Last week’s shortened trading week brought mixed news for the stock market. Last Tuesday saw U.S. oil prices surge to six-year highs before jumping up again on Wednesday, while stock futures plunged 1.3% Thursday after Japan announced a state of emergency in Tokyo for the duration of the upcoming summer Olympics.
The sudden switch led to the island nation locking down the Olympics on updated Covid policies, after which a number of stocks – particularly airline and cruise industries – plummeted on the day. Thursday’s jobless report didn’t ease investor worries, as last week saw 373,000 new unemployment claims.
However, Friday brought relief as the three major stock indices closed at record highs after Thursday’s sell-off. Leading the charge were many of the stocks tied to economic recovery that fell Thursday, including banks, airlines, and cruise stocks. All told, the Dow added about 0.2% for the week, with the S&P 500 and Nasdaq ticking up 0.4%.
And now, investors are bracing themselves for the start of earnings season, as several key economic players plan to start rolling out their reports in the coming week. Among these are financial kings such as JPMorgan Chase, Goldman Sachs, and Bank of America, as well as investment bank Morgan Stanley and healthcare giant UnitedHealth.
And with our rundown out of the way, let’s take a look at the real reason you’re here: Q.ai’s weekly trending stocks list.
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Wells Fargo & Company (WFC)
Wells Fargo & Company jumped 3.8% Friday to $43.91 per share on the back of 25 million trades. The stock is trending below its 10- and 22-day price averages, though it remains up 45.5% YTD. Currently, Wells Fargo is trading at 12.7x forward earnings.
Wells Fargo is trending headed into the new week thanks to a decried decision made in the latter half of last week, as the bank announced that it is shuttering all personal lines of credit. Instead, the bank is moving its focus to personal loans and credit cards.
These lines of credit provided customers with access to up to $100,000 in revolving credit to help consolidate high-interest debt, pay for home renovations, or avoid overdraft fees. In a six-page letter sent to customers, Wells Fargo warned that this action “may have an impact on your credit score.”
While the move has angered some customers, the decision follows a pattern ever since the Federal Reserve’s 2018 ban on Wells Fargo growing its balance sheet until it fixed compliance shortcomings related to fake account scandals. Other similar actions include halting all new HELOCs and withdrawing from part of its auto lending products.
The Fed-mandated asset cap has proven detrimental to the bank’s balance sheet over the last three fiscal years. Revenue shrank from $84.7 billion to just $58.3 billion in the last fiscal year, while operating income is down from $28.5 billion to just $2.1 billion. Per-share earnings have absolutely plummeted from $4.28 to a mere $0.41 in the same periods; and return on equity has plunged from 11.3% to 1.9%.
All told, our AI rates Wells Fargo as a poor investment at this time, with a B in Low Volatility Momentum and D’s in Technicals, Growth, and Quality Value.
Nike, Inc (NKE)
Nike, Inc nudged up 0.2% Friday to $161 even, trading 5 million shares on the day to a price well above the 22-day, $143 average. The stock is up 13.8% for the year and currently trades around 37.4x forward earnings.
Nike stock has been trending since the start of summer as shoppers once again have the money – and lack of coronavirus restrictions – to explore the great outdoors (and the occasional indoor gym).
The company’s most recently quarterly report definitely helped, too, with the three-month period ending on the last day of May marking $12.3 billion in revenue growth – nearly double that of the year prior.
Management also raised its forecast to $50 billion in full-year sales, thanks in large part to its rebounding business in North American segments. (And despite continuing controversies related to its Chinese ties.)
In the last three fiscal years, Nike’s revenue has jumped 13.4% from $39.1 billion to $44.5 billion in the most recent year. Operating income has grown 50.8% in the period from $4.77 billion to $7.2 billion, while per-share earnings have risen nearly 43% to $3.56 compared to $2.49. Moreover, return on equity jumped from 42.7% to 55% in the three-year timespan.
Currently, our AI rates this athleticwear giant slightly above average as an investment opportunity, with a B in Low Volatility Momentum and Cs in Technicals, Growth, and Quality Value.
The Boeing Company (BA)
The Boeing Company jumped 1.2% Friday to $239.59 per share with 12.4 million trades on the books. The stock is down from its 22-day price average of around $242, though it remains up 11.9% YTD. Currently, Boeing is trading at a bloated 12-month P/E of 171x.
Boeing has trended nearly nonstop since the pandemic hit, beginning with the cancellation or delay of hundreds of airplanes and ending last week with reports that a decades-old Boeing cargo plane was forced to make an emergency landing off the coast of Hawaii. Both pilots were rescued shortly after the crash. The company aided search crews in the effort to find the sunken vessel, which was reported found on Friday.
In the last three fiscal years, Boeing’s revenue has plummeted from over $101 billion to just under $58.2 billion. In the same three-year period, operating income fell from $11.8 billion to $8.7 billion, while per-share earnings climbed from $17.85 to $20.88.
All told, Boeing is expected to see 12-month revenue growth in the neighborhood of 8.1%. Our AI rates the airplane manufacturer negatively overall, with a C in Growth, D in Technicals, and Fs in Low Volatility Momentum and Quality Value.
International Business Machines Corporation (IBM)
International Business Machines Corporation jumped up 0.6% to $141.52, trading 3.9 million shares on the day. The stock is up 12.4% for the year and currently trades around 12.5x forward earnings.
IBM’s last week proved to be a bumpy ride for the information technology giant, as shares fell following an announcement that the company’s president, James Whitehurst, chose to step down from his post. Whitehurst, former Red Hat CEO, was appointed to his position shortly after IBM acquired the cloud software provider in 2019.
The company reports that Whitehurst will remain on as Senior Advisor in its hybrid cloud and AI strategy. This most recent move denotes a series of completed and upcoming changes in the tech giant’s management structure as it moves into its “client-centric culture,” per CEO Arvind Krishna.
In the last three fiscal years, IBM has seen its revenue fall from $79.6 billion to just over $73.6 billion as the company has strived to innovate and accelerate in the changing digital landscape. The company’s operating income also fell in the same period, from $13.2 billion to $8.58 billion, with per-share earnings dropping over three dollars to $6.23 and return on equity plunging from 50.3% to 26.4%.
At this time, the information technology and cloud computing provider is only expected to see around 0.56% revenue growth in the next 12 months. Our AI rates this company slightly above average, with a B in Quality Value and Cs in Technicals, Growth, and Low Volatility Momentum.
Advanced Micro Devices, Inc (AMD)
Advanced Micro Devices, Inc. jumped 1.3% to $90.90 on Friday, ending the day on the back of 35.3 million trades and more than $4 over the 22-day price average. The stock is down 0.9% YTD and currently trades around 42.1x forward earnings.
AMD is trending leading the week thanks to receiving a pair of updated bullish ratings from top analysts at Bank of America and Goldman Sachs last week. The company’s stock recently received a boost as reports suggest that the global chip shortage could last well through the year, only easing up in early-to-mid 2022.
AMD’s own CEO, Lisa Su, recently reported that the company’s GPU supplies will remain tight for the rest of the year at least. This in spite of the fact that the company has boosted manufacturing capacity to the best of its ability – but there’s only so much that chip fabricators can do in the short-term, as chip production orders are typically placed months to years in advance.
The chip shortage will likely prove fruitful for the company’s short-term bottom line, as shortages provide an opportunity for companies to capitalize on the basic laws of supply and demand pricing. Not the AMD needs it, however – the company pulled in a 76.4% revenue increase over the last three fiscal years, with cash flow rising from just under $6.5 billion to over $9.76 billion.
In the same period, operating income jumped from $451 million to almost $1.37 billion – a change of over 314% – while EPS rose an astonishing 644% to $2.06 in the most recent fiscal year. Moreover, return on equity jumped from 36.2% to 57.5% in the three-year time frame.
Currently, AMD is expected to see forward 12-month revenue growth around 2.1%. Our AI rates this chip manufacturer as a mixed bag at this time, with an A in Growth, Cs in Low Volatility Momentum and Quality Value, and a D in Technicals.
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