- U.S. jobs report, Powell speech will be in focus this week.
- Tesla is a buy with better-than-expected Q3 deliveries expected.
- Levi Strauss is a sell with underwhelming earnings on deck.
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U.S. stocks ended mixed on Friday, with the Dow Jones Industrial Average closing at a fresh record as traders digested subdued inflation data that boosted hopes of another outsized interest rate cut at the Federal Reserve's November policy meeting.
All three major U.S. stock indexes posted a third straight week of gains, with the blue-chip Dow and benchmark S&P 500 both rising about 0.6% for the period. The tech-heavy Nasdaq Composite advanced nearly 1% during the week.
Source: Investing.com
The week ahead is expected to be an eventful one as investors continue to assess the Fed’s outlook for rate cuts. Markets are fully pricing in a cut of at least 25 basis points in November, with expectations for a cut of 50bps given a 48.1% chance, according to Investing.com’s Fed Monitor Tool.
Most important on the economic calendar will be Friday’s U.S. employment report for September, which is forecast to show the economy added 144,000 positions, compared to jobs growth of 142,000 in August. The unemployment rate is seen holding steady at 4.2%.
Ahead of the jobs report, the ISM manufacturing and services PMIs will also be closely watched.
Source: Investing.com
That will be accompanied by a heavy slate of Fed speakers, including Chairman Jerome Powell on Monday morning.
Elsewhere, the earnings schedule for next week includes reports from just a few noteworthy companies. These include Nike (NYSE:NKE), Carnival (NYSE:CCL), Levi Strauss (NYSE:LEVI), and Constellation Brands (NYSE:STZ).
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, September 30 - Friday, October 4.
Stock to Buy: Tesla
The main catalyst driving Tesla (NASDAQ:TSLA)'s stock this week is the highly anticipated release of its third-quarter delivery numbers, which are expected to be announced on Wednesday morning.
The EV company’s Q3 performance should show improvement after a bumpy first half of the year, where demand was impacted by slowing growth in key international markets.
Wall Street analysts are forecasting 462,000 vehicle deliveries for the quarter, up 6% compared to Q3 2023. This would mark the EV maker’s third-best quarterly total, following a record-setting 484,507 in Q4 2023 and 466,140 in Q2 2023.
Tesla's strong delivery numbers are fueled by increasing demand, especially in China, where government subsidies and low-cost financing have supported sales.
Tesla produces the Model 3, the Model Y, Model X and Model S, as well as the Semi and Cybertruck. The Model Y crossover accounts for the majority of sales. The Austin, Texas-based company is widely recognized as the global leader in the electric vehicle market, holding a dominant market share in the U.S. and China.
Investors will also be closely watching Tesla’s Robotaxi event on October 10, where updates on the company’s self-driving technology and artificial intelligence will be shared. This event is likely to generate buzz around Tesla's AI capabilities and future business opportunities, including autonomous ride-hailing services.
Source: Investing.com
TSLA stock surged 9.3% last week to end Friday’s session at $260.46 per share, its highest closing price since July 10. Shares are up 4.8% in the year to date.
At current levels, Tesla has a market cap of $812 billion, making it the world’s most valuable automaker, bigger than names such as Toyota (NYSE:TM), Volkswagen (ETR:VOWG_p), General Motors (NYSE:GM), and Ford (NYSE:F).
Source: InvestingPro
It is worth mentioning that Tesla has an above-average ‘Financial Health Score’ of 3.0 out of 5.0, as assessed by InvestingPro's AI-backed models, highlighting its robust fundamentals, technical strength, and market leadership in electric vehicles and AI-based automation.
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Stock to Sell: Levi Strauss
In contrast to Tesla’s upbeat outlook, Levi Strauss is struggling with weakening demand amid a challenging economic backdrop.
The iconic denimwear company is expected to post lackluster earnings for its third quarter financial report, which is due after the market close on Wednesday at 4:10PM ET.
Investor sentiment around Levi Strauss remains bearish, with analysts slashing their profit forecasts in the run-up to the earnings release. As per InvestingPro, all 12 analysts covering LEVI have lowered their earnings estimates in the last 90 days, reflecting growing concerns about the company's outlook.
Market participants expect a sizable swing in LEVI stock after the update drops, according to the options market, with a possible implied move of roughly 9.2% in either direction. Earnings have been catalysts for outsized swings in shares this year, as per data from InvestingPro, with Levi Strauss stock tumbling 15% when the company last reported quarterly numbers in late June.
Source: InvestingPro
Analysts predict earnings per share of $0.31, slightly up from $0.28 a year ago, while revenue is forecasted to rise 3% to $1.55 billion.
Despite these modest growth figures, Levi Strauss has been hit hard by weakening consumer demand, as inflation continues to pressure household budgets worldwide. With higher costs of living and inflation persisting for longer than anticipated, many consumers are pulling back on discretionary spending, including clothing purchases.
Taking that into account, I believe there is a growing downside risk that the company could lower its full-year earnings and sales growth outlook amid a deteriorating retail environment.
Source: Investing.com
LEVI stock closed at $21.65 on Friday, the highest level since June 26. Shares have gained 30.9% in 2024. At its current valuation, San Francisco-based Levi Strauss has a market cap of $8.5 billion.
It should be noted that Levi Strauss’ near-term outlook for profitability and free cash flow appears risky, according to InvestingPro, which flags its high earnings valuation multiple as a cause for concern.
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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 (NASDAQ:QQQ) 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.