I think many have paid attention to how the share price reacts to financial statements. This reaction is especially noticeable when the quarterly report exceeds analysts’ expectations. In such cases, the trading session for the company’s securities begins with a gap, that is, trading begins much higher than the previous closing price.
Knowing which companies’ earnings may surprise you, you can buy their shares in advance and wait for the quarterly report. Now there is a period of New Year’s rally, when the value of shares is growing on expectations that certain companies will benefit from the upcoming New Year’s holidays (the main thing is that the new strain of coronavirus does not frighten investors).
In this article, we will analyze which companies’ revenues may be affected by the New Year holidays, as a result of which their profit may turn out to be better than forecasted.
The first ones to look out for are retailers. Among them are Walmart (NYSE: WMT) and Amazon (NASDAQ: AMZN).
Walmart is a multinational trading corporation that operates a chain of hypermarkets, grocery stores and discounters. The company also owns Sam’s Club, an American retail chain of clubs whose members can purchase merchandise at a discount.
As of 2020, the Walmart chain has 11,510 stores and clubs in 27 countries. This company, according to the Fortune Global 500 list, has been at the top of the ranking of the largest companies in the world in terms of revenue since 2014. At Walmart, it reached 524 billion USD.
During the pandemic, the company’s net profit was breaking records. The results of the second quarter show that Walmart earned 6.47 billion USD in net profit, which is the highest in the history of the company.
Walmart ended the third quarter with a profit of 5.13 billion USD, which is 15% more than in the same quarter last year. It is possible that the results of the fourth quarter may also pleasantly surprise investors.
On the chart for Walmart stock, support formed at 145.00. Papers have been unable to pierce it for 5 days. This event indicates the presence of a large buyer (or buyers) that does not let the price lower and is gaining Walmart stock in the portfolio. An additional factor for price growth is the presence of an upward trend, which is indicated by the 200-day moving average.
Amazon is no less a famous company than Walmart. She is a leader in the e-commerce market. In addition to selling all sorts of products, the company is engaged in providing services in the field of cloud computing, streaming and artificial intelligence. In 2018, the company launched Delivery Service Partners (DSP). This fall, Amazon went a step further and secured FAA approval to deliver packages by drones.
Moreover, on November 17, the online pharmacy Amazon Pharmacy began operating, where you can order prescription drugs without leaving your home, which is very important during the coronavirus pandemic.
Amazon’s net profit began to grow rapidly during the pandemic. If in 2019 the average profit of the company was USD 2.9 billion, then by December 2020 it reached USD 4.7 billion. Growth was particularly strong in the second and third quarters. Profits during these periods have doubled compared to the same quarters last year.
Amazon’s strong point is its e-commerce system. This segment benefits the most during the coronavirus pandemic. New Year’s holidays are marked by high sales growth, accordingly, Amazon, providing the opportunity to purchase goods online, will not be on the sidelines and will most likely show another increase in revenue in the fourth quarter.
Amazon shares are trading in an uptrend, as indicated by the 200-day moving average. Also, a “Triangle” figure has formed on the chart, and the upper line of this figure has already been broken. This event indicates a high probability of further price growth. The growth target is the level of 3800 USD per share.
Sales growth cannot happen without the availability of goods on the shelves and the ability to deliver them to the customer. Accordingly, a few more beneficiaries of the New Year holidays are delivery services.
The practice is widespread in the world when the head office of a company is located in one country, and production facilities in another. In particular, this refers to China. Many companies use China as a production workshop, since goods can be produced in this country at a lower cost, even taking into account a longer delivery to the point of sale. Some of the largest shipping companies are FedEx and United Parcel Service, Inc. (UPS).
Amazon, with its Amazon Shipping, which was supposed to compete with UPS and FedEx, scared the investors in these companies. FedEx shares have been trading in a downtrend since 2018 and are down more than 50%.
UPS investors were more resilient, the stock corrected to the nearest support at the level of 90 USD and continued to trade in the range between 120 and 90 USD per share.
Further, in the spring of 2020, Amazon suspended Amazon Shipping indefinitely. As a result, in 6 months, FedEx shares recovered to the levels of 2018, and UPS shares are already trading at 170 USD per share. Investors have come to believe in these companies again and are investing money in them.
Let’s talk a little about what these companies are.
United Parcel Service, Inc.
United Parcel Service, Inc. (NYSE: UPS) is a US company specializing in the delivery of goods and documents. It is the world’s largest delivery service. It has its own fleet of aircraft operated by UPS Airlines and a maritime transport fleet operated by UPS Supply Chain Solutions. UPS delivers to 200 countries worldwide.
It was revealed that the company is partnering with global pharmaceutical distributor McKesson to assist in the delivery of the COVID-19 vaccine. Delivery will be handled by UPS Healthcare, which meets all the modern requirements of the pharmaceutical industry. Thus, on the eve of the new year, UPS has another source of income.
UPS shares are trading above the 200-day moving average. The shutdown of Amazon Shipping has led to a sharp increase in the value of securities, as a result of which they look overbought. But the expectation of good quarterly reports is keeping stocks from falling, and they are now trading at all-time highs. A breakdown of the 175 USD level may lead to further growth in the value of securities, but here you have to be brave to buy shares at such a high price.
FedEx Corporation (NYSE: FDX) is the second largest shipping service in the world after UPS. It operates in 220 countries around the world, and the number of employees reaches 220,000 people. In addition to delivery, the company provides services to customers in customs clearance – this area is handled by FedEx Logistics. Today FedEx moves more than 15 million shipments every day.
FedEx, like UPS, has been cleared to ship the COVID-19 vaccine, only it will partner with Pfizer. As a result, each of the presented postal services has an additional unexpected source of income.
It should also not be forgotten that in the context of a pandemic, many will prefer not to congratulate their relatives personally, but to send them gifts by mail, thus, there will be an increase in income not only in international transport, but also within the country. This is another factor in favor of profit growth for delivery services.
FedEx shares are trading at historic highs in an uptrend. Immediate support is at 260 USD per share, a price rebound from this level may lead to further growth in the share price.
On December 14, 2020, the head of the British Ministry of Health said that a new type of coronavirus had been identified, which is characterized by a very rapid spread. Several days later, several European countries closed flights to the UK. This event triggered a fall in stock indices.
Now investors are trying to assess the scale of the problem, but so far the market is dominated by optimistic sentiments. By the end of the trading session on Monday, stock indices had won back most of the fall. As the chart shows, the negative news was perceived as an opportunity to buy securities at a lower price.
The companies presented in the article are more likely to be able to make significant profits from the New Year holidays. The only thing that can prevent the shares of these companies from growing is the details about the new strain of coronavirus, which will turn out to be even more negative than at the moment. Otherwise, in the absence of news or their neutral character, the securities will continue to rise.
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