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Weekly Preview: Stocks To Watch (ADBE, CRWD, DOCU, ZM)

Stocks ended Friday higher, booking sharp gains for the week and for the month of May, prompting some market participants to wonder, when the disconnect (whether perceived or real) between Wall Street and Main Street will end. 

It’s one of the prevailing bear theses that opposes the incredible 35%+ rebound the stock market has witnesses since the March bottom. While bears are, understandably, scratching their heads, the bulls are boasting “don’t fight the Fed.” With the market near its pre-pandemic highs, who will win? Despite downbeat economic data showing the economic weakness, stocks continue to rise in a manner that assumes the number of Americans currently out of work is fictional.

Driven by optimism of easing lockdown restrictions, stocks sustained this week’s rally, shrugging off Friday’s news conference from President Donald Trump on China, which investors feared would have disrupted the market, particularly as it relates to trade. The Dow Jones Industrial Average ended down Friday 17.53 points lower, or less than 0.1%, to close at 25,383.11. It rebounded on its low of the day at 25,031.67. The S&P 500 index added 14.58 points, or 0.5% to end the session at 3,044.31, while the Nasdaq Composite Index closed at 9,489.87, surging 120.88 points higher.

For the week, the Dow gained almost 4%, while the S&P 500 added 3%, and the Nasdaq was higher by almost 2%. “Sell in May and go away?” It didn’t work this month as the Dow rose 4.3%, the S&P 500 added 4.5%. The Nasdaq was the biggest winner, netting almost a 7% return in May. As I said last week, the “TINA factor” (there is no alternative) seems to be what’s driving this market. With interest rates at zero, and with talks of negative rates surfacing, stocks are the surest way to counter inflation.

As for earnings? Here are this week’s names to keep an eye on.

CrowdStrike (CRWD) – Reports after the close, Tuesday, June 2

Wall Street expects CrowdStrike to lose 6 cents per share on revenue of $165.39 million. This compares to the year-ago quarter when it lost 47 cents per share on revenue of $96.08 million.

What to watch: Software stocks have gone on a massive rally since the market bottom in March. Among the biggest gainers have been cybersecurity stocks such as CrowdStrike which has surged as much as 76% year to date, including 27% returns in thirty days. Amid the rapid global spread of the coronavirus, this has increased demand for better security as companies have instructed employees to work from home. This shift have fueled a rise in demand for laptops not only with pre-installed security software, but also a surge in many companies to set up virtual private networks that allows employees to connect to the office remotely. In the case of CrowdStrike, the company is seen as a consistent winner in IT security spending.

Zoom Video (ZM) – Reports after the close, Tuesday, June 2

Wall Street expects Zoom to earn 10 cents per share on revenue of $202.49 million. This compares to the year-ago quarter when earnings came to 3 cents per share on revenue of $121.99 million.

What to watch: As the market has plunged during the coronavirus pandemic, Zoom stock skyrocketed, netting 140% in the past six months. It was one of a basket of work-at-home (and learn-at-home) companies that are seen as beneficiaries during the outbreak. Zoom’s video-first platform, which is based on the cloud, is disruptive in its ease of use. The stock is now up 164% year to date, compared with 6% decline in the S&P 500 index. But with stay-at-home restrictions being lifted across various states, can Zoom maintain its momentum? On Tuesday Wall Street will want to see how whether the surge in users and meeting participants has translated to sustainable profits.

Broadcom (AVGO) – Reports after the close, Thursday, June 4

Wall Street expects the company to earn $5.15 per share on revenue of $5.7 billion. This compares to the year-ago quarter when earnings came to $5.21 per share on revenue of $5.52 billion.

What to watch: After taking a massive hit from the coronavirus, the chip sector has rebounded impressively from the March bottom. But Broadcom has been left out of the rally, compared to the likes of Nvidia (NVDA), AMD (AMD) and Intel (INTC). On a mission to become the world leader in infrastructure technology, the company has gone on an acquisition spree and diversifying its business away from its core semiconductor segments. With recent deals for Brocade communications (spending $5.5 billion), CA Technologies (spending $18.9 billion), and Symantec Enterprise (spending $10.7 billion), the market is eager to see the not only increased revenue strength, but also bottom line synergies.

DocuSign (DOCU) – Reports after the close, Thursday, June 4 

Wall Street expects DocuSign to earn 10 cents per share on revenue of $281.12 million. This compares to the year-ago quarter when earnings were 7 cents per share on revenue of $213.96 million. 

What to watch: As the market tumbles from economic impacts of the coronavirus, so-called “stay at home” stocks like DocuSign, which provides individuals and businesses the ability to digitize an agreement process, have prospered. The company has seen its stock price soar 96% over the past six months, including more than 35% in thirty days. But with the stock now up 88% year to date, compared with an 6% decline in the S&P 500 index, the company will need a breathtaking quarter and guidance to sustain the momentum. DocuSign on Thursday must continue to show not only a re-acceleration of revenue but also outline its path towards profitability.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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