By Barbara Kollmeyer, MarketWatch
Better-than-expected export data from China is giving markets a welcome tailwind as what is expected to be a rough earnings season is kicking off, starting with banks for Tuesday.
Signs of slowing global coronavirus infections and lockdowns easing in parts of Europe are also a cause for cheer, though there are big questions still over the U.S. progress on this front.
Technology stocks bucked an otherwise down day on Monday, thanks in large part to a rally for Amazon /zigman2/quotes/210331248/composite AMZN +0.77% , which is set for another record session on Tuesday as investors continue to cheer news of 75,000 more planned hires. The internet sector is one of the few benefiting right now from the economic fallout brought on by the pandemic.
But according to our call of the day from analysts at Canaccord Genuity, investors would be wise to choose those stocks carefully, especially heading into earnings season.
“Among buy-rated names we see Amazon, Netflix /zigman2/quotes/202353025/composite NFLX +1.00% , Peloton /zigman2/quotes/208035743/composite PTON +0.36% and Wayfair /zigman2/quotes/201071690/composite W +3.02% not only benefiting from incremental demand in the near term as consumers are adjusting to stay-at-home routines, but also becoming more established platforms over time,” say analysts Maria Ripps and Michael Graham, in a note to clients.
The analysts are trimming near-term estimates for food delivery group Grubhub /zigman2/quotes/210404212/composite GRUB +1.64% , e-commerce company Etsy /zigman2/quotes/202790087/composite ETSY +1.11% and pet insurance provider Trupanion /zigman2/quotes/201408325/composite TRUP -0.17% . But they say those companies may benefit longer-term as online food delivery and e-commerce adoption “could further accelerate post-COVID and spending on pets may benefit in a slower economic environment.”
They are also cutting advertising revenue estimates by 8% to 10% in the social media space for Facebook /zigman2/quotes/205064656/composite FB +2.58% , Twitter /zigman2/quotes/203180645/composite TWTR +0.30% and Snap /zigman2/quotes/205087158/composite SNAP -0.49% , along with Alphabet parent Google /zigman2/quotes/202490156/composite GOOGL +3.10% .
The analysts say average 2020 revenue growth rate for companies they cover is around 16% year over year from 22% previously, while 2021 forecasts are down for most names, but they expect revenue will rebound to 23% by next year. And over the next three to five years, their estimates are unchanged as they say internet companies will keep taking share from offline rivals.
“Certain segments like e-commerce, where global online penetration is still less than 15%, as well as more ‘digitally-advanced’ sectors such as online food delivery, digital streaming and digital advertising, will likely see the pace of digital adoption accelerate post-pandemic,” say the Canaccord analysts.
Global fund managers surveyed by Bank of America Merrill Lynch seem fairly unanimous about how the global economy will emerge from the pandemic-driven global recession. So forget about a quick rebounding “V” bounce, and count on a slower “U”-shaped recovery.
Johnson & Johnson /zigman2/quotes/201724570/composite JNJ +1.98% posted an earnings beat and hiked its dividend, while JPMorgan Chase /zigman2/quotes/205971034/composite JPM +0.23% missed forecasts and Wells Fargo’s /zigman2/quotes/203790192/composite WFC +0.73% profit sank 89%.
Tech conglomerate SoftBank /zigman2/quotes/207303954/delayed JP:9984 +0.05% expects to take a nearly $17 billion loss on its Vision Fund, putting it on track for the worst annual performance in its 39-year history.
Democratic governors are forming multistate alliances over when to reopen businesses, while President Donald Trump insists it is his call. And health-policy adviser Dr. Anthony Fauci tried to walk back some criticism of Trump’s coronavirus efforts.
Self-isolating in an abandoned ghost town.
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