7 Earnings Reports to Watch Next Week
Editor’s note: InvestorPlace’s Earnings Reports to Watch is updated weekly. Please check back next week for our latest earnings picks.
Earnings season comes to an end next week — and the earnings calendar just got a bit more interesting. A market-wide selloff on Thursday was concentrated in a tech sector that has a number of intriguing reports looming.
To be sure, earnings next week aren’t going to assuage current fears — or exacerbate them. As was the case this week, there aren’t enough major companies reporting to truly move the market. But there are enough high-growth tech names reporting to provide another test for the market.
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That was the case this week as well. And when Zoom Video Communications (NASDAQ:ZM) soared 41% on another blowout earnings report, it brought other high-growth, high-value names for the ride.
But the gains started reversing on Wednesday, and accelerated to the downside on Thursday. At least for the moment, it looks like long-held worries about valuation finally are impacting investor sentiment.
We’ll see if that holds next week, as more growth names report. Meanwhile, there are a few key reports to watch outside of tech as well, which could highlight consumer sentiment — another potential pain point for the market.
In other words, earnings next week suddenly loom large in a market that looks shakier than it has in a while. For investors trying to make sense of Thursday’s sell-off, these are the seven key earnings reports to watch:
Coupa Software (NASDAQ:COUP)
Slack Technologies (NYSE:WORK)
Lululemon Athletica (NASDAQ:LULU)
American Eagle Outfitters (NYSE:AEO)
Chewy (NYSE:CHWY)
Peloton Interactive (NASDAQ:PTON)
Kroger (NYSE:KR)
Earnings Reports to Watch: Coupa Software (COUP)
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Earnings Report Date: Tuesday, Sept. 8, after market close
Cloud-based software plays have been the market’s biggest winners in the past few years — and among the biggest losers in Thursday’s selloff. COUP stock is no exception. Even with a 6% decline on Thursday, it has rallied a whopping 887% since the beginning of 2018.
Thursday’s sell-off hardly makes the stock cheap. Based even on next year’s consensus estimates, COUP trades at 500x earnings and more than 30x revenue. Coupa’s business spend management platform underpins a wonderful business, but valuation remains a question mark.
Of course, that push-and-pull between the business and the stock has highlighted the debate across tech in recent years. On Thursday, bears scored their first victory in some time. When Coupa kicks off the major earnings reports next week, it will highlight how deep-seated those valuation concerns are at the moment.
Slack Technologies (WORK)
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Earnings Report Date: Tuesday, Sept. 8, after market close
From a broad standpoint, WORK stock doesn’t look much different from COUP or other high-growth names. It trades at about 15x forward revenue, with profitability not expected until 2022.
But WORK actually is a different story — because it has missed out on the tech rally. Shares trade almost 20% below where they opened when the company executed a direct listing in June of last year. WORK has gained 38% so far this year, but after a fade yesterday the stock is nearly flat relative to February highs.
As far as the market goes, then, WORK does provide a test — but a different one. If it sells off after a strong report, then growth stocks may well be in trouble. This, after all, is one of the “cheaper” names in the software space, at least relative to growth and revenue-based valuation. If investors aren’t buying a strong report from Slack, they’re unlikely to pay up for similar growth elsewhere.
And for Slack itself, the quarter looks huge. The company should be a “work from home” winner, but hasn’t been treated as such yet. A blowout quarter could change that — and spark a rally that leads WORK to catch up to other more dearly-valued high-growth names.
Lululemon Athletica (LULU)
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Earnings Report Date: Tuesday, Sept. 8, after market close
The growth stock parade on Tuesday continues with Lululemon Athletica — which presents yet another test for the market.
After all, many tech stocks are benefiting from the pandemic, with Zoom the best example. Lululemon, however, is not. Its stores were closed. Analysts actually expect sales to decline year-over-year, though lesser retailers like Buckle (NYSE:BKE) and Vera Bradley (NASDAQ:VRA) have posted sharp surprises to the upside.
There’s no argument that Lululemon is among the best stories in retail, and maybe the best story. But LULU has surged from its March lows. And it’s far from guaranteed that the current crisis provides a long-term benefit (though “athleisure” demand could rise in a “work from home” environment). Has the rally run too far? And even if it hasn’t, are suddenly nervous investors willing to stay patient?
American Eagle Outfitters (AEO)
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Earnings Report Date: Wednesday, Sept. 9, before market open
Again, we’ve seen even mall-heavy retailers post better-than-expected numbers in recent weeks. And there have been signs of life in the sector, with AEO itself climbing into earnings before a pullback on Thursday.
American Eagle has a chance to keep that optimism going on Wednesday morning. This is one of the group’s best operators, and its Aerie unit was posting enormously impressive growth before the pandemic.
More broadly, there’s a case that specialty retailers may wind up learning a valuable lesson from this crisis: that stores aren’t as valuable as they believed, and that e-commerce growth can contribute materially to overall profitability. If that thesis has any validity, American Eagle — and Aerie in particular — need to top expectations.
If they do, AEO stock has room to continue a recent rally. But such a beat would be bad news for mall operators like Simon Property Group (NYSE:SPG) and Macerich (NYSE:MAC), both of which have all the bad news they can handle.
Chewy (CHWY)
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Earnings Report Date: Thursday, Sept. 10, after market close
I’ve recommended Chewy since not long after its IPO last year, and owned the stock until recently. But above $55, the valuation looked potentially stretched even to this bull.
As has been the case with so many growth stocks, however, CHWY powered through those worries. It cleared $70 on Wednesday — and promptly declined nearly 12% on Thursday. It was one of a number of online retailers to outpace even the NASDAQ Composite’s 5% decline. Wayfair (NYSE:W) and Overstock.com (NASDAQ:OSTK) did the same — and both of those stocks already were heading in the wrong direction.
The fades add import to Chewy’s fiscal second-quarter release on Thursday afternoon. Investors have been pricing in a steady shift to online shopping for Chewy and its peers — but they may have done a little too much pricing in. It could take a blowout quarter from Chewy to re-inspire optimism and keep a modest reversal from turning into a full-blown slide.
Peloton Interactive (PTON)
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Earnings Report Date: Thursday, Sept. 10, after market close
Peloton wraps up tech earnings with much the same story as other companies reporting earnings next week. The stock has soared on hopes that the pandemic will drive demand. PTON stock has gained a stunning 190% in 2020 — and that includes a nearly 10% sell-off on Thursday (which came after the stock, like CHWY, hit an all-time high on Wednesday).
It seems likely that Peloton’s earnings will beat, and perhaps crush, Street estimates. That’s been the case for most pandemic winners (with Zoom, again, the best example).
But the question will be how investors react. Does PTON become another victim of a “sell the news” event — or the final sign that this Thursday’s sell-off was just a quickly-forgotten blip?
Kroger (KR)
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Earnings Report Date: Friday, Sept. 11, before market open
The earnings calendar closes with a very different report, as Kroger reports fiscal second quarter earnings on Friday morning.
It’s a big report for Kroger. Pandemic optimism has driven KR stock to a three-year high. But with many states reopening, it’s unclear as to whether Kroger can keep the same-store sales momentum it saw in the first half of 2020.
If Kroger can deliver a solid report, the rally can continue. Shares still trade at only 14x forward earnings. That’s cheap in any market — and particularly this one, even after Thursday’s sell-off.
On the date of publication, Vince Martin did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets.
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