Though the final weeks of August are usually a quiet time for markets, this year there's no respite for investors—volatility is back and the future looks uncertain. Both the S&P and the Dow Jones Industrial Average tumbled on Friday after an unexpected escalation in the U.S.-China trade war.
With a new round of tariffs from both China and the U.S. announced on Friday, the probability of this trade war becoming yet more ugly has increased, and so does the possibility of the U.S. economy falling into recession. These fears will likely keep stocks under pressure as investors avoid taking new positions while shunning riskier assets.
Even with the worsening economic backdrop, there will still be some new information to digest from a number of important companies, each scheduled to report quarterly earnings. Here are three stocks we're keeping in focus:
Dell (NYSE:DELL) will release its fiscal 2020 second quarter results on Thursday, Aug. 29, after the market close. Analyst consensus expects earnings per share of $1.49 earnings on sales of $23.32 billion.
During its forecast for fiscal 2020, Dell had warned that sales growth will slow over the next year, hurt by the global economic issues that may weaken corporate demand for the company’s hardware products. Last year, Dell consistently generated strong hardware sales, as the company prepared to transition back to the public markets after five years of restructuring aimed at cutting back debt and simplifying a tangled corporate structure.
Investors liked the restructured Dell, sending its shares higher by 50% until late May this year. But its shares have been on a downward spiral since then, as the company reported sales for Q1 that fell short of Wall Street estimates, with weaker demand for its servers. The stock closed about 7% down on Friday at $45.81.
Perhaps adding to the company's woes, Dell’s business in China generates a high single-digit percentage of the company’s total revenue. Some customers in the country were delaying orders because of the U.S.-China trade war, according to Dell’s chief financial officer Tom Sweet.
Best Buy Co Inc (NYSE:BBY) is another high profile name that will come under investor scrutiny this coming week. The big box electronics and technology retailer reports Q2 earnings on Thursday, Aug. 29 before the market opens.
The stock has rallied strongly this year, surging more than 25%, as Best Buy benefits from its expanding services business and its increasing assortment of smart-home devices, such as door locks and cameras, along with appliances, video games and wearable devices. Shares closed at $66.21 on Friday.
That growth momentum may come under pressure, however, with Apple (NASDAQ:AAPL), the company’s largest supplier, predicting a slowdown in sales this year and the U.S.- China tariff tit-for-tat escalating yet again, pushing the cost of electronic products higher. Best Buy relies heavily on China to source its large inventory of products. That could mean more pressure on retailers earnings and shares.
For the second quarter of 2019, the company is likely to report EPS of $0.99, up from $0.91 a year ago. Revenue is likely to rise $9.79 billion according to analyst estimates.
Tesla Inc (NASDAQ:TSLA) continues to keep investors on edge as a flurry of bad news hit the stock last week. Shares plunged 5% on Friday, falling to $211.40, adding to the 19% plunge during the past one month alone.
On Friday, Amazon.com Inc (NASDAQ:AMZN) said a June 2018 blaze on the roof of one of its warehouses in Redlands, California, involved a solar panel system that Tesla’s SolarCity division had installed. News of the Amazon fire comes just three days after Walmart (NYSE:WMT) filed a lawsuit against Tesla (NASDAQ:TSLA), accusing it of faulty panel installations that led to fires at more than a half-dozen stores.
These claims put further pressure on Elon Musk who’s facing increasing criticism over his decisions and the bad financial situation at Tesla’s electric car division. In the second quarter, Tesla (NASDAQ:TSLA) lost $1.12 a share, a bigger deficit than any analyst had projected.
The earnings miss and departures of top executives in recent months are making investors nervous about Musk’s ability to turn this company profitable.
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