Investors might be ready to ignore their earnings calendar at this point. Earnings season is pretty much over now that most retailers have released fiscal Q2 numbers. It would seem like there are more no key earnings reports until mid-October, when Q3 reporting begins.
But even in a short week, there are some intriguing earnings releases on the earnings calendar. None of the reports are likely to move the market, particularly after a strong earnings season that helped boost the S&P 500 to new all-time highs. But investors — particularly those with exposure to a few key sectors — still will have plenty to chew on.
A major chipmaker will not only release numbers, but perhaps give more color on its longstanding (and highly successful) M&A strategy. Numbers and commentary from a key member of one of the market’s more volatile sectors likely will reverberate across several stocks. And a high-flying SaaS play will show how much tolerance investors have for high valuations as attention moves from earnings to geopolitical and macroeconomic concerns. All told, investors returning from a three-day weekend will have to get right back to work.
3 Earnings Reports to Watch: Workday (WDAY)
Earnings Report Date: Tuesday, September 4, after market close
Workday (NASDAQ:WDAY) earnings on Tuesday may give a clue as to just how high investors are willing to go from a valuation standpoint. WDAY stock has marched pretty much straight higher for the past month, gaining over 20% on very little news.
In fact, WDAY shares actually sold off following fiscal Q1 earnings in late May. The acquisition of Adaptive Insights in June made some sense, but a $1.55 billion dollar buy isn’t a game-changer for a company now valued at $32 billion.
It’s that valuation that seems to make the fiscal Q2 report potentially dicey. WDAY now trades at 13x revenue — and 93x forward EPS. It’s difficult to see what kind of quarter can possibly send the stock higher, particularly after recent gains — unless investors are willing to pay up.
So far — and for years now — the market has been fine with those valuations, particularly for SaaS stocks. And, admittedly, the earnings calendar in July and August featured plenty of stocks that seemed to have gone too far, too fast. The response to WDAY’s earnings — particularly if they’re strong — may show whether there’s any multiple expansion left in the software space, and perhaps for other high flyers as well.
3 Earnings Reports to Watch: Finisar (FNSR)
Earnings Report Date: Thursday, September 6, after market close
Fiscal Q1 results from $2.4 billion market cap Finisar (NASDAQ:FNSR) aren’t going to move the market. But shareholders of FNSR and other optical networking stocks are likely to be watching closely.
The optical group — which also includes Oclaro (NASDAQ:OCLR), Applied Optoelectronics (NASDAQ:AAOI) and Acacia Communications (NASDAQ:ACIA), among others — tends to trade together. Demand tends to be choppy. And a series of external events have hurt — and helped — the group at various times this year. Tariff concerns and a ban on sales to China’s ZTE have added to long-running worries about Chinese demand.
FNSR stock itself has had a volatile year, but sits about where it started 2018. The Q1 report on Thursday could be another inflection point in the stock’s choppy trading. And it could move not only FNSR, but its peers as well.
3 Earnings Reports to Watch: Broadcom (AVGO)
Earnings Report Date: Thursday, September 6, after market close
From here, the fiscal Q3 report from Broadcom (NASDAQ:AVGO) is the most important one on the earnings calendar. AVGO stock sold off sharply back in July, when the company announced its acquisition of CA, Inc. (NASDAQ:CA).
The market, quite simply, didn’t like the deal. AVGO stock lost some $15 billion in market value over a $19 billion deal. The move from chips into software raised questions about the company’s M&A strategy, and perhaps if the company was starting to reach after its attempted takeover of Qualcomm (NASDAQ:QCOM) fell through.
Personally, I liked AVGO stock before the deal — and still do at a cheaper price. And Thursday’s release might give AVGO a chance to rebound, even with an ~8% bounce from 18-month lows reached in July. Management will have another chance to justify the CA deal. Solid results can remind investors of the strength in the legacy business. And an ~11x forward EPS multiple seems far too low in a sector that has seen a lot of optimism the last few years (albeit with some choppy trading this year).
An AVGO rally would help major tech indices and could help other chip stocks. It might also give the company more ammunition to make yet another deal. It’s a big report, then, for Broadcom — and one that investors in many other companies should be watching as well.
As of this writing, Vince Martin has no positions in any securities mentioned.
