Shortened Presidents' Day Week – The Market 411

Last week delivered more record highs due to a combination of factors. There was a fresh round of COVID spending, vaccines are being administered across the globe and stock market has witnessed strong fourth quarter corporate earnings from some of the largest S&P 500 companies.

This week will be shortened due to Monday's Presidents' Day holiday, also known as Washington's Birthday, but there will be quite a few earnings reports from notable retailers.

The IPO market takes a breather

After a busy start of the year, the IPO market quiets down with only one scheduled IPO. The newly-formed commercial mortgage REIT AFC Gamma AFCG operates in cannabis finance by originating, structuring, underwriting and managing loans for established companies operating in the industry. The company plans to raise $119 million at a $240 million market.

Baidu and Shopify

Shopify SHOP is trading near its all-time highs. With merchant sales doubling YoY during the third quarter, the market is eagerly waiting results for the crucial holiday quarter.

Wall Street expects Baidu BIDU to earn $2.61 per share on revenue of $4.65 billion. Baidu shares have been on fire, skyrocketing about 150% over the past six months, greatly exceeding 16% rise in the S&P 500 index during the same timespan. This remarkable performance might be just the beginning as the Chinese tech giant is reportedly in early developments of a stand-alone AI semiconductor company.

Walmart

Moving on to another e-commerce success, expectations for Walmart WMT are high as it has taken a page out of Amazon's AMZN playbook. Wall Street expects earnings of $1.50 per share on revenue of $148.11 billion. Many analysts project the retail giant has secured more market share gains not only for its physical stores, but also from its expanded e-commerce capabilities. Walmart grew revenue while sacrificing profits to enhance the customer experience. The stock market has applauded its efforts as digital revenue grew tremendously at an average of 35% annualized gains over the past five quarters. Walmart's results have been nothing short of impressive, including record top-line beats, strong same-store sales, consistent execution across all product categories and margin expansion. But the company is now facing much tougher comps and it needs to show it can it continue to deliver.

Dropbox

On Thursday, we will find out how much has Dropbox DBX benefited from the work-from-home trend. Despite its strong position in home-work economy, the document storage and cloud company has been largely ignored, compared to Zoom Video ZM, DocuSign DOCU, Fastly FSLY and other cloud stocks that became synonymous with work-from-home. Last week, it announced it will cut its global workforce by 11% and analysts have applauded the move, giving investors confidence that the company will do what it takes to hit its profit targets. On Thursday, it needs to show it can monetize its user base to sustain long-term profitability.

Roku

Roku ROKU is another stock that has been on fire as it soared  more than 100% over the past three months, driven by rapid revenue and account growth due to lockdowns and new streaming entrants. Although Wall Street expects a loss of 7 cents per share on revenue of $613.07 million, there's more to come as advertising dollars that are shifting from linear television to streaming. The optimism is also centered on Roku's growth prospects which are now much more favorable, particularly with dominant streaming services such Netflix NFLX and Hulu showing strong growth trends, combined with the emergence of Apple's AAPL Apple TV+ and Disney's DIS Disney+ platform. As more households continue to cut the cord and the streaming continues to expand, concerns regarding Roku's valuation should begin fading away.

Outlook

As for the pandemic that is still shaping our everyday lives, even though global cases have reached 108.81 million and deaths topping 2.39 million, there are some bright spots. The seven-day average of new cases fell below 100,000 which is the lowest since early November, while the number of hospitalizations have also fallen sharply. The market is shifting its focus on reopening the economy. This week might be shorter but it won't be any less exciting as we mark the end of the fourth quarter earnings season, which ended up being far better than anyone expected.

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