1 share to buy, 1 to empty when markets open: GameStop, Lululemon
Wall Street stocks closed sharply higher on Friday, ending their longest streak of weekly losses in decades, as signs of a peak and waning concerns about sharp interest rate increases by the Federal Reserve put investors in a buying mood.
The benchmark index rose 6.5%, its best week since November 2020. The benchmark index rose 6.2%, while the technology-heavy index was the best performer, up 6.8%.
The big event for markets in the shortened week of the holiday will be Friday’s US report, which is expected to show solid job gains, but a slowdown from strong growth in April.
US stock markets will be closed on Monday in observance of Memorial Day.
The next four-day trading week will feature a handful of companies including Salesforce (NYSE:), Chewy (NYSE:), Crowdstrike Holdings (NASDAQ:), and HP (NYSE:), as in the first quarter reporting season of general. injury.
Regardless of which direction the market is headed, below we highlight a stock that is likely to be in demand and another that could fall further.
Remember though, we have the time frame Just for the next week.
Stocks to buy: GameStop
GameStop (NYSE:) shares – which are having their best week in two months – may see more buying activity in the coming days as one of the largest US video game retailers prepares to release its latest financial results after the market closes on Wednesday, June 1.
Consensus estimates have the Texas-based Grapevine reporting a loss of $1.22 per share, compared to a loss per share of $0.45 in the same period last year, mostly due to higher costs related to the transformation efforts as well as ongoing supply chain issues.
Led by Chewy co-founder Ryan Cohen, GameStop is ramping up spending to prepare itself for the digital age by steering its sluggish business toward e-commerce.
This includes launching a redesigned app, attracting new members to its bounty program, as well as hiring executives with experience in e-commerce, operations, and blockchain gaming.
Revenue is expected to rise about 3% to $1.316 billion, according to InvestingPro+.
Source: InvestingPro +
In addition to the bottom line numbers, investors will be keen to hear comment from GameStop executives regarding the company’s transformation and new products it plans to introduce to enhance its digital presence.
The company launched its marketplace for non-fungible tokens (NFTs) last week as well as a digital wallet to accompany its NFT trading platform as a way to bypass its legacy video game business.
Based on moves in the options market, traders are pricing in a large post-earnings swing for GME shares after the report, with a potential implied movement of about 20% in either direction.
Shares of GME, which was at the center of the epic trading frenzy in 2021, ended Friday’s session at $137.21. At current levels, the market capitalization of video game stores is $10.4 billion.
Shares of the popular Mimi are up nearly 77% since dropping to a 52-week low of $77.58 on March 14. Despite the recent bounce, GME is still down 7.5% year-to-date, almost 72% below its record peak of $483.00 in late January 2021.
Stock to unload: Lululemon Athletica
Lululemon Athletica (NASDAQ 🙂 stock, which fell to its lowest level since May 2020 last week, is expected to face a challenging week as investors brace for disappointing earnings and sales growth when the leisure apparel retailer reports first-quarter earnings on Thursday, 2 June after the closing bell.
According to InvestingPro+, the consensus calls for first-quarter earnings per share of $1.43, which translates to a 23.2% improvement in earnings per share of $1.16 in the year-ago period, but slows from 30.6% earnings growth. in the previous quarter.
Sales for the period are expected to rise nearly 25% year-over-year to $1.546 billion, down from 23% growth in the previous quarter.
Source: InvestingPro +
Perhaps crucially, Lululemon’s outlook for the rest of the year is in focus as the sportswear company deals with macroeconomic headwinds, such as supply constraints, rising inflationary pressures, and rising fuel and freight costs.
Executives’ comments on consumer health will also be scrutinized in the US as shoppers spend less on discretionary items, such as yoga equipment and sportswear, amid rising gas and food prices.
Option traders are pricing in a big move for LULU shares after the results, with an implied 9.4% probability of a move in either direction.
Lululemon dropped to a two-year low of $251.51 on May 25, before rebounding moderately to close at $293.65 by the end of trading on Friday. According to current valuations, the Canadian sports apparel maker’s market capitalization is approximately $37.6 billion.
Year-to-date, LULU shares are down 25%, underperforming the broader market over the same time frame. It is currently about 40% below its all-time high of $485.83 that it touched in November 2021.
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