In today’s top stories, big tech’s fortunes are mixed. Analysts smell trouble for the ecommerce sector following Amazon’s disappointing Q1 results, and pandemic stock stars such as Peloton and Zoom are set to be overtaken by peers. Meanwhile, the S&P 500 could see further downside pressure due to inflated earnings valuations and Morgan Stanley reveals its list of companies it believes are on the up.
Amazon highlights ecommerce woes
The online retail giant’s disappointing first-quarter earnings results, released last week, shined a light on how demand for ecommerce has dropped since the pandemic-induced boom. With Etsy [ETSY], Wayfair [W] and Shopify [SHOP] due to report this week, analysts have been paring back forecasts. Amazon shares had seen its worst selloff since 2006 after posting a weaker than expected revenue forecast.
Polymetal International’s shares have sunk 77.7% from its high of 1,114.50p, which it hit on 23 February — the day before Russia invaded Ukraine. While the company could benefit from soaring gold prices, Goldman Sachs analysts forecast gold prices to jump to $2,500 before the end of the year, it may find it increasingly hard to sell as analysts downgrade the stock.
Morgan Stanley’s top stock picks
Analysts at the firm released a list of 45 stocks they believe have a 32% upside compared to analysts’ average price targets. In the communication services industry, top stocks included Comcast [CMCSA] and Warner Music Group [WMG]. Consumer discretionary stocks Ferrari [RACE] and Amazon [AMZN] were highlighted, alongside consumer staples Constellation Brands [STZ] and Procter and Gamble [PG]. Valero [VLO] and Suncor Energy [SU] were also mentioned, as well as tech names Palo Alto Networks [PANW] and Accenture [ACN].
The UK cyber defence firm has seen its shares jump 11.5% over the past three months, driven by a 50% year-on-year increase in revenue during the third quarter of the fiscal year 2022. Following the positive earnings report, which saw net customers grow by 37% from the year-ago period, analysts at Jefferies issued a ‘buy’ rating on the stock.
Are markets at rock bottom?
While the S&P 500 has fallen 13% so far this year, Barron’s says one key variable suggests that valuations for the index are still too high: earnings. Wells Fargo [WFC] data shows that analysts have raised estimates for 2022 S&P 500 earnings by 3.1% since 1 January. However, with the macro environment under pressure, growing risks to a company’s bottom line could be missed.
Pandemic stocks primed for comeback
Pandemic stars, such as Peloton [PTON], Zoom [ZM] and Teladoc [TDOC] saw significant growth in 2020. However, since the start of the year, their performances have lagged. MarketWatch has compiled a list of pandemic stocks that are expected to double over the next year, including TG Therapeutics [TGTX], Farfetch [FTCH], Caravana [CVNA], Sunrun [RUN] and Zai Lab [ZLAB].
RBC’s key levels to watch
With the Federal Reserve expected to announce a second interest rate hike tomorrow, RBC Capital Markets equity analysts Lori Calvasina and Sara Mahaffy expect the S&P 500 to reach a new low of 3,850, if the last week’s bottom doesn’t hold. “Daily trading in the index still resembles most of the post-financial crisis growth scares that we’ve previously highlighted as being useful reference points for how low US equities could trade in 2022,” the analysts told MarketWatch.