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1 Stock to Buy, 1 Stock to Sell This Week: Apple, AMD

Published 04/30/2023, 08:58 PM
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  • Fed rate hike, Powell comments, U.S. jobs report, and more earnings will drive sentiment this week.
  • Apple stock is a buy with earnings due on Thursday.
  • AMD shares are a sell amid expected weak Q1 sales, sluggish outlook.
  • Stocks on Wall Street rallied on Friday to wrap up a winning week and month as investors digested the latest round of corporate earnings results while continuing to focus on the Federal Reserve’s monetary policy outlook.

    For the week, the blue-chip Dow Jones Industrial Average rose 0.9%, while the benchmark S&P 500 and the tech-heavy Nasdaq tacked on 0.9% and 1.3% respectively.

    The Dow ended April 2.5% higher to notch its biggest monthly gain since January. The S&P 500 logged a 1.5% monthly increase - its second positive month in a row - while the Nasdaq finished the month essentially unchanged.

    S&P 500 vs. Nasdaq vs. Dow

    The blockbuster week ahead is expected to be an eventful one filled with several market-moving events, including a key Fed rate decision, as well as a flurry of heavyweight earnings reports and economic data.

    The U.S. central bank is almost certain to follow through with its tenth consecutive rate increase at the conclusion of its two-day policy meeting on Wednesday, May 3, with FOMC officials set to hike by 25 basis points.

    Fed Chair Jerome Powell’s comments on the future direction of monetary policy will be in focus as investors ramp up bets that the upcoming rate hike will be the last one in the Fed’s current tightening cycle.

    Economic calendar

    Elsewhere, on the economic calendar, most important will be Friday’s U.S. employment report for April, which is forecast to show the economy added 180,000 positions, slowing from jobs growth of 236,000 in March.

    Meanwhile, the corporate earnings season continues in earnest with reports expected from high-profile companies, such as Qualcomm (NASDAQ:QCOM), Coinbase (NASDAQ:COIN), DraftKings (NASDAQ:DKNG), Shopify (NYSE:SHOP), Block (NYSE:SQ), Ford (NYSE:F), Uber (NYSE:UBER), Starbucks (NASDAQ:SBUX), and Anheuser Busch (NYSE:BUD).

    Some of the other notable reporters include Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA), CVS Health (NYSE:CVS), Kellogg (NYSE:K), Kraft Heinz (NASDAQ:KHC), Yum! Brands (NYSE:YUM), MGM Resorts (NYSE:MGM), and AMC Entertainment (NYSE:AMC).

    Regardless of which direction the market goes, below I highlight one stock likely to be in demand and another which could see further downside.

    Remember though, my timeframe is just for the week ahead, May 1-5.

    Stock To Buy: Apple

    After closing at a new 2023 year-to-date high on Friday, I expect Apple shares (NASDAQ:AAPL) to outperform in the coming week as the consumer electronics giant’s latest financial results will surprise to the upside in my view.

    Following bullish earnings reports from tech titans like Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Facebook-parent Meta Platforms (NASDAQ:META), and Amazon (NASDAQ:AMZN) last week, Apple will be the last ‘FAAMG’ stock to report quarterly results when it releases its fiscal Q2 update after the market closes at 4:30PM ET on Thursday, May 4.

    A call with CEO Tim Cook and CFO Luca Maestri is set for 5:00PM ET.

    I believe the Cupertino, California-based tech conglomerate is poised to deliver a better-than-expected print as solid demand growth for its lineup of high-end iPhones will offset incremental weakness in other areas of the business.

    According to the options market, traders are pricing in a swing of around 4% in either direction for AAPL stock following the update.

    AAPL earnings

    Source: InvestingPro

    Apple’s earnings per share are expected to be $1.43, a decline of 5.9% from a year ago, according to Investing Pro data, due to elevated operating expenses amid the current macro backdrop.

    Meanwhile, revenue in the March quarter is forecast at $92.84 billion, or a 4.5% decrease annually, as Apple faces weak demand for its Mac computers amid a deteriorating PC market.

    Analysts have raised their EPS estimates 10 times in the past 90 days, according to an Investing Pro survey, while 19 of the analysts surveyed downwardly revised their AAPL earnings forecast.

    Despite the expected decline in profit and sales growth, one bright spot is expected to be Apple’s services business, which was the fastest growing segment in fiscal Q1 with annualized revenue growth of 6.4%. The segment includes sales from the App Store, Apple Card payment fees, subscriptions, extended warranties, licensing fees, and advertising.

    Looking ahead, I believe Apple is well positioned to withstand the challenging economic climate thanks to its dependably profitable business model, healthy balance sheet and enormous cash pile.

    AAPL daily chart

    AAPL ended at an eight-month peak of $169.68 on Friday, the highest level since Aug. 26, 2022. At its current valuation, Apple has a market cap of $2.68 trillion, making it the most valuable company trading on the U.S. stock exchange.

    Shares are up 30.6% so far in 2023, outperforming the broader market by a wide margin over the same timeframe.

    Stock To Sell: Advanced Micro Devices

    Despite the recent uptrend, I believe AMD (NASDAQ:AMD) stock will suffer a difficult week ahead as the semiconductor company’s upcoming earnings report will likely reveal a sharp slowdown in both profit and sales growth.

    Underscoring several near-term headwinds AMD faces amid the current environment, analysts have cut their EPS estimates a whopping 30 times in the three months leading up to the earnings update, compared to zero upward revisions, as per an Investing Pro survey.

    Market participants expect a sizable swing in AMD shares following the results - which are due after the close of regular stock trading on Tuesday, May 2 - with a possible implied move of 6.6% in either direction, according to the options market.

    AMD earnings

    Source: InvestingPro

    According to Investing Pro, Wall Street sees the Santa Clara, California-based chipmaker earning $0.56 a share in the first quarter, collapsing 50.4% from EPS of $1.13 in the year-ago period.

    If confirmed, it would mark AMD’s smallest quarterly profit in eight quarters, dating back to Q1 2021.

    Meanwhile, revenue is expected to decline 10% year-over-year to $5.30 billion, reflecting weakening demand for PC and server chips.

    Looking ahead, it is my belief that AMD’s management will strike a cautious tone in its forward guidance given the potential for slower near-term data center demand and a sluggish PC market.

    AMD competes with Intel (NASDAQ:INTC) in making central processing units (CPUs) for personal computers and servers. It also rivals Nvidia (NASDAQ:NVDA) in the market for graphics processing units (GPUs) for PCs, gaming consoles and data centers.

    AMD daily chart

    AMD stock closed Friday’s session at $89.37. At current valuations, Advanced Micro Devices has a market cap of $143.8 billion.

    Shares have been on a roll this year, jumping 40% so far in 2023, amid a broad-based rebound in the semiconductor space. Notwithstanding the recent turnaround, AMD remains 45% below its November 2021 record peak of $164.46.

    Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR S&P 500 ETF (SPY), and the Invesco QQQ Trust ETF (QQQ). I am also long on the Technology Select Sector SPDR ETF (XLK). I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials. The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.

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