Weekly Market Review: Dramatic Rebound Ahead of Earnings Rush

After sharp declines on Monday and Tuesday, U.S. stocks rallied to end the week with just modest losses. Investors went bargain-hunting as President Trump approved another $484 billion of stimulus relief on Friday targeted at small-business owners.

The S&P 500 fell 1.3% for the week, Real Estate and Utility names led the way lower. Energy stocks were the best performing sector, even though the price of U.S. based crude oil closed Monday at negative $37 a barrel.

Coronavirus Update

The main driver of volatility these days remains fear of the global spread of the coronavirus. At this point, there have been about 2.8 million global cases, with over 197,000 deaths reported. That figure includes around 924,000 cases in the U.S., where more than 52,000 have died.

Some U.S. states, led by Georgia, began cautiously opening back up for business this week. Meanwhile, there was negative press regarding the safety and efficacy of two potential coronavirus treatments, chloroquine and Gilead’s (GILD) remdesivir.

Earnings Outlook

Refinitiv has tallied that aggregate S&P 500 profits are on track to fall more than 15% in the first quarter. 65% of the 122 companies in the index that have posted results so far have exceeded expectations, which is in-line with the historical average.

Those numbers could change next week, with 169 S&P 500 members scheduled to post quarterly results. Some of the highlights include:

Tuesday – Alphabet (GOOGL), Merck (MRK), Pepsi (PEP), Pfizer (PFE) and Starbucks (SBUX)

Wednesday – Boeing (BA), eBay (EBAY), Facebook (FB) and Microsoft (MSFT)

Thursday – Amazon (AMZN) and McDonald’s (MCD)

Friday – Chevron (CVX) and Exxon Mobil (XOM)

On the economic front, next week’s big number will be the preliminary reading of first-quarter GDP, due out Wednesday morning. The consensus estimate is for a 4.3% decline; but there could be a lot of variance in that reading, similar to the recent employment data.

We know that deciding what and when to buy can be challenging for any investor. This is especially true when uncertainty is high and sentiment can quickly shift from Bull to Bear.

However, the fact remains that attractive investments are out there, if you’re willing to dig a little deeper.

One such Healthcare name is worth a closer look and is our Stock of the Week.

Stock of the Week: Halozyme (HALO)

The company provides drug-delivery technology and is on the verge of turning profitable for the first time.

The stock gained 23% this week and we believe this momentum can continue throughout 2020. Here’s why:

Halozyme’s newfound profits are a result of a recent pivot in its business model. Last November, the company moved away from developing cancer treatments in-house, to focus on its drug-delivery system, Enhanze.

The business generates mid-single digit royalties from a handful of products already sold by partners, with more than a dozen others in clinical trials. Management believes this can grow to a $1 billion operation over the next seven years.

Halozyme’s new business model is expected to lead to its first ever annual profit of $0.63 a share this year, rising to $1.43 in 2021.

History has shown that buying a company on the verge of sustainable profitability can prove to be a lucrative investment. This could be especially true for Halozyme, which is currently valued at just 15.5x expected forward profits.

Insiders agree the stock has more upside potential. Back in March, a member of the Board of Directors bought about $750,000 worth of the company, on the open market. In addition, management has pledged to repurchase about $150 million of shares in 2020.

It’s also worth noting that HALO carries a Smart Score of 10/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.

On top of the positive aspects mentioned already, the Smart Score indicates that the company has seen improving sentiment from analysts, hedge funds and financial bloggers.

FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.

You may also want to learn more about how we use TipRanks indicators to find stocks that are primed to outperform. Discover the Smart Investor portfolio here >>

Wishing you a world of investment success!

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