These reports, excerpted and edited by Barron’s, were issued recently by investment and research firms. The reports are a sampling of analysts’ thinking; they should not be considered the views or recommendations of Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.
Advanced Micro Devices AMD-Nasdaq
Buy (four stars out of five) • Price $64.52 on Dec. 23
by CFRA
Our Buy recommendation reflects our expectation for significant share gains on the central-processing-unit data-center side from the ramp-up of AMD’s next-generation EPYC processor, greater momentum for AMD’s graphics processing units, and our expectation for balance sheet improvement.
While many have been focused on the apparent explosion of COVID cases in China, and the lack of reliable data from China’s government, there are signs suggesting the U.S. situation is also getting worse even as case counts and deaths are falling.
At first look, initial fears of another COVID surge in the U.S. over the holidays may be overblown. About a week after the year-end holiday gatherings began, the seven-day average of new COVID cases fell to a more than three-week low of 58,354 on Thursday, down 9% from two weeks ago and down 17% from a recent peak of 70,508 on Christmas Eve, according to a New York Times tracker.
And the daily average for deaths fell has fallen to a three-week low of 355, and has dropped 5% in two weeks.
But as the NYT tracker has been warning, case and death counts could be “artificially low” this week, as officials who track those numbers take vacation for the Christmas and New Year’s holidays. Therefore, hospitalization data, which is typically not affected by holidays, should remain more reliable.
And by that measure, the numbers are getting worrisome.
The daily average of hospitalizations rose to 41,620 on Thursday, up 3% from two weeks ago but also the highest number seen since mid-August.
There are 29 states that have seen hospitalizations increase from two weeks ago, including 20 states that have seen double-digit percentage increases, led by South Carolina at 54%, West Virginia at 52% and Louisiana at 47%.
The number of severe COVID cases is also seeing a troubling rise, the daily average of COVID-related patients in intensive care units (ICUs) climbed to 5,080 on Thursday. That’s up 10% from two weeks ago, and the most seen since July 30.
The New York Times
Another sign that the fall in case counts is artificial is that the test positivity rate has been rising, to a four-month high above 14% on Thursday, with 41 states seeing double-digit positivity rates.
“Higher test positivity rates are a sign that many infections are not reported — even if they are tested at home. This results in a more severe undercount of cases,” the NYT tracker said.
Meanwhile in China, amid a “lack of adequate and transparent” data from China’s government, there is reason to believe the situation will still get a lot worse before it gets better.
U.K. health firm Airfinity estimates that new daily COVID cases in China is currently running at about 1.8 million, based on data from China’s regional provinces, and on new-case trajectories from areas that also lifted zero-COVID policies, such as Hong Kong.
That case number is expected to more than double, to about 3.7 million a day, in mid-January, Airfinity estimates, before another surge in March takes the number up to about 4.2 million per day.
As a result of the concerns over surging case counts, Spain joined the growing number of countries that are requiring COVID tests for air passengers arriving from China, as the Associated Press reported. This comes after the European Union said Thursday that it is “assessing” the situation in China.
The U.S. will also require those arriving from China to take a PCR test, starting Jan. 5, while Japan started requiring a test on Friday. Other countries requiring a test for air passengers from China include Italy, India and South Korea.
The BBC reported that the U.K. was set to announce that travelers will need to show a negative COVID test before they board a plane from China.
In other COVID news, China’s National Medical Products Administration has given emergency approval to Merck & Co. Inc.’s MRK, -0.33% COVID antiviral molnupiravir. That joins Pfizer Inc.’s PFE, -0.96%
Paxlovid, which has already been approved for use in China. Merck’s stock, which fell 0.4% in afternoon trading Friday, has soared 44.0% in 2022, while the Dow Jones Industrial Average DJIA, -0.88%
has lost 9.4%.
Novavax Inc. NVAX, +0.21%
said Friday that it has initiated a Phase 2 trial for its COVID-19-Influenza Combination (CIC) vaccine candidate in people aged 50 through 80. “We believe that like influenza, COVID-19 will also be seasonal moving forward, and that there is room in the market for new alternatives to provide better protection against the impact of influenza, particularly in older adults, and to explore the potential to combine this with protection from COVID,” said Chief Executive Stanley Erck. Novavax’s stock, which eased 0.3% Friday, has plunged 93.2% year to date while the S&P 500 index SPX, -1.03%
has dropped 20.1%.
Looking at the worst-performing sectors, you might wonder why the consumer discretionary and communication services sectors have fared worse than information-technology, the core tech sector. One reason is that S&P Dow Jones Indices can surprise investors with its sector choices. The consumer discretionary sector includes Tesla Inc. TSLA, +0.70%
and Amazon.com Inc. AMZN, -1.17%,
which has fallen nearly 50% this year. The communications sector includes Meta Platforms Inc. META, -1.21%,
along with Match Group Inc. MTCH, +0.50%,
which is down 69% for 2022, and Netflix Inc. NFLX, -0.44%,
which is down 52% this year.
There have been many reasons easy to cite for Big Tech’s decline, such as a questionable change in strategy for Facebook’s holding company, Meta, as CEO Mark Zuckerberg has put so much of the company’s resources into developing a new world that most people don’t wish to enter, at least yet. Meta’s shares were down 64% for 2022 through Dec. 29.
You might also blame the Twitter-related antics and sales of Tesla shares by CEO Elon Musk for the 65% decline in the electric-vehicle maker’s stock this year. But Tesla had a forward price-to-earnings ratio of 120.3 at the end of 2021, while the S&P 500 SPX, -0.72%
traded for 21.4 times its weighted forward earnings estimate, according to FactSet. Those P/E ratios have now declined to 21.7 and 16.4, respectively. So Tesla no longer appears to be a very expensive stock, especially for a company that increased its vehicle deliveries by 42% in the third quarter from a year earlier.
Click on the tickers for more information about the companies.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Another way of measuring the biggest stock-market losers of 2022
It is one thing to have a large decline based on the share price, but that doesn’t tell the entire story. How much of a decline have investors seen in the holdings of their shares during the year? The S&P 500’s total market capitalization declined to $31.66 trillion as of Dec. 28 (the most recent figure available) from $40.36 trillion at the end of 2021, according to FactSet.
Shareholders of these companies have suffered the largest declines in market cap during 2022.
China has turned a corner in its zero-Covid policy, lifting quarantines for foreign travelers from early next year, but that has come with cost as cases are surging and hospitals are packed.
The National Health Commission said over the weekend that it will drop the COVID-19 quarantine requirement for passengers arriving in China from abroad, starting Jan. 8. That was a major step in China’s lifting of the zero-COVID policy that have kept foreigners locked out, and its citizens locked in, for more than 2 1/2 years.
“It feels like China has turned the corner,” said Colm Rafferty, chairman of the American Chamber of Commerce in China, in a statement, as the Associated Press reported.
In other China COVID news, China Meheco Group Co., which distributes Pfizer Inc.’s PFE, -1.35%
Paxlovid COVID-19 vaccine in China, said over the weekend that Paxlovid can only be purchased at hospitals. That limits broader sales of the drug, including through e-commerce channels.
Back in the U.S., the latest data showed that the daily average of new cases and deaths have slipped during the Christmas holiday weekend, while hospitalizations have leveled off.
The seven-day average of new cases was 66,014 on Monday, according to a New York Times tracker. That’s down from 70,508 on Dec. 24, and down 1% from two weeks ago.
However, case counts could be artificially low during as officials who track the numbers take vacation for the Christmas and New Year’s holidays. Also, rising test positivity rates suggest many new COVID cases are not reported, as many who test at home don’t report results to health officials.
The daily-average test positivity rate climbed to a four-month high of 14% on Monday, up 14% from two weeks ago.
COVID-related hospitalizations dipped to 40,156 on Monday from 40,969 on Saturday, but had ticked up 3% from two weeks ago. Meanwhile, COVID patients in intensive care units (ICUs) increased to a 4 1/2-month high of 4,931 on Monday, up 11% from two weeks ago.
The daily average of deaths eased to 426 on Monday from 428 on Christmas Eve, and has declined 9% in two weeks.
The number of Americans who have been fully vaccinated was 229.99 million, or 69% of the total population, according to the latest data from the Centers for Disease Control and Prevention, while only 14.6% of Americans have received the updated (bivalent) booster dose.
Triangle Securities Wealth Management lifted its stake in Target Co. (NYSE:TGT – Get Rating) by 1.9% in the 3rd quarter, according to its most recent filing with the Securities and Exchange Commission (SEC). The institutional investor owned 7,069 shares of the retailer’s stock after purchasing an additional 134 shares during the period. Triangle Securities Wealth Management’s holdings in Target were worth $1,049,000 at the end of the most recent reporting period.
Several other institutional investors and hedge funds also recently bought and sold shares of the stock. Blume Capital Management Inc. purchased a new position in shares of Target during the 1st quarter valued at about $25,000. Operose Advisors LLC raised its stake in Target by 55.8% during the 1st quarter. Operose Advisors LLC now owns 187 shares of the retailer’s stock worth $40,000 after acquiring an additional 67 shares during the period. HHM Wealth Advisors LLC lifted its holdings in Target by 75.6% during the second quarter. HHM Wealth Advisors LLC now owns 209 shares of the retailer’s stock valued at $30,000 after purchasing an additional 90 shares in the last quarter. EverSource Wealth Advisors LLC boosted its position in shares of Target by 83.3% in the first quarter. EverSource Wealth Advisors LLC now owns 220 shares of the retailer’s stock worth $47,000 after purchasing an additional 100 shares during the period. Finally, EdgeRock Capital LLC bought a new stake in shares of Target during the 3rd quarter valued at $34,000. 78.86% of the stock is currently owned by hedge funds and other institutional investors.
Target Price Performance
Target stock opened at $143.15 on Monday. The company has a debt-to-equity ratio of 1.29, a current ratio of 0.86 and a quick ratio of 0.14. The stock has a market cap of $65.89 billion, a price-to-earnings ratio of 19.61, a price-to-earnings-growth ratio of 2.62 and a beta of 1.01. The firm has a 50-day moving average of $158.48 and a two-hundred day moving average of $157.27. Target Co. has a 1 year low of $137.16 and a 1 year high of $254.87.
Target (NYSE:TGT – Get Rating) last announced its quarterly earnings results on Wednesday, November 16th. The retailer reported $1.54 earnings per share (EPS) for the quarter, missing analysts’ consensus estimates of $2.15 by ($0.61). The firm had revenue of $26.12 billion during the quarter, compared to analysts’ expectations of $26.40 billion. Target had a net margin of 3.17% and a return on equity of 30.51%. The firm’s revenue for the quarter was up 3.3% on a year-over-year basis. During the same quarter in the previous year, the firm posted $3.03 EPS. On average, research analysts forecast that Target Co. will post 5.54 earnings per share for the current year.
Analysts Set New Price Targets
A number of brokerages have issued reports on TGT. Deutsche Bank Aktiengesellschaft lowered Target from a “buy” rating to a “hold” rating and cut their price target for the stock from $183.00 to $144.00 in a research note on Thursday, November 17th. StockNews.com assumed coverage on Target in a research note on Wednesday, October 12th. They set a “hold” rating on the stock. The Goldman Sachs Group cut their price objective on shares of Target from $205.00 to $175.00 and set a “buy” rating for the company in a report on Thursday, November 17th. BMO Capital Markets downgraded shares of Target from an “outperform” rating to a “market perform” rating and lowered their target price for the stock from $190.00 to $165.00 in a report on Thursday, November 17th. Finally, Gordon Haskett cut shares of Target from a “buy” rating to a “hold” rating and set a $132.00 target price for the company. in a research note on Wednesday, December 21st. Eleven equities research analysts have rated the stock with a hold rating, seventeen have assigned a buy rating and one has issued a strong buy rating to the stock. Based on data from MarketBeat, the stock presently has a consensus rating of “Moderate Buy” and a consensus price target of $182.64.
Target Corporation operates as a general merchandise retailer in the United States. The company offers food assortments, including perishables, dry grocery, dairy, and frozen items; apparel, accessories, home décor products, electronics, toys, seasonal offerings, food, and other merchandise; and beauty and household essentials.
See Also
Receive News & Ratings for Target Daily – Enter your email address below to receive a concise daily summary of the latest news and analysts’ ratings for Target and related companies with MarketBeat.com’s FREE daily email newsletter.
Restaurants are set to become the biggest winners of a holiday season that could turn out to be the most normalized since the onset of the pandemic.
That’s according to a new Mastercard SpendingPulse survey released on Monday, which showed spending at dining establishments surging 15.1% over the 2021 holiday period. Total retail expenditures for the Nov. 1–to–Dec. 24 period in 2022 rose 7.6%, with in-store spending up 6.8% and online spending up 10.6%.
Restaurant spending beat out several other categories, such as apparel, where spending was up 4.4% from 2021, and electronics and jewelry, where a respective 5.3% and 5.4% less were spent, and department stores, which saw spending rise 1%.
“This holiday retail season looked different than years past,” said Steve Sadove, senior adviser for Mastercard and former CEO and chairman of Saks Inc. “Retailers discounted heavily but consumers diversified their holiday spending to accommodate rising prices and an appetite for experiences and festive gatherings postpandemic.”
Government data for November showed consumer spending was up just 0.1%, reflecting cautiousness among households and price cutting by retailers to lure those hesitant shoppers in. But the data also showed more spending on holiday recreation and travel, expected to go in the books as a busy season even if deadly winter storm may have wreaked havoc on the plans of many Americans over the Christmas weekend.
Of course, even as some merrymakers felt confident enough to make more plans and see more friends and family this year, the virus of course continues to cause illness and death. The U.S. reported 70,000 newly diagnosed cases for the first time since September on Thursday, while 422 people died of COVID-19 on Wednesday.
The Mastercard SpendingPulse data measure in-store and online retail sales for all payment forms and are not inflation-adjusted.
As for the companies that might be benefiting from that increased traffic, the year-end cheer probably won’t be enough to make a dent in what has been a difficult year with would-be consumers juggling worries over inflation, rising interest rates and a war in Europe.
The Invesco Dynamic Leisure & Entertainment exchange-traded fund PEJ, +0.79%,
whose holdings include Chipotle Mexican Grill CMG, +0.32%,
McDonald’s MCD, +0.68%
and First Watch Restaurant Group FWRG, +0.42%,
has gained 6.5% to date in the fourth quarter and is down 20% for the year as of Thursday. The broad benchmark S&P 500 SPX, +0.59%
is poised for a nearly 20% loss in 2022.
Cheesecake Factory appears to be “running the same play,” wrote J.P. Morgan analyst John Ivankoe in a recent restaurant industry outlook. I don’t think he meant it as a compliment—the stock, he noted, trades where it did in 2004, adjusted for splits.
Why the long stall-out? My first thought was that maybe hitting the mall for a hypercaloric sit-down meal off a menu the size of a Gutenberg Bible has fallen out of favor over the years. But no: Sales have bounced back and then some from the Covid pandemic, with plenty of takeout business and dessert orders. The average
Cheesecake Factory
(ticker: CAKE) restaurant does more than $10 million in yearly sales, or twice as much as an Olive Garden.
COVID-19 cases are once again rising in the U.S., but how prepared are we for the next pandemic?
That’s a question worth asking. The $1.7 trillion omnibus spending bill presented by lawmakers on Tuesday includes a pandemic preparedness package, which has provisions that aim to build up the stockpile of drugs and medical supplies, strengthen how the U.S. can predict, model and forecast infectious disease threats, and test out a loan repayment plan for workers with expertise in infectious diseases and emergency preparedness.
The package does not include a task force that would investigate the origins of SARS-CoV-2 or the $9 billion that President Joe Biden requested to address the ongoing pandemic.
“We are not fixing the things that led to a bad response over COVID, and we’re facing a serious possibility that new variants of concern could arise in China,” Dr. Zeke Emanuel, vice provost of global initiatives at the University of Pennsylvania, told Axios.
COVID news to know:
Masks are coming back. Oakland is now requiring masks in government buildings, reports the San Francisco Chronicle, while New York City Mayor Eric Adams wore a mask on Tuesday during a press briefing telling New Yorkers to take precautions against circulating viruses. “The mayor is signaling to you that it is the socially conscious thing to do right now,” he said, according to the New York Times.
Germany sending COVID shots to China. Germany said Wednesday that it has shipped doses of the vaccine developed by BioNTech BNTX, +1.44%
and Pfizer PFE, +0.74%
to China, to be administered to Germans who live there, according to the Associated Press. The vaccine is not authorized for use in China.
At least 67,000 people in the U.S. are testing positive every day. That’s 24% higher than it was two weeks ago, according to a New York Times tracker. COVID hospitalization and deaths continue to increase, as well, with about 40,000 people in the hospital and 407 people dying every day. At the beginning of December, about 250 deaths were reported every day.
Few seniors in the U.S. are getting a booster. Nearly 95% of all Americans who are 65 years old and older got the primary series of COVID shots. But only 36% have opted to get the new bivalent boosters, which equally protect against the original strain of the virus and the BA.4/BA.5 subvariants. The rationale? They aren’t sure it works, can’t find it, or didn’t know it was available, according to the New York Times.
Nike Inc.’s stock spiked more than 13% in extended trading Tuesday after the sporting-goods retailer reported early holiday earnings and sales are tracking solidly higher than Wall Street expected, though inventories remain high and a forecast could still loom.
Nike NKE, +0.16%
reported fiscal second-quarter net earnings of $1.33 billion, or 85 cents a share, compared with net earnings of 83 cents a share in the year-ago quarter. Revenue was $13.32 billion, up 17% from $11.36 billion a year ago for the sneaker maker in the quarter, which ended Nov. 30.
Analysts surveyed by FactSet had expected on average net earnings of 64 cents a share on revenue of $12.58 billion.
Nike executives did not provide a third-quarter forecast in their announcement, though Chief Financial Officer Matthew Friend said in a conference call he expects annual revenue grow in the the “low teens.” In an earlier statement, Chief Executive John Donahoe said the results “give us confidence in delivering the year as our competitive advantages continue to fuel our momentum,” while Friend added, “We are on track to deliver on our operational and financial goals.”
In a conference call late Tuesday, Donahoe noted a rebound of business in China and improving inventory levels because of strong consumer demand.
Nike announced the results amid a daunting confluence of slackening consumer spending, foreign-exchange headwinds and an elevated promotional environment, Jefferies says in a research note. In September, Nike shares tumbled after executives said markdowns on the retailer’s products would squeeze margins, and they expected clothing competitors to keep slicing prices through at least the end of the year.
With consumers buying fewer clothes, Nike and other retailers have shouldered swelling inventories, though executives at Nike insist the level of excess goods likely peaked in North America this summer. In Tuesday’s report, Nike reported inventories of $9.3 billion, up 43% from the same quarter a year ago. Analysts on average were projecting inventories of $8.83 billion, according to FactSet.
“The market is focused on progress to resolution of FY23 inventory issues as a set up to a strong margin recovery” in fiscal 2024, Stifel analysts said in a note last week.
Shares of Nike have declined 38% this year, while the broader S&P 500 index SPX, +0.10%
is down 20%.
World soccer’s governing body FIFA rebuffed an offer from Ukrainian President Volodymyr Zelensky to share a message of world peace at the World Cup final, according to a CNN report.
Citing an unnamed source, CNN reported that Zelensky’s office offered an appearance via video link prior to kickoff at Sunday’s final. Defending World Cup champion France takes on Argentina in the match at Lusail Stadium, several miles north of the Qatari capital Doha.
The source told CNN that Zelensky’s office was surprised by the negative response. It’s unclear if the message was to be delivered live, or taped, the report said. “We thought FIFA wanted to use its platform for the greater good,” the source was quoted as having told CNN, reportedly adding that talks between Ukraine and FIFA are ongoing.
MarketWatch has reached out to FIFA and Zelensky’s office with requests for comment.
Since Russia launched its full-scale invasion of Ukraine on Feb. 24, Zelensky has used high-profile video addresses to rally international support for his embattled nation. These have included addresses to the U.N. General Assembly, the U.S. Congress, Britain’s House of Commons, the German Bundestag, the European Parliament and a G-20 summit, as well as video-link appearances at the Grammys and the Cannes Film Festival.
The last World Cup was held in Russia, with Russian President Vladimir Putin in attendance as France defeated Croatia 4-2 in the final. (FIFA, controversially, announced its host-country selections for 2018 and 2022 — Russia and Qatar — on the same December day in 2010.)
The 2022 tournament is perhaps the most controversial in World Cup history, with Qatar facing a barrage of criticism over its treatment of migrant workers and its approach to LGBTQ+ rights in the country.
The criticism of Qatar, the first Arab nation to host a World Cup, reached a crescendo before the tournament kicked off last month. During a press conference on the eve of the opening game, FIFA’s president, Gianni Infantino, launched into a lengthy defense of the decision to hold the tournamentin Qatar and accused the West of “hypocrisy.”
This World Cup is also the first to take place during the northern hemisphere’s winter. Traditionally, the tournament takes place in June and July, but this year’s tournament was moved to minimize the impact of Qatar’s searing heat.
Branding experts have observed that this controversial World Cup poses challenges for the big-name corporations involved in the event. FIFA’s list of partners includes U.S. corporate titans Coca-Cola Co. KO, -0.57%
and Visa Inc. V, -0.49%,
who are both involved in the Qatar event. McDonald’s Corp. MCD, -2.06%
and Crypto.com are also World Cup sponsors.
The tournament’s beer sponsor, Budweiser, an Anheuser-Busch InBev BUD, -0.18%
brand, has had a particularly eventful several weeks in Qatar. In an abrupt reversal just two days before the soccer showpiece kicked, Qatar organizers banned beer sales in the tournament’s eight stadiums.
The reversal of that decision appeared to take Budweiser by surprise, with the company tweeting “Well, this is awkward …” before deleting the post. Budweiser quickly shrugged off the beer ban and promised a huge victory party for the country that wins the soccer showpiece.
Fox Sports, which is owned by Fox Corp. FOX, -0.21%,
a sister company of MarketWatch publisher Dow Jones’s parent company, News Corp NWSA, +0.28%,
holds English-language broadcast rights in the U.S. to the Qatar World Cup.
Following a sharp and sustained rise in interest rates, U.S. stocks have taken a broad beating this year.
But 2023 may bring very different circumstances.
Below are lists of analysts’ favorite stocks among the benchmark S&P 500 SPX,
the S&P 400 Mid Cap Index MID
and the S&P Small Cap 600 Index SML
that are expected to rise the most over the next year. Those lists are followed by a summary of opinions of all 30 stocks in the Dow Jones Industrial Average DJIA.
Stocks rallied on Dec. 13 when the November CPI report showed a much slower inflation pace than economists had expected. Investors were also anticipating the Federal Open Market Committee’s next monetary policy announcement on Dec. 14. The consensus among economists polled by FactSet is for the Federal Reserve to raise the federal funds rate by 0.50% to a target range of 4.50% to 4.75%.
A 0.50% increase would be a slowdown from the four previous increases of 0.75%. The rate began 2022 in a range of zero to 0.25%, where it had sat since March 2020.
A pivot for the Fed Reserve and the possibility that the federal funds rate will reach its “terminal” rate (the highest for this cycle) in the near term could set the stage for a broad rally for stocks in 2023.
Wall Street’s large-cap favorites
Among the S&P 500, 92 stocks are rated “buy” or the equivalent by at least 75% of analysts working for brokerage firms. That number itself is interesting — at the end of 2021, 93 of the S&P 500 had this distinction. Meanwhile, the S&P 500 has declined 16% in 2022, with all sectors down except for energy, which has risen 53%, and the utilities sector, which his risen 1% (both excluding dividends).
Here are the 20 stocks in the S&P 500 with at least 75% “buy” or equivalent ratings that analysts expect to rise the most over the next year, based on consensus price targets:
Most of the companies on the S&P 500 list expected to soar in 2023 have seen large declines in 2022. But the company at the top of the list, EQT Corp. EQT,
is an exception. The stock has risen 69% in 2022 and is expected to add another 62% over the next 12 months. Analysts expect the company’s earnings per share to double during 2023 (in part from its expected acquisition of THQ), after nearly a four-fold EPS increase in 2022.
Shares of Amazon.com Inc. AMZN
are expected to soar 50% over the next year, following a decline of 46% so far in 2022. If the shares were to rise 50% from here to the price target of $136.02, they would still be 18% below their closing price of 166.72 at the end of 2021.
You can see the earnings estimates and more for any stock in this article by clicking on its ticker.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Mid-cap stocks expected to rise the most
The lists of favored stocks are limited to those covered by at least five analysts polled by FactSet.
Among components of the S&P 400 Mid Cap Index, there are 84 stocks with at least 75% “buy” ratings. Here at the 20 expected to rise the most over the next year:
Among companies in the S&P Small Cap 600 Index, 91 are rated “buy” or the equivalent by at least 75% of analysts. Here are the 20 with the highest 12-month upside potential indicated by consensus price targets:
A growing chorus of voices is questioning why there is no concerted effort to persuade Americans to wear face masks in public settings again as COVID cases, hospitalizations, fatalities and test-positivity rates rise across the nation.
The Centers for Disease Control and Prevention continues to encourage people to keep up with vaccines and boosters and to urge others to do so too. But for now, there is no push for face masks or social distancing, the public safety measures that helped contain the spread of the virus at the peak of the pandemic.
The daily average for new cases stood at 65,528 on Monday, according to a New York Times tracker, up 56% from two weeks ago. Cases are climbing in 47 states, led by Mississippi, where they are up 356% from two weeks ago.
The average for hospitalizations is up 24% to 38,331. Hospitalizations are climbing in 44 states, led by Vermont, where they are up 83% from two weeks ago.
The number of COVID deaths is up 48% to a daily average of 468, a disappointing reversal of the declining trend seen over the past several months. The test-positivity rate has climbed 25% to 12%.
New York City and New York state have emerged as hot spots, with an average of 6,405 new cases a day in the state in the last week, the tracker shows. Cases are up 74% from two weeks ago.
The omicron strains called BQ.1 and BQ.1.1 have become dominant in the Empire State, replacing BA.5. Both are sublineages of BA.5 but are more infectious than the original variant, meaning they can spread faster and more easily.
Meanwhile, other respiratory illnesses including flu, RSV and strep throat are also circulating, adding to the burden on healthcare systems.
Children are having an especially rough winter so far amid shortages of medicines to treat common childhood illnesses such as flu, ear infections and sore throats, CNN reported.
“Right now, we are having severe shortages of medications. There’s no Tamiflu for children. There’s barely any Tamiflu for adults. And this is brand-name and generic,” Renae Kraft, a relief pharmacist in Oklahoma City, told the network. Additionally, she said, “as far as antibiotics go, there’s not a whole lot.”
Physicians are reporting high numbers of respiratory illnesses like RSV and the flu earlier than the typical winter peak. WSJ’s Brianna Abbott explains what the early surge means for the winter months. Photo illustration: Kaitlyn Wang
Families have taken to social media to highlight their hunt for oseltamivir, the generic for Tamiflu, as well as for the antibiotics amoxicillin and augmentin, said CNN. And there is also a shortage of the inhaler albuterol, which helps open airways in the lungs, according to the American Society of Health-System Pharmacists.
• Some two years after they were first introduced, COVID vaccines have prevented more than 3 million additional deaths and about 18 million additional hospitalizations in the U.S., according to a new study from the Commonwealth Fund. More than 655 million doses of vaccine have been administered in the U.S., and 80% of the overall population has had at least one dose. “The swift development of the vaccine, emergency authorization to distribute widely, and rapid rollout have been instrumental in curbing hospitalization and death, while mitigating socioeconomic repercussions of the pandemic,” the authors wrote.
• Chinese universities say they will allow students to finish the semester from home in hopes of reducing the potential for a large COVID-19 outbreak during the January Lunar New Year travel period, the AP reported. It wasn’t clear how many schools were participating, but universities in Shanghai and nearby cities said students would be given the option of returning home early or staying on campus and undergoing testing every 48 hours. The Lunar New Year, which falls on Jan. 22, is traditionally China’s busiest travel season.
Some movie theaters in China reopened and COVID-testing booths were dismantled ahead of an announcement by authorities on Wednesday to scrap most testing and quarantine requirements. The changes come after nationwide protests against Beijing’s zero-COVID policy. Photo: Ng Han Guan/Associated Press
• The Nasdaq-listed 111 Inc. YI, +4.80%
has started retail sales of Pfizer’s PFE, +1.74%
oral COVID-19 treatment pill in China, according to the healthcare platform’s website, Dow Jones Newswires reported. The sales page for the Chinese platform on Tuesday showed it is now offering Paxlovid, the COVID medication that Beijing approved in February, for customers with positive results from polymerase chain reaction or antigen tests. Paxlovid has been used by medical practitioners to treat patients in China since March, when Shanghai was hit by a COVID outbreak, according to local media reports.
The U.S. leads the world with 99.5 million cases and 1,084,766 fatalities.
The Centers for Disease Control and Prevention’s tracker shows that 228.6 million people living in the U.S., equal to 68.9% of the total population, are fully vaccinated, meaning they have had their primary shots.
So far, just 42 million Americans have had the updated COVID booster that targets the original virus and the omicron variants, equal to 13.5% of the overall population.
Omicron subvariants continued to account for more new cases of COVID-19 in the U.S. in the latest week than did BA.5, according to the latest data from the Centers for Disease Control and Prevention.
BQ.1 and BQ.1.1, which are sublineages of BA.5, accounted for 67.9% of cases in the week through Dec. 10, while BA.5 accounted for 11.5%, the data show.
Last week, BQ.1.1 and BQ.1 accounted for 62.8% of all cases in the U.S., while BA.5 accounted for 13.8%.
In the New York region, which includes New Jersey, Puerto Rico and the U.S. Virgin Islands, the numbers were even higher, with BQ.1 and BQ.1.1 accounting for 73.3% of new cases, compared with 10% for BA.5.
In the previous week, BQ.1 and BQ.1.1 accounted for 72.4% of all cases, compared with 6.9% for BA.5.
New York City is again emerging as a hot spot for COVID, according to a New York Times tracker, which shows cases up about 60% in recent weeks and hospitalizations at their highest level since February.
The test-positivity rate in New York City stood at 13% on Thursday, the tracker shows.
Overall, known U.S. cases are up 53% from two weeks ago. The daily average for hospitalizations is up 30% at 37,066, while the daily average for deaths is up 35% to 460.
For now, the numbers remain far below the peaks seen last winter, when omicron first hit, but with flu and other respiratory infections currently sweeping the country and affecting young children, experts are warning people to take precautions.
• A rash of COVID-19 cases in schools and businesses was reported by social-media users Friday in areas across China. This comes after the ruling Communist Party loosened its antivirus rules as it tries to reverse a deepening economic slump, the Associated Press reported. Official data showed a fall in new cases, but after the government on Wednesday ended mandatory testing for many people, those data no longer cover large parts of the population. That was among the dramatic changes aimed at gradually emerging from the zero-COVID restrictions that have confined millions of people to their homes and sparked protests and demands for President Xi Jinping to resign.
• U.S.-listed shares of China Jo-Jo Drugstores Inc. CJJD, +51.20%
rallied on Friday as the stores filled with customers buying cold medicines after COVID restrictions were eased, MarketWatch’s Jaimy Lee reported. The stock was up 22%. The company, which is based in Hangzhou, China, operates drugstores and an online pharmacy in China. It is also a wholesale distributor of pharmacy products and grows and sells herbs used in traditional Chinese medicine.
Some movie theaters in China reopened and COVID-testing booths were dismantled ahead of an announcement by authorities on Wednesday that will scrap most testing and quarantine requirements. The changes come after nationwide protests against Beijing’s zero-COVID policy. Photo: Ng Han Guan/Associated Press
• Pfizer PFE, -0.12%
and German partner BioNTech BNTX, -0.88%
have received fast-track designation from the U.S. Food and Drug Administration for a single-dose mRNA-based vaccine candidate targeting both COVID and flu. The companies have already announced that they are in early-stage trials to review the safety and immunogenicity of their combined vaccine in healthy adults. The vaccine will target the BA.4 and BA.5 omicron sublineages, which have become dominant globally, as well as four different flu strains recommended for use in the Northern Hemisphere by the World Health Organization. If approved, the vaccine would be the first to target both COVID and flu.
• A bill to rescind the COVID vaccine mandate for members of the U.S. military and to provide nearly $858 billion for national defense was passed by the House on Thursday as lawmakers scratch one of the final items off their yearly to-do list, the AP reported. The bill provides about $45 billion more for defense programs than President Joe Biden requested, the second consecutive year Congress has significantly exceeded his request, as lawmakers seek to boost the nation’s military competitiveness with China and Russia. The bill is expected to easily pass the Senate and then be signed into law by Biden.
The U.S. leads the world with 99.4 million cases and 1,084,236 fatalities.
The Centers for Disease Control and Prevention’s tracker shows that 228.6 million people living in the U.S., equal to 68.9% of the total population, are fully vaccinated, meaning they have had their primary shots.
So far, just 42 million Americans have had the updated COVID booster that targets the original virus and the omicron variants, equal to 13.5% of the overall population.
The numbers: The University of Michigan’s gauge of consumer sentiment rose to a preliminary December reading of 59.1 from a November reading of 56.8.
Economists polled by the Wall Street Journal had expected a December reading of 56.5.
Inflation expectations over the next year fell to 4.6% from 4.9% last month. It is the lowest since September 2021. Five-year inflation expectations remained steady at 3%.
Key details: A gauge of consumer’s views of current conditions rose to 60.2 in December from 58.8 in November, while an indicator of expectations for the next six months rose to 58.4 from 55.6 last month.
Big picture: Economists think falling gasoline prices are behind the improvement in confidence.
The national average retail price for a gallon of gas is now $3.33, down $1.69 from June, according to White House data.
Still, high inflation has consumers remain in a relatively dour mood. The index is only marginally above the record low of 50 in June. By comparison, the consumer sentiment index was 101 in February of 2020.
Looking ahead: “High prices coupled with ongoing aggressive rate hikes will be a headwind for consumers and sentiment going forward,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
SPX, -0.73%
were higher on Friday on the back of hotter-than-expected wholesale inflation in November. The yield on the 10-year Treasury note TMUBMUSD10Y, 3.583%
rose to 3.54%.
Lululemon Athletica Inc. stock fell more than 10% in the extended session Thursday after the athleisure-wear maker reported mixed quarterly results and saw inventories soar.
Lululemon LULU, +0.59%
earned $735 million, or $2 a share, in the third quarter, compared with $541 million, or $1.44 a share, in the same quarter last year. Adjusted for one-time items, Lululemon LULU, +0.59%
earned $1.62 a share.
Revenue rose 28% to $1.9 billion, the company said. Same-store sales were up 22%.
Analysts polled by FactSet expected Lululemon to earn $1.97 a share on revenue of $1.81 billion. Same-store sales were expected to rise 19.1%.
“We are proud to have delivered another quarter of strong sales and earnings growth, despite an operating environment that remains dynamic,” Chief Financial Officer Meghan Frank said in a statement.
The retailer said inventories ended the quarter up 85% to $1.7 billion, compared with $900 million at the end of the third quarter of 2021.
“The company believes its inventories are well-positioned to support its expected revenue growth in the fourth quarter,” it said.
Lululemon guided for fourth-quarter revenue between $2.605 billion and $2.655 billion, and adjusted EPS between $4.20 and $4.30.
For the full year, the company expects revenue between $7.944 billion and $7.994 billion, and adjusted EPS between $9.87 and $9.97. FactSet consensus calls for EPS of $9.92 on sales of $7.935 billion.
Analysts were relatively upbeat about Lululemon heading into the results, saying the company was able to keep its prices higher, even as other retailers cut their prices.
Retailers have slashed prices on clothing in an effort to clear shelves and entice customers, following an inflation-induced shift in consumer spending to necessities. But Raymond James analysts, in a note this week, said they found that Lululemon “didn’t have broad-based promotions” in the third quarter, or the fourth quarter so far.
They said that the company leaned on its “We Made Too Much” section to iron out its inventories. And they noted a jump in downloads for Lululemon’s app. However, they said business in China “could be a curveball” amid that nation’s COVID-19 restrictions.
Piper Sandler analysts, in October, also said that Lululemon remained more insulated than other clothing retailers from big markdowns.
Lululemon stock is down 4% so far this year. The S&P 500 Index SPX, +0.75%,
by comparison, has slid 17% over that time.
Claudia Assis in San Francisco contributed to this report.
What worked well during the years-long bull market through 2021 — a focus on growth, regardless of price — has ground to a halt this year. The rebirth of the value style of investing — and modest valuations overall — has taken hold.
The approach taken by the Invesco S&P 500 GARP ETF has paid off through both bull and bear markets.
Let’s begin with a 10-year chart comparing total returns with dividends reinvested for the Invesco S&P 500 GARP ETF SPGP, +0.67%
and the SPDR S&P 500 ETF Trust SPY, +0.78%,
which tracks the benchmark S&P 500:
FactSet
So far this year, SPGP is down 12%, while SPY is down 16%. But the long-term chart shows significant and consistent outperformance for SPGP, even during the bull market.
The S&P 500 GARP Index
GARP stands for “growth at a reasonable price.” SPGP tracks the S&P 500 GARP Index, which is reconstituted and rebalanced twice a year, on the third Fridays of June and December. The next change occurs Dec. 16.
S&P Dow Jones Indices assigns a growth score to each component of the S&P 500 by averaging the three-year compound annual growth rate (CAGR) for earnings and sales per share.
The top 150 components of the S&P 500 by growth score are eligible for inclusion in the GARP index. Those 150 are ranked by “quality/value composite score,” which is the average of these three ratios:
Financial leverage — total debt to book value.
Return on equity — trailing 12 months’ earnings per share divided by book value per share.
Earnings-to-price — 12 months’ earnings per share divided by the share price.
The top 75 of the 150 by QV rankings are then included in the GARP index and weighted by the growth score, with portfolio weightings ranging from 0.5% to 5%.
There is a weighting limitation of 40% to any one of the 11 S&P sectors.
Addressing concentration risk
The benchmark S&P 500 Index SPX, +0.75%
is weighted by market capitalization, which means it is more heavily concentrated than you might expect — success is rewarded, with rising stocks more heavily weighted over time.
That can backfire during a bear market, with Amazon.com Inc. AMZN, +2.14%
down 47% and Tesla Inc. TSLA, -0.34%
down 51% this year, to name two prominent examples.
Looking at the SPDR S&P 500 ETF Trust SPY, +0.78%,
which is the first and largest exchange traded fund and tracks the benchmark index by holding all of its components, six companies (Apple Inc. AAPL, +1.21%,
Microsoft Corp. MSFT, +1.24%,
Amazon, both common share classes of Alphabet Inc. GOOGL, -1.30%
That percentage has come down this year, but a lot of risk remains concentrated in a handful of companies. (Apple alone makes up 6.4% of the SPY portfolio. Tesla is now the ninth-largest holding, making up 1.4% of the portfolio.)
One way to address high concentration in an index fund is to use an equal-weighted approach, which Mark Hulbert recently discussed.
For the Invesco S&P 500 GARP ETF, the underlying index’s selection methodology has resulted in much less portfolio concentration than we see in SPY, with the top five holdings making up 10.9% of the portfolio.
Monday served as another smackdown for investors who are banking on a Goldilocks economy and a less aggressive Fed.
Some are now not ruling out a Grinch-like turn from the central bank — a 0.75% hike next week instead of the 0.50% markets have been pinning hopes on — following strong data on services, jobs and wages.
It all goes along with the theme of 2022 — expect the unexpected. The relief of moving out of a crippling pandemic was quickly replaced by the biggest war on Europe’s shores in decades, that sparked worldwide inflation surges.
What comes next is anyone’s guess and that brings us to our call of the day via Saxo Bank’s annual “Outrageous Predictions” for 2023.
While some of these will sound crazy, note that the Saxo team, led by Chief Investment Officer Steen Jakobsen, have nailed a few wild prophecies in the past decade. Those include: a Brexit prediction in 2015, a 25% drop for the S&P 500 from its 2007 high in 2008, a tripling of Bitcoin’s value forecast in 2017.
The focus for 2023’s prediction is that “a return to the disinflationary prepandemic dynamic is impossible because we have entered into a global war economy, with every major power across the world now scrambling to shore up their national security on all fronts; whether in an actual military sense, or due to profound supply-chain, energy and even financial insecurities that have been laid bare by the pandemic experience and Russia’s invasion of Ukraine,” says Jakobsen.
As for those predictions, here we go:
Gold crosses $2,075 then rockets to $3,000 on unstoppable inflation. “Fed policy tightening and quantitative tightening drives a new snag in U.S. treasury markets that forces new sneaky ‘measures’ to contain Treasury market volatility that really amounts to new de facto quantitative easing,” says Saxo. And China’s end of zero-COVID drives up demand, commodity prices and inflation.
Widespread price controls to cap official inflation due to war economy mentality. “In 2023, expect broadening price and even wage controls, maybe even something like a new National Board for Prices and Incomes being established in the U.K. and the U.S.,” said Saxo. Market fallout? Fuel for gold’s GC00, +0.19%
climb.
There’s a new reserve asset in town. Non U.S.-allied countries move away from the U.S. and IMF to create an “international clearing union (ICU) and a new reserve asset, called the Bancor (currency code KEY)” that borrows from economist John Maynard Keynes idea of resisting U.S. power over the international monetary system. Nonaligned central banks slash U.S. dollar reserves, Treasury yields soar and the dollar DXY, +0.09%
drops 25% against a basket of currencies that trade with Bancor.
Japan pegs USDJPY to 200. Pressure intensifies on the already weak yen USDJPY, +0.04%
into 2023 as currency intervention fails and inflation soars. The government resets the financial system, erasing all debt, recapitalizing banks, as trillions of yen return to Japan shores. But the yen still weakens by year-end.
A $10 trillion-dollar Manhattan project. A team of major tech leaders form a mega research-and-development effort for energy infrastructure and ground-breaking technologies — the Third Stone. Companies tied to the project soar in an overall weak environment for investing.
Tax haven ban kills private equity. The OECD launches a full ban on the biggest tax havens in the world in 2023 and in the U.S., carried interest tax as capital gains is shifted to ordinary income. It’s a body blow for private equity and venture capital — the valuation of publicly listed private-equity firms fall 50%.
The rest of their predictions are here, such as the formation of an EU Armed Forces in 2023 and an “UnBrexit” referendum.
Powell Industries POWL, +19.11%
stock is up 9% after the electrical equipment maker’s well-received results and new orders. Within software Sumo Logic SUMO, +11.65%
and GitLab shares GTLB, +5.71%
are surging on upbeat results and forecasts.
Headed into the holidays, consumers are using savings and credit, says a team of Jefferies analysts led by Corey Tarlowe. “The savings rate continues to trend lower and credit card balances are growing +15% Y/Y. We believe these trends indicate that the consumer is stretched.”
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Stock futures traded lower Monday as investors remained keyed on interest rate policy from the Federal Reserve and as a surge in China stocks over a loosening of Covid-19 restrictions in the country failed to boost U.S. equities.
Here are some stocks that could make moves Monday:
