Only once since March 22 did the S&P 500 decline further than it did on Friday, when the index dropped 1.79%. And it has been exactly four months since the index saw even the 3.3% pullback it has posted over the past six sessions.
Those figures highlight the reason for caution toward U.S. stocks at the moment and the argument why investors shouldn’t panic. Coronavirus fears obviously are dominating the market right now. But there’s hope for containment — and potential beneficial results as the likes of Gilead Sciences (NASDAQ:GILD) work for a treatment.
Meanwhile, last week saw a string of impressive earnings reports from the likes of Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN). Central banks remain ready in China and likely the U.S. to provide support if macro conditions worsen. It does seem potentially too soon to write off this bull market just yet, even if valuation remains a concern.
At the very least, volatility does appear likely to rise, which makes Monday’s big stock charts particularly interesting. All three stocks sit at key levels at the moment, with earnings due in the next couple of weeks. With volatility elevated in the market more broadly, each of these names could make a big move into, and out of, those earnings reports. The question is in which direction.
Planet Fitness (PLNT)
As the first of Monday’s big stock charts shows, Planet Fitness (NYSE:PLNT) is back at resistance for a fourth time. With some external help, however, this time could be different:
- The multiple top is a concern from a technical perspective. But the rest of the chart looks bullish. The rally from October lows, catalyzed by a third quarter earnings beat in November, has been textbook. Shares continue to bounce off the 20-day moving average, which could provide support going forward. Meanwhile, PLNT saw a “golden cross” last month, with the 50DMA crossing above the 200DMA. This looks like a rally that has enough momentum to get through resistance.
- Fundamentally, PLNT stock doesn’t look cheap. But shares haven’t looked cheap for years now. As I detailed almost two years ago, PLNT has been a battleground stock since its initial public offering in 2015, in large part due to valuation concerns. Bulls have won, and still might. Franchisors — think McDonald’s (NYSE:MCD) or Domino’s Pizza (NYSE:DPZ) — remain coveted by investors, and so a 42x forward price-to-earnings multiple isn’t as crazy as it sounds.
- Wall Street does see the rally ending, as the average price target sits right at current levels, but even that could be bullish near-term. Analysts may have to catch up to the rally with upgrades and higher price targets, particularly if Planet Fitness impresses with its fourth quarter earnings release later this month.
- And so the near-term direction here may well be decided by the broader market. PLNT stock has soared in the bull market so far, rising over 400% from its IPO price of $16. It has been the right kind of stock for a market that focused on growth over valuation. If that changes, or if the “risk-off” trade returns in focus, PLNT might not be the right kind of stock anymore. In that scenario, resistance holds again.
While PLNT looks for new highs, Dropbox (NASDAQ:DBX) is trying to avoid new lows. The second of our big stock charts suggests that may be difficult without some help:
- Support held at current levels twice last year. But the declining triangle pattern of lower highs, as well as the double top in September and November, suggest steadily increasing pressure on DBX stock. Shares are below moving averages as well; if support around $17 breaks, the downside could be severe.
- The fundamental issue is that it’s not as if Dropbox stock necessarily is cheap. The stock still trades at 29x 2020 consensus earnings per share estimates. I thought a year ago that shares were cheap enough given growth potential, but so far the market has disagreed. Rising competitive threats from the likes of Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) are a key reason why.
- Still, DBX stock does look interesting here. A 29x forward multiple is not out of line given expectations for 20%-plus growth. Those expectations could rise with an earnings beat when the company reports fourth quarter results on Feb. 20. Salesforce (NYSE:CRM) has been a rumored acquirer in the past, and another larger tech company could see the business as attractive. But from a near-term standpoint, the outlook appears dicey. To avoid reaching new all-time lows, Dropbox likely needs either a big market rebound or a big earnings report.
National Beverage (FIZZ)
Shares of National Beverage (NASDAQ:FIZZ), the maker of LaCroix sparkling water, haven’t quite reached a key level yet. But a steady reversal since a fiscal second quarter earnings beat in early December has FIZZ stock hurtling toward support. The third of Monday’s big stock charts, however, suggests the news might not be quite as bad as trading over the past two months suggests:
- KO) drove an analyst downgrade last month, perhaps adding to the post-earnings reversal. Obviously, FIZZ stock looks like a classic falling knife on the daily chart. A new launch from Coca-Cola (NYSE:
- But competition has been a big part of the story here for some time, with Coca-Cola, Pepsi (NASDAQ:PEP), Nestle (OTCMKTS:NSRGY), and many others targeting the fast-growing sparkling water market. Ugly 2020 trading has come on thin volume, with the 30-day average at its lowest point since May. And as the weekly chart shows, FIZZ stock at least has managed to stabilize after a long, steep decline. It wouldn’t be terribly surprising to see investors again step in around $40, as they have in the past.
- That alone certainly doesn’t make FIZZ a buy. And as I wrote last year, I still believe the short case for the stock makes some sense. But FIZZ, too, has been a battleground stock — and the bulls can make a strong case as well. If LaCroix sales can stabilize, FIZZ is cheap enough, and one of the majors may look to a buyout. That case has attracted investors before. Barring a market collapse, and at least from a short-term standpoint, it may do so again.