Weekly Preview: Stocks To Watch (AVGO, CRWD, DOCU, ZM)

Stocks ended Friday’s trading session higher, booking sharp gains for the week and for the month of August. With the market now in record-setting territory, economists have begun to wonder, when will the disconnect (whether perceived or real) between Wall Street and Main Street end?

The fact that all three major indexes are now positive for the year — Dow Jones Industrial Average reached that milestone Friday — while the economy is still reeling from the pandemic, confounds even the bulls. Yet, based on options activity (the difference between puts and calls) — where recent purchases of the latter have more than doubled the former — investors continue to place massive bets that the market will keep tracking higher.

The Dow rose 161.60 points, or 0.6%, to close at 28,653.87. The Blue Chip index was powered by, among others, shares of Walmart (WMT), Coca-Cola (KO), which rose 2.68% and 3.39%, respectively, contributing to a combined gains of 35 points to the Dow. The S&P 500 climbed 0.7% to close at 3,508.01, while the tech-heavy Nasdaq Composite added 0.6% to end the day at 11,695.63. All told, investors bought commodity, tech and cyclical stocks, leading the indexes higher Friday, erasing earlier declines.

For the week, both the Dow and the S&P 500 gained 3%, while the Nasdaq ended the week up about 3.5%. As to where the market is heading next? As noted, evidenced by the disparity between put and call options, investors voting with their portfolios that the market will end the year higher. While bears are, understandably, scratching their heads over downbeat economic data, the bulls are boasting “don’t fight the Fed.” To date, that has proven to be sound advice.

Meantime, here are this week’s stocks I’ll be watching.

Zoom Video (ZM) - Reports after the close, Monday, Aug. 31

Wall Street expects Zoom to earn 45 cents per share on revenue of $500.45 million. This compares to the year-ago quarter when earnings came to 8 cents per share on revenue of $145.83 million.

What to watch: As the market has plunged during the coronavirus pandemic, Zoom stock has skyrocketed, netting 160% in the past six months. It was one of a basket of work-at-home (and learn-at-home) companies that are seen as beneficiaries during the outbreak. Zoom’s video-first platform, which is based on the cloud, is disruptive in its ease of use. The stock is now up 333% year to date, compared with 8% rise in the S&P 500 index. But with stay-at-home restrictions being lifted across various states, combined with drug companies being in latter phases of vaccine production, can Zoom maintain its momentum? On Monday Wall Street will want to see whether the surge in users and meeting participants not only can continue, but also translate to sustainable long-term profits.

CrowdStrike (CRWD) - Reports after the close, Wednesday, Sept 2

Wall Street expects CrowdStrike to lose 1 cent per share on revenue of $188.54 million. This compares to the year-ago quarter when it lost 18 cents per share on revenue of $103.79 million.

What to watch: Software stocks have gone on a massive rally since the market bottom in March. Among the biggest gainers have been cybersecurity stocks such as CrowdStrike which has surged as much as 135% year to date, including gains of 103% and 13% over the respective six months and thirty days. Amid the rapid global pandemic, there has been increased demand for better security as companies have adopted a work-from-home mindset. This shift  fueled a rise in demand for laptops not only with pre-installed security software, but also a surge in virtual private networks — those that allow employees to connect to the office remotely. CrowdStrike is posed to be a long-term beneficiary of that shift in IT security spending.

Broadcom (AVGO) - Reports after the close, Thursday, Sept 3

Wall Street expects the company to earn $5.23 per share on revenue of $5.76 billion. This compares to the year-ago quarter when earnings came to $5.16 per share on revenue of $5.51 billion.

What to watch: After taking a massive hit earlier in the year from the pandemic, the chip sector has rebounded impressively from the March bottom. But unlike the extraordinary surges seen in Nvidia (NVDA), AMD (AMD), Broadcom has been left out of the rally. Broadcom stock is up 7% year to date, compared to respective gains of 115% and 82% from Nvidia and AMD. But now could be a time to buy, especially with optimism surrounding 5G kicking in to high gear. On a mission to become the world leader in infrastructure technology, the company has gone on an acquisition spree and diversifying its business away from its core semiconductor segments. But it will take upbeat semiconductor revenue guidance to help Broadcom stock catch up to its aforementioned peers.

DocuSign (DOCU) - Reports after the close, Thursday, Sept. 3

Wall Street expects DocuSign to earn 8 cents per share on revenue of $318.57 million. This compares to the year-ago quarter when earnings were 1 cent per share on revenue of $235.61 million.

What to watch: DocuSign, which provides individuals and businesses the ability to digitize an agreement process, has prospered over the last few months like the other stocks mentioned here. The company has seen its stock price skyrocket almost 200% year to date, including 160% over the past two months. This compares with an 8% year-to-date rise for the S&P 500 index. Of course, this invites the obligatory concern about valuation. To avoid a selloff in its shares, DocuSign on Thursday must continue to show not only a re-acceleration of revenue but also outline its path towards profitability. In other words, it needs a breathtaking quarter and upside guidance to sustain the momentum.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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