Friday was an unfortunate day for the stock market, as the witching hour clipped a small portion of recent gains from each of the stock market indices: 1.6% from the Dow, 1.3% from the S&P 500 and 0.9% from the Nasdaq Composite.
Okay, so these indices relinquished their gains long before the witching hour. But witches were involved – at least in a sense – as Friday marked the quarter’s quadruple witching day.
Quadruple witching occurs once per quarter on the third Friday of March, June, September, and December. This is the day when single-stock options, single-stock futures, stock-index options, and stock futures expire at the same time, which can lead to increased market activity and short-term volatility.
Perhaps we should have marked Friday the quintuple witching this year, as the markets were still reeling from the Federal Reserve’s Wednesday announcement that it would act soon to curb rising inflation. Investors were most worried by the Fed’s intentions to raise interest rates in late 2023, after stating in March that it did not foresee raising interest rates until well beyond then.
Moreover, Friday’s quarterly quadruple witching served as prelude to the upcoming rebalancing of both the S&P 500 and FTSE Russell indices next week, which can further lead to significant moves in the markets as investors and funds alike adjust their portfolios to mimic these popular benchmarks.
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Microsoft Corporation (MSFT)
First up on this week’s trending stock list we have Microsoft Corporation, which ticked down 0.6% to $259.43 per share on the back of 37.2 million trades. The stock is up against the 22-day price average of $252.27 and 16.6% for the year. Currently, Microsoft is trading at 32.2x forward earnings.
Microsoft is trending as the company is set to showcase its new Windows operating system this coming week, most notably a refreshed design and user interface. This latest update is both long-overdue and a clear no-brainer in light of the current battle over work-from-home arrangements, as the company’s cloud computing and Suite software stand to benefit from more people working at home long-term. In fact, in the firm’s most recent quarterly results, commercial cloud revenue alone rose to $17.7 billion.
Over the course of the last year, Microsoft saw revenue growth of almost 12% to $143 billion, compared to just $110 billion raked in three years ago. In the same period, operating income jumped 21.3% to $53 billion, marking over 83% growth against its $35 billion revenue three years ago. And per-share earnings leaped 27.4% in the last year and over 244.5% in the last three, bringing total EPS from $2.13 to $5.76.
All told, Microsoft’s return on equity in the last year was 40% – and it’s still growing. The company is expected to pull in 8.6% revenue growth in the next twelve months. Currently, our AI rates Microsoft A in Low Volatility Momentum and Quality Value, B in Growth, and D in Technicals.
Moderna Inc (MRNA)
Next up on today’s trending list is Moderna, Inc.. The biotech company and manufacturer of the famed mRNA Covid-19 vaccine ticked down 1.6% Friday to $199.19 per share, closing out the day at 6.66 million trades against the 22-day price average of $209.44. Currently, Moderna is up 90.7% YTD and trading at 7.2x forward earnings.
Moderna is trending this week on the back of last week’s double-whammy. The first came Monday, when rival Novavax reported that its yet-to-be-approved vaccine showed over 90% efficacy against most Covid-19 variants. Covid-19 vaccine manufacturers dipped across the board at the prospect of another competitor on the world stage – though Novavax’s vaccine may ultimately see more use outside U.S. borders than within.
Moderna took a second blow Thursday after a report that the second dose of both the Pfizer and Moderna mRNA vaccines may lead to myocarditis and pericarditis (inflammation of and around the heart) in recipients between the ages of 16-24. That said, the conditions are rare, and the CDC noted that the benefits of vaccination outweigh the risks, as most individuals respond favorably to medicine and rest.
Still, Moderna may be able to take a little beating after the results of its last fiscal year, which saw revenue jumped 240% to $803.4 million compared to a paltry revenue of $135 million three years ago. In the same three-year period, operating income leaped from $413.3 million to over $763.1 million, though per-share earnings plunged well over half from $4.95 to $1.96. Still, return on equity saw slight growth from 35.7% to 40%.
Currently, Moderna, Inc. is expected to see 12-month revenue growth around 17%. However, our AI rates Moderna as an unfavorable stock prospect at this time, with a B in Quality Value, D’s in Technicals and Low Volatility Momentum, and an F in Growth.
The Boeing Company (BA)
The Boeing Company closed down 0.8% on Friday to $237.35, ending the day on volume of 11.96 million shares. The company is trending below the 10-day price average of $245.96 per share, though it remains up 10.9% YTD. Currently, Boeing is trading at a whopping 172.9x forward earnings.
Boeing has been trending for several weeks now as the company continues to receive bone after bone following two years of significant drawbacks – everything from crashed planes to canceled orders. Now, Boeing is navigating agreements to provide hundreds of aircraft to the lines of United Airlines, Southwest Airlines, Ryanair, and others.
Additionally, last week the U.S. and EU agreed to suspend tariffs for five years relating to Boeing and Airbus subsidies, with the U.K. seeking a similar arrangement in coming days. Under this agreement, both the Biden administration and European Union seek to undermine China’s practices in the aviation industry.
U.S. trade representative Katherine Tai noted during a media call that the “tariffs will remain suspended so long as EU support for Airbus is consistent with the terms of this agreement.” However, if EU support should “cross the red line” and make it difficult for U.S. producers to compete fairly, the U.S. retains the right to reactive suspended tariffs.
The results of such an agreement have yet to be seen, of course – but Boeing is likely hoping that suspended tariffs will lead to increased revenue, which the company sorely needs. Over the course of the last three fiscal years, the bottom has dropped out from under Boeing’s balance sheet, with revenues plummeting from $101 billion to $58 billion and operating profit plunging from $11.8 billion to $8.66 billion. But thanks to depressed shares, per-share earnings rose from $17.85 to $20.88.
Currently, Boeing is expected to see 12-month revenue growth around 8.2%. That said, our AI is pessimistic on Boeing’s return to the limelight, and has rated the aircraft manufacturer B in Technicals, C in Growth, and F in Low Volatility Momentum and Quality Value.
Netflix Inc (NFLX)
Netflix, Inc. closed up 0.5% Friday to $500.77 per share, trading on volume approaching 5.2 million. The stock is down 7.4% YTD, though it’s up against the 10-day price average of $493 and change. Currently, Netflix is trading at 48.4x forward earnings.
Netflix had a banner 2020 as work-from-home arrangements and soaring unemployment gave America the excuse it needed to finally binge Avatar: The Last Airbender. All told, the streaming media giant added 37 million new subscribers throughout 2020– which saw investors and critics worry about the company’s ability to bring in new revenue following such intense and unsustainable growth.
And those fears weren’t entirely unfounded, as the first quarter of the new year saw Netflix post a paltry four million new subscribers compared to six million expected, while the upcoming second quarter is projected to sign up a measly one million new binge-watchers.
However, the company may have had a make-or-breakthrough moment this year, as the company opened a new online store for Netflix Originals-branded merchandise. And while the company’s offerings are limited (and pricey) at the moment, Netflix promises that new shows, trinkets, and clothing will be added in the coming months.
In the last fiscal year, Netflix saw revenue growth of 5.6% to $25 billion, a 67% rise compared to $15.8 billion three years ago. In the same periods, operating income jumped 21.8% and 248%, respectively, from $1.6 billion to $4.585 billion. And per-share earnings skyrocketed 35.9% to $6.08 in the last year, a 208% change from $2.68 in the 36-month-ago period.
Currently, Netflix is expected to see revenue growth around 3.33% in the next 12 months. Our AI rates the streaming behemoth positively overall, with an A in Growth, B in Low Volatility Momentum and Quality Value, and D in Technicals.
Nike Inc (NKE)
Last on our weekly list of trending stocks we have Nike, Inc.. The famous athleticwear retailer slipped down 0.4% to $128.41 per share, trading 9.78 million shares on the day to down 9.2% YTD. Currently, Nike is trending at 36x forward earnings.
Nike is trending this week as investors look forward to the company’s next earnings report, which will be released on 24 June. The world’s largest athletic footwear and apparel retailer is expected to post overall growth for the quarter. That said, its Asia numbers are likely to trend lower thanks to ongoing negative social media sentiment in China after Nike spoke out against alleged forced labor practices months ago.
Over the last fiscal year, Nike has raked in revenue growth of 3% to $37.4 billion compared to $36.4 billion three years ago. Operating income grew 40.9% in the last year to $3.1 billion, though this is a substantial dip from the $4.4 billion operating profit seen three years before. That said, per-share earnings have grown 33.7% in the last year alone to $1.60 compared to $1.17 three years ago. Moreover, return on equity leaped significantly from 17.4% to 29.7%.
Currently, Nike’s forward 12-month revenue is expected to grow by 10.2%. However, our deep-learning algorithms are less optimistic on the company as a stock pick – due in part to the company’s elevated forward earnings estimate – and has rated the athleticwear giant C across the board in Technicals, Growth, Low Volatility Momentum, and Quality Value.
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