Economic releases dominate the calendar for the holiday-shortened week ahead. The Empire State Manufacturing Index will be released on January 18 to be followed by the produce price index report and retail sales report on January 19. The retail sales number for December is expected to be influenced by a more pronounced pull-forward of holiday sales in 2022 and weakness in categories that are associated with holiday shopping like clothing, furniture, general merchandise, and department stores. The week also includes a heavy slate of speeches from Federal Reserve members as the critical January 31-February 1 meeting of the FOMC starts to get closer. The earnings season kicks up another notch with key reports due in from Goldman Sachs (GS), Netflix (NFLX) and Procter & Gamble (NYSE:PG). There is also a political wildcard to watch after the Treasury Department warned the U.S. will reach the debt limit on January 19 and will need extraordinary measures from Congress to avoid a default. In a technical look at the market, Fairlead Strategies warned that investors may be out in front of their skis with more than 60% of the S&P 500 stocks now affected by short-term overbought conditions. Analyst Katie Stockton said the overbought conditions suggests momentum will fade next week. “Past peaks in this breadth measure have provided early warning, preceding downdrafts in the SPX by a week or two,” she noted.
Earnings spotlight: Tuesday, January 17 – Goldman Sachs (GS), Morgan Stanley (MS), United Airlines (NASDAQ:UAL), and Silvergate Capital (NYSE:SI)
Earnings spotlight: Wednesday, January 18 – Charles Schwab (SCHW), PNC Financial (PNC), Discover Financial (DFS), and Kinder Morgan (NYSE:KMI).
Earnings spotlight: Thursday, January 19 – Fastenal (FAST), Procter & Gamble (PG),and Netflix (NFLX).
Earnings spotlight: Friday, January 20 – Ally Financial (NYSE:ALLY) and Regions Financial (RF).
Volatility watch: Options trading on highly-shorted Bed, Bath & Beyond (BBBY) is sky high, setting up the stock for more wild swings. Virgin Galactic (SPCE) could update on key ground tests as it pushes closer to commercial service. Carvana (CVNA) and Blue Apron (APRN) are also expected to see some wild swings as the battle between longs and shorts plays out.
IPO watch: Psychotropic drug developer Lucy Scientific (LSDI) could price its IPO during the week. The IPO lockup periods expire for blocks of shares of WeTrade Group (NASDAQ:WETG) and Cerberus Cyber Sentinel (CISO).
Netflix earnings preview: Netflix (NFLX) will report earnings on January 19 with analyst expecting revenue of $7.84B and EPS of $0.55 to be reported. The streamer’s subscriber tally will get even closer attention this quarter with the new basic tier launch a factor. While Barclays thinks NFLX will miss its guidance mark of 4.5M net subscriber additions based on third-party data on app downloads, JPMorgan has forecast a beat of 4.75M net adds. The firm thinks a strong content slate during the quarter that included Glass Onion, Troll, All Quiet on the Western Front, My Name is Vendetta, and breakout hit Wednesday will help Netflix surprise to the upside. Meanwhile, Oppenheimer thinks the biggest catalyst in play with the Netflix earnings report could be the conference call update on the progress with the ad tier and new initiatives to reduce password sharing. Shares of Netflix have rallied more than 13% so far in 2023.
Procter & Gamble earnings preview: Procter & Gamble (PG) leads off the earnings season for the household products sector on January 19. Consensus estimates for the report are for revenue of $20.7B and EPS of $1.59 to be reported. Wells Fargo tipped that there could be upside to the consensus organic sales expectations for 4.5% growth. However, the Street is wary on P&G’s bottom line due to profit pressure from F/X, labor costs, and commodities inflation, and freight expenses. 15 of the last 17 earnings revisions on P&G from analysts have been to the downside and shares have drifted about 2% lower over the last week.
Sports betting to the max: The NFL playoffs will begin during the weekend with games scheduled for Saturday, Sunday, and Monday. The playoff season will culminate with the Super Bowl, which is anticipated to see the most legal bets placed on an event in the U.S. of all time. Crucially, sports betting momentum is peaking just ahead of the NFL playoffs with the top five states (NJ, PA, IL, MI, NY) seeing an ~8% sequential increase in volume and 107% year-over-year jump (29% ex-New York). Of note, New Jersey sports betting growth accelerated slightly to +13% year over year. Weighing in on those numbers, Morgan Stanley said it is an impressive mark for New Jersey to still see growth after five years in the OSBM market and considering the New York online sports betting launch in 2022. Sports betting in Ohio also appears to be off to a very strong start with GeoComply reporting over 11M online sportsbook transactions in the state were recorded on the first two days that sports betting was legal. The 2023 launch in Ohio means that over 44% of U.S. citizens have access to legal and regulated sports betting. While online sports betting handle is anticipated to set another record in 2023, Bank of America reminded recently that only a select few states are likely to see legislation passed during the year which could hold back betting volume growth until 2024 and beyond. A bigger story during the year may be the race to set up casinos near New York City, with Las Vegas Sands (NYSE:LVS) the latest casino operator to throw its name into the mix.
Eyes on Monster Beverage: The attention of the beverage sector will be on Monster Beverage (NASDAQ:MNST) when the company holds its annual Investor Day event on January 17. Analysts expect to hear updates on sales trends, promotional activity, and the margin outlook amid the inflationary backdrop. Also look for details on the innovation pipeline, including Beast Unleashed and Monster Zero Sugar. Monster Beverage will hold the event with competition heating up following Keurig Dr Pepper’s (KDP) investment in Nutrabolt and PepsiCo’s (PEP) deal with Celsius Holdings (CELH). MNST has been a relative outperformer over the last year in the sector and broad market with a 6% gain over the last 52 weeks.
Corporate events: The Washington State Supreme Court holds a hearing on January 17 to weigh in on the proposed $4B Albertsons (NYSE:ACI) dividend. F5 (NASDAQ:FFIV) will hold a Solution Day event in Berlin, Germany on January 18 to show off its products. The FDA action date arrives for Seagen’s (NASDAQ:SGEN) Tukysa in combination with Trastuzumab for metastatic colorectal cancer. Merck (MRK) has rights to Tukysa outside of the U.S., Canada, and Europe. The FDA is also expected to act on BeiGene’s (NASDAQ:BGNE) Brukinsa (zanubrutinib) for chronic and small lymphocytic leukemia. Shares of BGNE have been active after Brukinsa developments. Zymeworks (NASDAQ:ZYME) is scheduled to present Phase 2 data at the ASCO Gastrointestinal Cancers Symposium on January 20. Check out Seeking Alpha’s Catalyst Watch for more events scheduled for next week.
Notable conferences: The conference schedule is relatively busy for the week ahead with the B. Riley Securities’ 3rd Annual Oncology Conference, Sidoti Micro-Cap Virtual Conference, CIBC Western Institutional Investor Conference and Stifel’s 2023 Seniors Housing and Healthcare Real Estate Conference the main events.
Barron’s mentions: Endava (DAVA) is singled out by the publication this week as an attractive stock. Despite corporate spending on software and tech decelerating due to recession concerns, Endava is said to be well positioned in 2023. The expectation for lower growth rates for Salesforce (CRM) and ServiceNow (NOW) has weighed on shares of London-based Endava (DAVA), with share down 39% over the last 52 weeks. However, Barron’s pointed out that companies are always looking to get more efficient by cutting costs and replacing old software with newer tech. In addition, Endava’s relatively small size is noted to allow it to work more closely with customers. Endava has seen revenue grow at a 29% annual clip over the past three years and is forecast to see sales compound annually at a 28% pace to $1.44B over the next two years. That means shares currently trade with an attractive PEG ratio of under 1X.
Sources: EDGAR, Bloomberg, CNBC, Reuters
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