2 Stocks To Watch Next Week

Stock markets once again have come under pressure and sold off 1.22% on the S&P500 while the Nasdaq was a leading decliner down by nearly 3%.  Stocks are now adjusting to a cycle of high inflation, tapering of monetary policy and an interest rate curve that is moving forward rate increases.  While many market participants believe factors affecting these narratives are temporary or transitory, we believe they are here to stay for longer.  Stocks with high rates of growth need to meet or beat growth estimates to remain in uptrends.

With that in mind we highlight 2 stocks with near term news-flow and upcoming earnings reports;

Lululemon Athletica reports earnings on Thursday after the markets close.  The company has seen strong performance in both women’s and menswear.  In fact,  menswear revenues are now growing faster than the womenswear with a 2 year CAGR of 31%.  The company is growing its digital sales revenues by 60%+ year-over-year.  International sales growth of 43% year-over-year and N.A. sales growth of 30% in the same timeframe.  The company hopes to quadruple international sales growth over the next 2 years.  Our data checks show stores are full of consumers, with low promotional activity.  We expect the company to report another strong quarter with above estimated forward looking guidance.  We also believe the company’s recent launch of the virtual exercise device “Mirror” will add meaningful revenues in 2022.  Investors can add calls with 30 day or less expiry’s in the $480-500 strikes and hedge with weekly puts in the $400-410 range.    Consider actioning the strategy closer to Thursday to allow for any theta burn and potential for general market weakness.  Bias = Long.

Chewy Inc. reports earnings after the close on Thursday.  Last quarter the company reported heavy spending on SG&A, ad-marketing and labor as the company contused to invest in its stores reopening.  We did see the company grow its user base, but not enough to offset the spend to acquire.  As such we believe the company is going to miss various estimates which were set out earlier in 2021.  With a current market cap of $27 B this stock stands out to be re-rated lower by 25-50% if expectations are not met.  Investors can add $50-55 puts in expiry’s 30 days or less and hedge with NTM or ATM weekly calls.  Bias = Short.

2 Stocks To Watch Next Week