VIDEO: What We're Watching This Week and Price Targets We're Revisiting

In today’s Daily Rundown video, Chris Versace lays out the week’s events and shares what we’ll be watching in this latest wave of retailer earnings.

He also touches on what’s next for our price targets for Bank of America BAC and Morgan Stanley MS, and what could lead us to up our target for Qualcomm QCOM.

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Transcript

CHRIS VERSACE: Hey, folks. Chris Versace here Monday, May 20, start of the last full trading week for the month of May. And as I talked about in our opening comments to you, we do have a rather slow start to the week. No major economic data, very few earnings reports out today. Certainly nothing that's really going to move the market one way or the other.

But as I did share in those opening comments, we did have some news regarding Apple and OpenAI, something that just reinforces our view that Apple's upcoming WWDC event will be a big event for the company. We do think they're going to showcase their AI efforts. And I think this is going to lead people to rethink about Apple shares as the AI on device upgrade cycle begins.

You know, the middle of the week is going to be a little busier. We've got a couple of things going on. We've got the start of Microsoft's Builder Conference. And again, speaking to the AI on device, I think they're going to really emphasize what they're doing with AI, windows, and the PC market. I also think that we're going to have a big focus on Nvidia's earnings as well.

I shared my comments with you last week, but just quickly, I do see a very solid print for the earnings, but it's going to be the guidance that matters most. I think given the expectation, including the price target increases we talked about in this morning's news, the company is going to have to deliver a beat and raise quarter. The question is going to be, is the guidance good enough? Our plan, again, as I talked about with you last week, is that if we do see NVIDIA shares come back, trade-off in response, depending on where they are, it could give us a little bit of room to round out that position in that company. Something we'd like to do because we're in the early innings of AI adoption.

Now, we also have another wave of retailer earnings. And it's going to be busy. We're going to get a lot of data points about the consumer. We, of course, will be watching for those comments about where consumers are spending, are they trading down, that sort of thing. But we'll also want to be listening for inventory levels at these retail companies, what might it mean for promotional activity, and their margins. I think when we step back and we listen to the aggregated comments from the likes of Lowe's, Macy's, Target, TJX, VF Corp, BJ's, Ralph Lauren and Dollar Tree, I think we're going to have very confirming nuggets as it relates to the portfolio's positions, not only in Costco, but in Amazon as well.

In particular, though, I will say a couple of things. When we go through Target, we will be listening for that trade down to private label. Remember, it's not just Walmart that's a key customer for Treehouse Foods, which of course, we put in the bullpen recently, but also Target as well, BJ's potentially as well. So we'll be wanting to be listening for those comments in and around that. We also have another retail-facing company reporting-- Elf Beauty. And this is one that we're going to want to pay attention to as it relates to our Coty shares.

Remember, Elf has been a strong growth company in the beauty segment, particularly here in the US. And we kind of use it as a read-through for Coty's US business as well. But with Coty shares, they've been trading off, they're hovering just slightly below our average cost basis. And we have-- I should say we continue to be bullish on Coty shares, one, because they continue to take market share. Two, they're leaning into the higher margin prestige business. And the company is continuing to deliver the balance sheet, which should drop incremental EPS particularly in the second half of the year and beyond.

Remember, we are coming out of their seasonally slowest time of the year. The second half of the year is the busiest time of year for Coty. So we'll be taking our cues from what Elf has to say. And we do have potentially a little bit of room to round out our position in Coty shares. So that's going to be something we're watching midweek. Elf reports, I believe, on Wednesday. So we could have a little bit of action in Coty maybe exiting the week.

We also want to talk about two other things regarding the portfolio names as we think about today, but also the coming days this week. First, this morning, JP Morgan came out and raised its net interest income expectations for 2024. That's going to be the latest data point that has us revisiting our price targets not only for Bank of America, but Morgan Stanley. We also have another IPO that's going to price this week.

So we'll probably kind of wait a couple of days and digest all of that before we make that move. But just to be clear, odds are we'll be inching our price targets for both Bank of America and Morgan Stanley higher from where they currently are. Stay tuned for that. And the other one that we'll be watching this week is Qualcomm. I say this because we do have Microsoft's builder event, like I mentioned. But as I pointed out in this morning's notes, Qualcomm did talk quite a bit during its recent earnings call about its position with Snapdragon chipsets on forthcoming next generation AI windows in the PC market.

So when Microsoft kind of showcases what it will be doing on that front, we will be listening rather closely for partner announcements that potentially could include Qualcomm. That would be a reason for us to revisit that price target, especially after the shares have had a very strong run of late. But I do think that there's going to be more upside based on the news for these announcements, but also the overall AI on device upgrade cycle as we get more positive data points surrounding that.

Now, what this means is that we're going to have a quiet start to the week, a busy middle of the week, and then more likely than not, kind of a slow finish to the week on Friday. I say this because we do have the three day holiday weekend coming up. And typically trading volumes tend to thin out that Friday afternoon before the long weekend. But rest assured, we'll be working rather intently during the week. And that reminds me that we also have our office hours both Tuesday from 4:00 PM to 5:00 PM Eastern, and then Thursday from 12:00 PM to 1:00 PM Eastern as well.

As we go through all of this stuff, please remember to check your emails, check your alerts. We want to make sure you're getting our latest thoughts. And of course, any moves that we might happen to make with the portfolio. Thanks for watching.

At the time of publication, TheStreet Pro Portfolio was long BAC, COTY, NVDA, MS and QCOM.