Last week was full of excitement, as the May jobs report sparked a ton of debate over whether the Federal Reserve would start tapering some of its QE program. We also are heading further into the summer, where the number of market participants will decrease as vacations are taken. This week will be a key bridge week, as everyone looks forward to the Federal Reserve meeting on June 18th and 19th (next Tuesday and Wednesday). There are also several interesting single stock stories to track, and I'll cover some of them today. Here are five names to watch closely this week.
How did I come about these names? Well, I decided to use a broad based approach to cover a wide variety of topics. One name was chosen because it is reporting earnings this week. Another name faces a huge lockup expiration this week, which will add a massive amount of shares to the float. A third name received two positive analyst notes on Monday, which could help a beaten down stock rebound. One ETF was chosen because of the upcoming Federal Reserve meeting mentioned above, and the fifth name on my list is a biotech name that recently received some positive test results.
The Canadian apparel retailer will report fiscal first quarter earnings on Monday afternoon, and everyone will be watching to see how much of an impact has been caused by the company's pants problem. The stock itself closed just a dollar off its 52-week high on Friday, a high that was set recently. Many are wondering if this is a "buy the rumor, sell the news" event, where a pullback could be likely after earnings.
The company guided to Q1 revenues in a range of $333 million to $343 million, and current estimates call for $341.07 million, towards the upper end of the range. The company has been known for giving conservative guidance in the past, but this quarter is different. How consumers are treating this name after it was mocked in the media for its see-through pants will be something to watch. That's not something a company can exactly forecast financially. On an earnings per share front, analysts are looking for $0.30, the high end of the $0.28 to $0.30 guidance range.
The stock hit a low of $61.60 after the pants problem was announced in March, and we've rallied about $20 since then, a gain of 32%. Investors have certainly poured back into this name, but shares now trade for nearly 41 times this year's expected earnings. That's a hefty price to pay for a company who expects lower revenues and earnings because of the pants issue. With nearly 1/6 of shares short at the mid May update, there is the potential for a nice short squeeze if the company shows the pants problem is behind it. But if they give another round of conservative guidance (Q2 estimates currently stand at $328.88 million and $0.33, respectively), look for this stock to head towards $75.
Despite Google (GOOG) being the clear leader for Waze, Facebook shares were higher on Monday morning thanks to some positive comments. By Google acquiring Waze, it could definitely hurt Facebook's and Apple's (AAPL) goal to develop a rival platform to Google Maps. Facebook and Apple were rumored as buyers of Waze in recent months, but Google appears to be the clear winner.
The positive news on Monday is that Facebook received some positive analyst coverage. One analyst at Stifel stated that Facebook could be added to the S&P 500 within a year. That would provide an expanded investor base and could provide a level of support to the name. Stifel upgraded its view on Facebook from "Hold" to "Buy" on the potential S&P 500 inclusion. Also, analysts at JP Morgan reiterated their "Overweight" recommendation and $35 price target on Facebook after the stock's recent weakness.
As you can see from the chart below, Facebook shares last week hit levels not seen since November 2012. The low point of $22.67 has been a short-term bottom, and Facebook was trading around $24 in Monday's pre-market session. These positive analyst notes could provide a much needed boost to a stock that's been beaten down over the past few months.
(Source: Yahoo! Finance)
iShares Barclays 20+ Year Treasury Bond ETF (TLT):
Traders, place your bets! As I mentioned above in my opening, we are less than 10 days from the Federal Reserve meeting and announcement. Jon Hilsenrath thinks the June meeting is where the Fed will start to taper. Will traders push the 30-year yield up towards the 3.50% level, or will they pile back in once more and make a run at 3.00%? We'll begin to find out this week.
Lately though, the rate on the 30-Year has jumped higher, as you can see from the chart below (chart is 30-Year rate, not the TLT ETF). Since the beginning of May, the TLT has dropped roughly $10, and those who are worried about rising rates should not be in this name. On the economic front this week, the headline numbers will be Retail Sales, the Producer Price Index, and University of Michigan sentiment. These reports could hold some keys to what the Fed decides next week.
(Source: Yahoo! Finance)
The solar name will have a huge lockup expiration early this week of more than 60 million shares. Credit Suisse is arguing that the tradeable float of this name could rise by 8 to 10 times, a staggering amount.
It's been a wild ride for shareholders of this name since the company went public at $8.00 last December, as you can see in the chart below. Just in the past month, the name rocketed higher from $23.50 to $52.50, only to fall back to $36 by Friday's close. Shares are now down more than 31% from that May 28th high, and the lockup expiration could open the floodgates even more. Tesla (TSLA) CEO Elon Musk owns 28% of SolarCity, which accounts for a little more than 1/3 of the upcoming expiration.
(Source: Yahoo! Finance)
Regeneron Pharmaceuticals (REGN):
The biotech name will be one to watch after positive data was released on Eylea, which treats neovascular age-related macular degeneration and macular edema. On the back of the positive top line results last week, Regeneron and Bayer will look for regulatory approval in Asia during the second half of 2013. This could help with the treatment of mCNV (myopic choroidal neovascularization), basically helping to improve the clearness of a patient's vision.
Regeneron, like most biotech names, had been on an extended rally until a few weeks ago. Shares, which started the year at just $171, raced up to nearly $284 in mid-May. Shares then dropped nearly $60, touching a low of $227.47 last week. The latest positive news has pushed shares up by $30, and it will be interesting to see how they fare this week. Also, with shares dropping during late May, it will be interesting to see how short interest changes when we get the next update (next short interest update from NASDAQ is this week).
While the summer doldrums may be starting for some, expect market action to continue at a decent pace this week. All eyes will be on Apple at WWDC, looking for new product launches. Canadian apparel favorite Lululemon will report quarterly earnings, and we'll see the impact of the pants problem. SolarCity faces a huge lockup expiration, which could put further selling pressure on shares. Regeneron will look to regain more of its recent losses after positive results on Eylea. All of these names will be in the spotlight, while investors will also be looking at interest rates leading up to next week's Fed meeting.