2 Earnings Reports That Loom Large In The Near Term For 2 Sectors

Summary

• Lululemon Athletica Inc. reports earnings on Tuesday, with analysts expecting revenue of $1.66B and EPS of $2.48.
• Micron Technology Inc. company reports quarterly earnings Wednesday, with analysts expecting revenue of $6.2 billion and EPS of $0.94.
• Since the U.S. economy is on the verge of re-opening and stimulus checks are being sent out, it’s more important than ever to determine how these two corporate giants fair.

By Roger Scott

WealthPress Senior Strategist

This week we’ve got earnings from two very different companies, but both can give traders and investors much-needed clues in terms of where both the retail and semiconductor sectors are headed in the near term.

Since the U.S. economy is on the verge of re-opening and stimulus checks are being sent out, it’s more important than ever to determine how these two corporate giants fair at this time.

Retail Sector

Lululemon Athletica Inc. (Nasdaq: LULU) reports earnings on Tuesday, March 30, with analysts expecting revenue of $1.66B and EPS of $2.48. Oppenheimer thinks the recent weakness in Lululemon is largely market-driven and not reflective of underlying fundamental weakness at the company.

"We are optimistic that forthcoming, positive data points from the company should underpin a gradual recovery in LULU back toward recent highs. LULU continues to represent one of our preferred re-opening plays across consumer," Oppenheimer said. "As we increasingly look toward prospects for post-COVID reopening in the U.S. and elsewhere, we are hard-pressed to envision a better consumer play than LULU, given prospects for improving demand for clothing and now even more heightened tendencies for consumers to dress more casually and shop online," notes the firm."

Technically, the stock is trading below the 50-day moving average and I would strongly urge anyone to wait until we’re above the 50-day line before jumping in. Because once the stock picks up momentum once again, the odds are strong it will take out the previous September high that’s sitting close to $400 per share.

Keep your eye on the $325 level since that’s roughly where the 50-day moving average sits. The company is a leader in retail and I expect momentum levels to begin driving its price higher sooner than later.

Semiconductor Sector

The next stock I want to focus on is Micron Technology Inc. (Nasdaq: MU).

The company reports quarterly earnings March 31st. Analysts expect revenue of $6.2 billion and EPS of $0.94. The revenue estimate implies high-single-digit percentage growth.

Revenue is expected to grow in the high-to-single-digit-percentage range.

According to the company, Rising DRAM demand could lead to revenue growth and margin expansion. Moreover, rising consumer spending is positive for retailers, mobile phone-makers and computer manufacturers. According to the Gartner group, the global PC market grew 4.8% Y/Y, and 10.7% in Q4 2020. Since the pandemic, consumers have put more emphasis on PCs, according to preliminary results by Gartner Inc.

For the year, PC shipments reached 275 million units in 2020, a 4.8% increase from 2019 and the highest growth in ten years.

Micron's strategic shift to the data center market has lessened its dependence on the consumer as well, which should pay off in in the near term.

Technically, the stock just broke below the 50-day line but appears to be roaring back quickly, which is a sign of strength.

I expect more upside and a potential price target near $100 per share in the near term.

I like the overall chip sector and believe it will bounce back faster than the broader large-cap tech market that holds several FAANG stocks that haven’t done much in months.

Micron is making significant impact in the self-driving car segment since DRAM chips are required and they provide close to 50% of the market at this time. Look for more upside from one of the biggest and most strategic chip companies in the world.

I hope that helps!

Roger Scott

WealthPress Senior Strategist