Wall Street recently saw a mix of closures with its primary indexes, marking the highlight of 2024. The Federal Reserve maintained its stance on three interest rate cuts by year-end, alongside the echoing optimism surrounding artificial intelligence.
The week brought a surge, with the benchmark scaling 2.3% – the most significant percentage gain since the prior December.
Simultaneously, the tech-heavy Nasdaq and the blue-chip S&P 500 ascended by 2.9% and 2%, respectively.
The next week will see a shortened schedule, as the markets will be closed for Good Friday. Investors are bracing for evaluating the durability of the AI-induced bull run on Wall Street and anticipating when the Fed will pull the interest rate trigger.
Crucial on the economic docket is Friday’s core personal consumption expenditures (PCE) price index, coupled with important fourth-quarter GDP data to be unveiled on Thursday.
Accompanying these releases will be a cohort of Fed speakers, with notable figures like Raphael Bostic, Christopher Waller, and Mary Daly slated to make appearances post the FOMC meeting.
Fed Chairman Jerome Powell will also partake in a moderated discussion at the Federal Reserve Bank of San Francisco Macroeconomics and Monetary Policy Conference.
The betting odds, according to Investing.com, speculate a 75% likelihood of the initial rate cut happening in June.
Interestingly, earnings announcements lined up for a select few, including Carnival, GameStop, and Walgreens Boots Alliance.
Irrespective of the market’s direction, here stands one anticipated stock and one possibly facing a downturn. My lens is focused squarely on the week ahead, from Monday, March 25, to Friday, March 29.
Optimistic Forecast: Carnival
Carnival (NYSE:) is poised for a stellar performance in the coming week as the cruise line operator’s earnings report shows potential to outstrip expectations. This optimistic outlook is fueled by promising consumer travel trends.
The Florida-based cruise giant is set to release its first-quarter update bright and early on Wednesday at 9:15 AM ET.
The options market hints at a substantial swing in CCL shares, with a projected implied movement of around 10% in either direction. Notably, the stock recorded a close to 5% surge post its last earnings unveil back in December.
The market outlook predicts Carnival posting a loss of $0.18 per share, a steep improvement from the $0.55 per share loss in the corresponding period last year, as the company rebounds from the Covid-19 impact.
Furthermore, Carnival’s revenue is anticipated to surge by 22.7% year-over-year to $5.44 billion, buoyed by increasing traveler footfall on its cruises amidst the uptick in tourism trends.
Despite a downward revision by five out of seven analysts surveyed by InvestingPro on their sales forecasts ahead of the report, projections remain higher than before.
With this, I foresee Carnival’s CEO, Josh Weinstein, painting a rosy future picture ahead, reflecting robust forward booking statistics and surging ticket requests as the crucial summer vacation season draws near.
Closing at $17.09 on Friday, Carnival marked its highest finish since January 19. At present valuations, Carnival boasts a market cap of $21.3 billion, securing its rank as the world’s second most valuable cruise operator, trailing Royal Caribbean Cruises (NYSE:).
Cruise industry stocks have soared given the pent-up demand for international travel delayed by the pandemic-related lockdowns.
Royal Caribbean stock surged by 124% over the past year, with Carnival and Norwegian Cruise Line (NYSE:) climbing by 90% and 66%, respectively, during the same period.
ProTips highlights several bullish indicators favoring Carnival, such as an optimistic profitability outlook and rising net income prospects.
Pessimistic Forecast: Walgreens Boots Alliance
On the contrary, I anticipate a bearish trajectory for Walgreens Boots Alliance (NASDAQ:) in the forthcoming week, with potential dips to new lows looming. The struggling pharmacy chain is expected to underwhelm investors with disappointing earnings and guidance.
Walgreens’ update on its fiscal second quarter is slated to drop before the U.S. market opens on Thursday at 7:00 AM ET, with results likely impacted by reduced foot traffic in its outlets as it loses market share to competitors.
Highlighting near-term hurdles faced by Walgreens in the current landscape, nine out of ten analysts surveyed by InvestingPro have slashed their profit projections in recent months, reflecting a roughly 33% dip from their initial estimations.
According to market indicators, traders foresee a swing of about 9% in either direction for WBA stock post the results. Notably, shares slid by 2.2% post the company’s fiscal Q1 report in January.
The Deerfield-based company is anticipated to earn $0.83 per share, marking a 28.5% decline from the $1.16 EPS recorded in the same period last year, amidst escalating cost pressures and dwindling operating margins.
Revenue, however, is expected to inch up by 2.6% year-over-year to $35.8 billion as it contends with subdued consumer spending, a drop in Covid-19 product sales, and a sluggish ramp-up of its new healthcare segment.
Considering these factors, there’s a growing risk that Walgreens might revise its full-year outlook downwards as it continues heavy investments in transitioning from a retail drugstore chain operator to a comprehensive healthcare provider.
Closing Friday’s session at $20.58, Walgreens sat in close proximity to a recent low of $19.68 – the weakest level since October 1998. At its current valuation, the pharmacy giant commands a market cap of $17.7 billion.
Having been edged out of the Dow Jones Industrial Average recently, Walgreens relinquished its position in the blue-chip index to Amazon (NASDAQ:). Notably, the company was the Dow’s most disappointing performer in 2023, plunging by 30%, with shares showing a further 21% decline in 2024.
Walgreens currently holds a bleak InvestingPro ‘Financial Health’ score of 1.7 out of 5.0, reflective of concerns over its substantial debt load and dim profit and sales growth projections.
Moreover, Walgreens faces significant balance sheet worries, having halved its dividend payout in January while burning through capital at an alarming rate. Previously, the company had upped its dividend payouts for 47 consecutive years.
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