7 Earnings Reports to Watch Next Week

earnings reports - 7 Earnings Reports to Watch Next Week

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After the holiday weekend, investors will return to a relatively full earnings calendar. Two sectors will dominate these earnings reports: software and retail.

Those two sectors are headed in different directions — again. Software names have led the significant rally in tech in recent years, while all but the biggest and best retail stocks have slid. But over the last couple of months, fortunes have reversed.

Many software names have stagnated or even faded amid valuation concerns. Meanwhile, even smaller retailers have performed surprisingly well despite the impacts of the novel coronavirus pandemic, and fiscal second-quarter reports in August and September sparked a number of rallies.

We’ll see if the more recent trend holds after earnings next week. Certainly, there will be enough reports to draw conclusions. The likes of Veeva Systems (NYSE:VEEV), Box (NYSE:BOX) and Synopsys (NASDAQ:SNPS) are just a few of the software names releasing earnings. After blowout quarters from leaders Walmart (NYSE:WMT) and Target (NYSE:TGT), At Home Group (NYSE:HOME), Five Below (NASDAQ:FIVE) and Michaels (NASDAQ:MIK) are a few of the companies who will try and keep pace.

There are some intriguing releases elsewhere in the market. Recent IPO Snowflake (NYSE:SNOW), chip player Marvell Technology (NASDAQ:MRVL) and China-based Trip.com (NASDAQ:TCOM) are on the docket. But the focus will be primarily on just two sectors, and particularly on these seven earnings reports to watch:

  • Zoom Video Communications (NASDAQ:ZM)
  • Salesforce (NYSE:CRM)
  • Splunk (NASDAQ:SPLK)
  • CrowdStrike (NASDAQ:CRWD)
  • Dollar General (NYSE:DG)
  • DocuSign (NASDAQ:DOCU)
  • Ulta Beauty (NASDAQ:ULTA)

Earnings Reports: Zoom Video Communications (ZM)

Zoom (ZM) logo on a building
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Earnings Report Date: Monday, Nov. 30, after market close

Expectations are likely to be high for Zoom’s fiscal third-quarter release on Monday afternoon. Zoom has been perhaps the biggest winner of the pandemic so far. The rapid shift to video conferencing has led to explosive user and revenue growth. As a result, Zoom has posted literally historic beats in each of its last two quarters.

But those expectations may have been tempered a bit given a reasonably sharp pullback in ZM stock over the past five weeks. ZM has dropped 27% from its highs. Obviously, the stock is far from cheap at an incredible 85x trailing 12-month revenue. But a 146x forward price-earnings multiple seems at least a bit more reasonable, and triple-digit top-line growth can reduce both multiples in a hurry.

Zoom does need a big quarter, however, given fears that a gradual return to normalcy may lead growth to collapse rather quickly. Wall Street is not sure what next year looks like: Analyst projections for 2021 revenue range from growth of nearly 50% to a rate under 20%. Increased confidence toward the higher end of that range would go a long way toward resuming the rally in Zoom stock. A return to the aggressiveness that marked tech trading until recently wouldn’t hurt, either.

Salesforce.com (CRM)

A hand with pink painted fingernails holds a Salesforce (CRM) sticker.
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Earnings Report Date: Tuesday, Dec. 1, after market close

Salesforce stock long has been a barometer for market sentiment. There is really not much debate about the quality of the business; the argument is mostly about valuation.

That argument has been a stalemate for three months now. CRM stock soared 26% on the back of a blowout Q2 earnings report in late August. From that post-earnings close, the stock has pulled back more than 5%.

In the context of tech trading, that modest decline is not a surprise. Again, the case for (or against) CRM largely comes down to valuation, and it is clear that investors have some worries on that front. And so barring a repeat of the Q2 blowout, CRM once again will provide an intriguing test for the market ahead of earnings from more than a few dearly valued names later on in the week.

Earnings Reports: Splunk (SPLK)

Splunk (SPLK) logo on the company office in Santana Row.
Source: Michael Vi / Shutterstock.com

Earnings Report Date: Wednesday, Dec. 2, after market close

At 324x forward earnings, Splunk stock is one of those expensive names, even after roughly five months of sideways trading. Bulls no doubt hope that the upcoming Q3 release will get SPLK out of its range.

There’s a case to be made. Splunk remains one of the better “Big Data” stories in the market. Growth remains impressive, and profit margins should come around relatively soon.

Of late, however, that has not been enough to move investors. The Q2 report didn’t do the trick, either: Splunk stock pulled back despite strong numbers. It remains to be seen if Splunk can spark a bit more optimism this time around.

CrowdStrike (CRWD)

A sign with the Crowdstrike (CRWD) company logo
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Earnings Report Date: Wednesday, Dec. 2, after market close

CrowdStrike headlines a big day for the cybersecurity sector, as it is joined by smaller peers Okta (NASDAQ:OKTA) and Zscaler (NASDAQ:ZS).

The group has seen the same flattish trading as other growth names of late. The ETFMG Prime Cyber Security ETF (NYSEARCA:HACK) is flat over the past three months, and bumping up against resistance that has held repeatedly over that stretch. CRWD stock has followed a similar pattern, though a recent rally gives the stock another chance at a breakout.

Strong results could do the trick, and there is a recent example that suggests some optimism. Palo Alto Networks (NYSE:PANW) posted an impressive quarter last week, and saw its stock break out to all-time highs as a result. CrowdStrike, in particular, has an obvious chance to follow the same path, as long as the company can deliver a blowout report of its own.

Earnings Reports: Dollar General (DG)

Dollar General Stock Should Continue to Climb Higher Post-Pandemic
Source: Jonathan Weiss / Shutterstock.com

Earnings Report Date: Thursday, Dec. 3, before market open

The biggest retailer to report next week needs a big quarter. Big-time sales numbers from Walmart show consumer strength even at the lower end of the market. Dollar General at least must keep pace to avoid any worries about lost market share.

DG stock isn’t priced for those worries. A 21x trailing earnings multiple hardly seems onerous in the context of the tech names reporting next week, but by the standards of the sector, DG is somewhat expensive. And with investors pricing in significant e-commerce growth in coming years, any near-term disappointment could feed a negative long-term narrative.

Dollar General earnings are worth checking out from a broader perspective as well. There is not a company more in touch with the U.S. consumer than Walmart, but Dollar General is not far off. Management no doubt will have some color on how consumers are reacting to the end of federal stimulus payments and an uneven economic recovery. Even for investors with no position in DG stock, that commentary will be worth listening to.

DocuSign (DOCU)

Docusign (DOCU) logo on building
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Earnings Report Date: Thursday, Dec. 3, after market close

Outside of Zoom, there haven’t been too many companies that benefited from the pandemic more than DocuSign. The closures of offices worldwide suggest potentially exponential growth in e-signature demand. Investors certainly are pricing in that growth: DOCU stock has nearly tripled so far this year.

But basically all of that growth came in the first half of the year. Just like so many other growth stocks, DOCU has stalled out in recent months. Like Zoom, DocuSign has a real chance to jumpstart a rally with big earnings next week. Like Zoom, the company needs to confirm the long-term narrative that investors still are pricing in.

And, like Zoom, it remains unclear whether even a blowout quarter will be enough. The two stocks add to the broader test for the market next week. If both ZM and DOCU can’t find a rally next week, even with quieter performance of late, that might be a sign that the stalled-out tech sector isn’t going to restart until the next earnings season in early 2021.

Earnings Reports: Ulta Beauty (ULTA)

Orange Ulta Beauty (ULTA) logo on storefront
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Earnings Report Date: Thursday, Dec. 3, after market close

Investors have not been quite sure what to make of Ulta Beauty for some time. A monster multi-year rally finally ended in 2017 (with weak earnings a key reason why). ULTA stock wound up dropping by one-third in a matter of months. The rally resumed the next year, with the stock reaching a new high by mid-2019.

Earnings again undercut the stock, which lost about 30% of its value after the Q2 report in late August. One more rally followed, only for the pandemic to cut the stock price by more than half.

Yet now ULTA is moving nicely, touching an eight-month high on Monday. Earnings can keep the momentum going. A strong quarter on the back of a solid Q3 would confirm Ulta as not just surviving the pandemic, but thriving in it. Valuation is reasonable, and the nature of the retail business model promises impressive bottom-line growth as long as the top line is moving in the right direction.

Simply put, this looks like a big quarter for Ulta Beauty. Its results on Thursday afternoon could well set the mid-term direction of ULTA stock. History, however, doesn’t suggest that’s a good thing.

On the date of publication, Vince Martin did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

After spending time at a retail brokerage, Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets.

Article printed from InvestorPlace Media, https://investorplace.com/earnings-reports-to-watch-next-week/.

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