There aren’t many marquee names on the earnings calendar this week, but don't make the mistake of thinking that as earnings season winds down the remaining reports will be boring. Each of the leading companies that do report will have burning questions investors want answered, making the coming week potentially one of the most volatile on this quarter's earnings calendar.
Walmart and JD.com lead the retail sector onslaught, with the majority of sector-focused companies reporting next week. Cisco and Nvidia represent the last of the big tech names to report this season. As well, Canopy Growth and the battered cannabis sector are also in focus.
Wednesday, November 13:
1. Cisco: Reports After Markets Close
Cisco Systems (NASDAQ:CSCO), the world’s biggest networking hardware manufacturer, looks to be in for a rough 2020. This past year was a good one for the tech giant; its revenue grew 7% while its earnings jumped 20% year-over-year. However, looking forward, guidance is signaling rougher times ahead.
Shares of the California-based company are down 17% since July, as revised guidance projects 0% to 2% revenue growth in Q1. Wall Street now anticipates Cisco’s revenue and earnings growth will slow to single digits in the coming year.
On the positive side, Cisco’s business is strong and diversified. Last year, the company grew in all geographic regions—the U.S., EMEA and Asia. It also saw expansion from each of its verticals: infrastructure, applications, security, and services.
As an infrastructure hardware company, Cisco is a barometer of business confidence. As companies look for product growth they often need upgrades and expansion of internal systems to support that growth.
Bullish thesis for the stock: Cisco’s share price is depressed based on limited outlook expectations. Wall Street might be underestimating Cisco’s ability to execute. An earnings beat and guidance adjustment could send shares back to all-time highs.
Thursday, November 14
2. Walmart: Reports Before Markets Open
Shares of the world's largest retailer, Walmart (NYSE:WMT), are trading at an all-time high—for good reason. Even with competitive pressure from Amazon (NASDAQ:AMZN) as well as other e-tailers and retailers, Walmart keeps finding ways continue growing.
The Bentonville, AR-based behemoth's U.S. sales have been growing for 20 consecutive quarters, marking one of the most impressive turnarounds in American business history.
What Walmart needs to do from here is pretty clear: as long as the company maintains the course its been on for the past five years, investors will reward it with increasingly higher valuations. Comparable sales and e-commerce are two critical components to watch in the upcoming report since each has been instrumental in Walmart's success to date. In Q2, comparable sales grew 2.8%, while e-commerce sales jumped 37%.
Last quarter, Walmart successfully rivaled Amazon’s Prime Day by offering thousands of deals of its own, which bodes well for the company’s online offering. In addition, Walmart’s NextDay delivery service is almost fully operational, and now covers 75% of the U.S. population.
Bullish thesis for the stock: Walmart’s hefty, $400B valuation is no mistake. The company keeps flawlessly executing its strategy and as long as U.S. consumers keep responding to Walmart’s initiatives, the stock will continue to go up. Any weakness in shares could create an attractive entry point rather than a reason to sell.
3. NVIDIA: Reports After Markets Close
After a terrifying finish in 2018—during which NVIDIA Corporation (NASDAQ:NVDA) lost 55% of its market cap in three months—the stock is up 59% so far this year. In classic Wall Street fashion, the chipmaker went through a well-known cycle of boom and bust.
The strong start Nvidia experienced at the beginning of 2018 was a by-product of 2017's cryptocurrency mania, which famously collapsed as the year wore on. Nvidia’s products were in high demand as they were used to mine an array of digital currencies. Unfortunately for NVIDIA, the sector's depressed outlook has overshadowed the strength of the business itself, which will inevitably benefit from macro developments.
While last year’s gaming revenue was propped up by cryptocurrency-related earnings, Nvidia remains the go-to graphics card for gaming, an industry that continues to grow. In addition, of interest this quarter will be its data center offering since competitor Intel (NASDAQ:INTC) has already reported strong demand in this area. NVIDIA should benefit from this as well.
Bullish thesis for the stock: The business world has grown increasingly more dependent on technology, a trend that bodes well for NVIDIA products. The Santa Clara, CA-based company is the leading name in graphic cards and data centers. Unless there's an unforseen release of some heretofore unexpected new technology and NVIDIA is unable to adapt long-term, the company is very well positioned to continue to thrive.
4. Canopy Growth: Reports After Markets Close
Cannabis week is officially here. In addition to Canopy Growth (NYSE:CGC) releasing earnings, the Cronos Group (NASDAQ:CRON) reports on Tuesday, November 12 before the open; Tilray (NASDAQ:TLRY) reports on Tuesday after the close and Aurora Cannabis (NYSE:ACB) reports at the same time as Canopy—Thursday, after the close.
For Canopy, its all about revenue growth. The company said it expects revenue to reach $1 billion CAD ($756M USD) by the fourth quarter of its fiscal 2020. This seems unlikely given that six months into its fiscal year, the company has only brought in $177 million CAD ($133.8M USD). This is the primary goal the company needs to hit, particularly in light of last quarter’s 1.3 billion CAD ($1B USD) loss, which continues to sting both the company ind its investors, who've shown less and less patience the company's heavy losses.
Canopy Growth’s partnerships (the most recent with rapper Drake, announced last week) can only boost its outlook up to a point. The Smiths Falls, Ontario-based company needs to deliver on the business side, not just via its marketing efforts.
Bullish thesis on the stock: Since Canopy Growth is likely to struggle to achieve its business goals, it needs good legislative news, particularly from the U.S. and renewed momentum and optimism for the cannabis industry. The partnership with Drake needs to translate to actual revenue and any positive management comments and future expectations could help send the stock higher, even if it's currently struggling.
Friday, November 15:
5. JD.com: Reports Before Markets Open
Wall Street is looking at this Chinese online retailer from a variety of angles. The first and most logical persepective is as a company with growing revenue. Last quarter, JD.Com (NASDAQ:JD) brought in 150 billion RMB, or $21.4 billion USD. That's significant growth by any measure: 23% year-over-year. This quarter last year was relatively soft for JD.com, allowing for a potentially favorable Y-on-Y growth rate this quarter.
The second number to watch is the company's active customer accounts. After not being able to grow its customer numbers for most of 2018 and 2019, last quarter JD saw an uptick of 2.5% in active accounts on the platform. Shares are currently down 55% from their all-time high, reached in January 2018. The only way the company gain scale back to that lofty level is by showing active user growth.
Bullish thesis on the stock: China's online retail market is still young and JD.com is among its first movers. Macro trends regarding internet penetration, along with the rise of a Chinese middle class, plus new technologies enabling better deliveries across large geographic distances should all work in JD.com’s favor in years to come.