Two Names I'm Watching this Holiday Week
It’s Thanksgiving week.
And across the country Americans are piling into cars, being herded onto planes, and corralled onto trains.
Off to grandma’s house… Cousin Ed’s… or the balmy Bahamas they go.
For the markets, this large-scale exodus to spend time with family and friends means the flow of trading slows. The Wednesday before Thanksgiving typically sees only 80% of normal trading volume. Thursday – Thanksgiving, for those that need a reminder – markets are closed. And Friday, volume is only 45% of normal, in part due to the fact U.S. exchanges shutter their doors at 1 PM EST.
But despite the holiday-shortened week, there are names that I’m watching. And I think investors should keep an eye on too…
A History to Face Rippers
On Friday, we have one of the – if not the – most important shopping days of the year: Black Friday.
In 2023, Black Friday sales totaled $9.5 billion in the U.S., as well as $70.9 billion globally. And of that, $16.4 billion was online.
But remember, Black Friday is merely the beginning of the annual holiday shopping tsunami.
The Monday after Thanksgiving is known as Cyber Monday… the online version of Black Friday. And Cyber Monday is the start of what we call Cyber Week.
In 2023, Americans spent $12.4 billion on Cyber Monday.
And Salesforce (CRM) estimated that $298 billion was spent online globally during Cyber Week last year. Plus, as a nod to our robot overlords, it’s worth mentioning that of that total, artificial intelligence influenced $51 billion in sales.
For 2024, the National Retail Federation forecasts U.S. holiday sales will be between $979.5 billion and $989 billion.
So, this week is the start to a pivotal stretch for retailers.
And in a slow week, we have apparel company, Abercrombie & Fitch (ANF) reporting third quarter tomorrow morning before the opening bell.
Expectations are for an 11.6% increase in revenue to $1.18 billion. Meanwhile, earnings are projected to increase to $2.48 per share from $1.83 a year ago.
And then looking ahead, analysts are expecting fourth quarter revenue of $1.52 billion with earnings of $3.44 per share.
Shares of Abercrombie have been volatile over the past couple of months. The culprit isn’t the business though, but the alleged criminal activity of former CEO Michael Jefferies. Jefferies - who left the company in 2015 - along with two others has been charged with sex trafficking and interstate prostitution.
Those are headlines no company wants… even though the person being charged hasn’t been at the helm for a decade.
But here’s the deal… Since 2015, this third quarter release has been Abercrombie’s best received of the year.
This report is notorious for very large moves. In fact, we’ve seen four one-day moves greater than 20% since 2015. And six of the last nine moves have been double digits, both gains and losses.
The average one-day move for shares on this report over that span is 7.33%.
The options market is currently forecasting a move of +/-13%. That would take shares to over $176 or a drop to $136.
On Friday, The Gap (GAP) soared 12.8% on a third quarter beat and a raise of full-year guidance.
Abercrombie has a history of face rippers on this report. Shares are well below their 52-week high of $196.99 set back in May, following first quarter earnings. So, this is a name that could be in store to make a significant move tomorrow at the opening bell.
AI’s Overlooked Hero
There’s one semiconductor name I feel doesn’t get enough attention.
It’s enjoying the windfall from the artificial intelligence (AI) boom… and more than that, it’s in the perfect position to gain market share as one of the industry’s shooting stars comes crashing down to earth.
Now, Super Micro Computers (SMCI) troubles have been well documented. But what isn’t talked about enough is that as customers abandon SMCI’s struggling ship, they’re turning to one name to pick up the workload: Dell Technologies (DELL).
The company develops, manufactures, markets and sells a variety of technological products across the globe. It operates in two segments. The first is Infrastructure Solutions Group (ISG), which provides various server services, including AI-optimized servers. The second is Client Services Group (CSG), which sells desktops, workstations, laptops, computer peripherals and audio devices.
Well, Dell reports third quarter earnings after the closing bell tomorrow.
Wall Street is looking for revenue to jump 11% to $24.71 billion with earnings rising to $2.05 per share. Looking ahead, analysts want to see fourth quarter revenue of $25.53 billion with earnings of $2.66 per share.
Now, since the company began trading again in 2016, the reaction to third quarter results have been a mixed bag…
We see four years and four years of gains. And our average one-day move – because these positives and negatives cancel each other out – is a gain of 0.12%.
For a name worth watching, that may appear underwhelming.
But what we’re looking for this year is Dell to capture some of the business lost from Super Micro Computer’s woes. There was actually a report last week that Elon Musk’s xAI has shifted $6 billion worth of server orders from Super Micro to Dell.
So, if management happens to provide commentary that alludes to that would be huge.
The options market is currently forecasting a move of +/-8.4% on earnings. That would represent a move higher to above $157 or a drop to $133.20.
Before the festivities and feast begin on Thursday, I think those two companies are worth being on your radar.
Abercrombie has a history of third quarter leaps… just in time for those Black Friday sales. And Dell is mopping up the spillover from Super Micro’s mess.
Keeping one eye on the turkey, the other on earnings,
Matthew