikes as initially feared.
The blue-chip Dow Jones Industrial Average jumped 3% for the week, while the benchmark S&P 500 and the tech-heavy NASDAQ Composite rose 4.3% and 4.7%, respectively.
The Dow and S&P ended July with their best monthly performance since November 2020, scoring gains of 6.7% and 9.1% for the month.
The Nasdaq’s 12.3% surge was its biggest monthly gain since April 2020.
Source: Investing.com
The coming week is expected to be another eventful one as markets continue to weigh the Fed’s monetary-tightening plans for the months ahead.
On the economic calendar, most important will be Friday’s U.S. employment report for July, which is expected to show solid job gains but a slowing from June’s strong growth.
Meanwhile, earnings from notable companies such as Advanced Micro Devices (NASDAQ:AMD), Pinterest (NYSE:PINS), PayPal (NASDAQ:PYPL), Uber (NYSE:UBER), Airbnb (NASDAQ:ABNB), Block (NYSE:SQ), CVS Health (NYSE:CVS), Caterpillar (NYSE:CAT), ConocoPhillips (NYSE:COP), Mosaic (NYSE:MOS), Starbucks (NASDAQ:SBUX), and Moderna (NASDAQ:MRNA) are also on the agenda.
Regardless of which direction the market goes, below we highlight one stock likely to be in demand and another that could see further downside.
Remember though, our time frame is just for the upcoming week.
Stock To Buy: Occidental Petroleum
Occidental Petroleum (NYSE:OXY) could see increased buying activity this week as the thriving energy company is expected to deliver explosive earnings and revenue growth when it releases its latest financial results.
Following positive updates and solid outlooks from industry heavyweights Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) last week, Occidental is expected to release second-quarter numbers after the closing bell on Tuesday, Aug. 2.
Consensus calls for the Houston, Texas-based oil-and-gas producer - which has beaten Wall Street estimates for five consecutive quarters - to report earnings per share of $3.03, improving a whopping 846% from EPS of $0.32 in the year-ago period.
Revenue is forecast to surge 64.4% year over year to $9.80 billion as it benefits from its stellar operations in the Permian Basin and takes advantage of strong crude and natural gas prices.
Source: InvestingPro+
If these estimates are confirmed, Occidental’s quarterly profit and sales total would mark their highest levels in the company's history, reflecting the positive impact of skyrocketing commodity prices on its business.
Perhaps of greater importance, market players will be eager to hear if the energy company, which borrowed heavily to finance the $38 billion acquisition of rival Anadarko Petroleum (NYSE:APC) in 2019, plans to take further steps to reduce its debt load and return more cash to shareholders in the form of higher dividend payouts and stock buybacks.
Source: Investing.com
OXY stock ended Friday’s session at $65.75, within sight of a recent five-year peak of $74.04 reached on May 31.
At current levels, Occidental has a market cap of $61.6 billion, making it the fifth-most-valuable U.S. energy company, behind Exxon Mobil, Chevron, ConocoPhillips, and EOG Resources (NYSE:EOG).
Despite the broader market slump, Occidental shares have soared by an astonishing 126.8% year to date thanks to a potent combination of surging oil and gas prices and improving energy-market fundamentals.
Investors have also been encouraged by news that Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) (NYSE:BRKb) has amassed a significant stake in the thriving energy company. Berkshire is OXY's largest shareholder with roughly 175 million shares, equaling a nearly 20% stake.
Stock To Dump: Robinhood Markets
Robinhood Markets’ (NASDAQ:HOOD) stock is expected to suffer a difficult week as investors brace for disappointing financial results from the struggling retail-brokerage firm, which is likely to reveal another quarterly loss as well as shrinking revenue.
Consensus expectations call for the Menlo Park, Calif.-based stock market-trading platform to post a loss of $0.34 per share when it reports second-quarter numbers after the closing bell on Wednesday, Aug. 3.
Meanwhile, revenue is forecast to plunge 42.7% year over year to $323.7 million, reflecting the impact of several negative factors plaguing the fintech company - mainly slowing user growth and lower retail trading activity in stocks, options, and cryptocurrencies.
Robinhood earns roughly 70% of its revenue from customer transactions, so its financial results tend to suffer when trading activity slows on its platform.
Source: InvestingPro+
As a result, investors will pay close attention to Robinhood’s update regarding a key metric, monthly active user (MAU) accounts, as the beleaguered trading app grapples with numerous macroeconomic headwinds, including growing recession fears, mounting inflationary pressures, and higher interest rates.
Robinhood's MAUs badly missed expectations in the last quarter, falling 10% on an annual basis to 15.9 million. Average revenue per user (ARPU) - another key metric - will also be eyed after declining 62% to $53 in Q1.
Based on moves in the options market, traders are pricing in a big move for HOOD shares following the results, with a possible implied move of about 12% in either direction.
Source: Investing.com
HOOD stock - which fell to a record low of $6.81 on June 16 - closed at $9.05 on Friday. At current levels, the financial-services company has a market cap of $7.9 billion.
Year to date, Robinhood stock is down 49% amid the ongoing selloff in shares of unprofitable technology companies with sky-high valuations.
Even more alarming, HOOD shares are a whopping 89% below their all-time peak of $84.12, touched shortly after the company's IPO in August 2021.
Disclosure: At the time of writing, Jesse had no position in any stocks mentioned. The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
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