A lot of hope was riding on Nvidia Corporation’s (NASDAQ:NVDA) quarterly report last night, and reaction to those numbers shows why this earnings season is winding down with more of a whimper than a bang.
Before President Donald Trump promised “fire and fury”, companies reporting earnings where moving along bullishly along with the general markets. With 91% of companies in the S&P 500 having laid bare their financial results, nearly three-fourths surprised to the upside on profits, while 69% showed better-than-expected sales.
Now that nuclear winter is on the table, reality is hitting investors. Valuations are stretched so thin it takes beyond perfection to attract anyone but profit-takers.
With a few key names left on the calendar, however, there’s still a chance to turn this trend around.
Earnings Reports to Watch: Target (TGT)
Target Corporation (NYSE:TGT) will be the last real shot the ailing consumer discretionary sector has to reverse what’s currently a slight year-over-year earnings decline. To pull that off, the “affordable upscale” big box chain will need to deliver better than $1.17 a share on Wednesday morning.
The last time Wall Street models admitted that possibility was back in February, when the retail future looked bright and TGT was a $65 stock. Since then, targets have moved all over the place but most of the analysts have shifted from looking at the company as a growth play to trying to gauge whether earnings have deteriorated 3%, 5% or a full 20% from last year.
At this point, I think sentiment is so defensive it would take a miracle to turn TGT around. If we get it, the pressure is off Wal-Mart Stores Inc (NYSE:WMT) on Thursday. Otherwise, the domestic retail door could be closing until the next quarterly cycle gives these stocks another chance to turn around.
Earnings Reports to Watch: Alibaba (BABA)
Alibaba Group Holding Ltd (NYSE:BABA), on the other hand, is all about the retail environment in China, where the company has become a proxy on the entire consumer economy.
We’re looking for a “conservative” 25%-30% growth Thursday morning, but once again, this is not a season where you want to get stuck in a stock that disappoints, even if the miss is only a currency rounding error.
My fear here is that a few expectations on BABA have become artificially inflated after converting yuan to dollars, so even if Jack Ma hits the target on Shanghai he may still have to eat a lot of red ink on Wall Street.
Still, if the company meets its mark, it’s good news for those who’ve been worried about conditions in China.
Earnings Reports to Watch: Cisco Systems (CSCO)
Cisco Systems, Inc. (NASDAQ:CSCO) effectively wraps up the cycle on Thursday after the close. On the one hand, expectations here have been low since November, which is the last time anyone seriously thought this one-time high-tech bellwether was still growing its business.
However, the stakes are relatively high because we’ve already endured so much exaggerated carnage in the technology group this season.
If CSCO can break the second-quarter curse and bounce on any combination of numbers and outlook, I think it’s a great omen for the Nasdaq’s ability to get back to exploring fresh record levels. Otherwise, there’s not a lot of joy in tech right now.
From the reaction to NVDA’s results overnight, I’m inclined to think the numbers don’t really matter as much right now. It’s all about gaming sentiment at this point.
Hilary Kramer is the editor of GameChangers, Breakout Stocks, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.