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Stocks on Wall Street tumbled on Friday to cap off a brutal month, amid lingering fears over rising interest rates, soaring inflation, and slowing economic growth.
The major averages fell for a third straight week. The blue-chip Dow Jones Industrial Average declined 2.9%, while the benchmark S&P 500 and the tech-heavy Nasdaq Composite fell 2.8% and 2.7%, respectively.
For September, the Dow sank 8.8%, the S&P 500 dropped 9.3%, and the Nasdaq tumbled 10.5%.
The coming week is expected to be another eventful one as markets continue to weigh the Fed’s aggressive monetary tightening plans for the months ahead.
On the economic calendar, most important will be Friday’s U.S. employment report for September, which is expected to show solid job gains but a slowing from August’s strong growth.
Meanwhile, there are just a handful of companies reporting corporate results in the run-up to Q3 earning season, including Constellation Brands (NYSE:STZ), ConAgra Foods (NYSE:CAG), Lamb Weston (NYSE:LW), Levi Strauss (NYSE:LEVI), and Tilray (NASDAQ:TLRY).
Regardless of which direction the market goes, below we highlight one stock likely to be in demand and another which could see further downside.
Remember though, our timeframe is just for the upcoming week.
Despite its current downtrend, I believe Intel (NASDAQ:INTC) shares are a good bet for the week ahead. Intel’s self-driving unit Mobileye, which makes key chips and processors for autonomous cars, has filed for an initial public offering, according to a Securities and Exchange Commission filing late Friday.
The Intel-owned company is seeking to list on the Nasdaq, under the ticker symbol ‘MBLY’.
The move to take Mobileye public is part of Intel’s broader strategy under Chief Executive Pat Gelsinger to turn around and revamp its core business. Intel previously said that it would use capital from the Mobileye listing to build more chip factories as it expands into the foundry business.
According to the SEC filing, Intel will retain full control of Mobileye through ownership of class B shares that carry 10 votes apiece, while selling class A shares that have only one vote. Mobileye also plans to have four Intel-affiliated members on its board, including Gelsinger serving as chairman of Mobileye’s board.
Though the filing did not include targeted prices for the shares and how many would be offered, Intel could seek a $30 billion valuation for Mobileye in the IPO.
Intel bought Israel-based Mobileye in 2017 for about $15.3 billion and it has quickly turned into one of its most prized assets. The subsidiary has enjoyed solid sales growth, with revenue improving from $879 million in 2019, to $967 million in 2020, to $1.39 billion in 2021. At the same time, losses from operations have shrunk from $328 million in 2019 to $75 million last year.
INTC stock, which has been making a series of new 52-week lows in recent sessions, closed at $25.77 on Friday, its weakest level since August 2015. At current valuations, the Santa Clara, California-based semiconductor company has a market cap of approximately $105.8 billion. Intel shares have cratered 50% year-to-date, with investors becoming increasingly concerned by the chipmaker’s future prospects.
Once widely considered the undisputed leader in the computer processors industry, Intel has been steadily losing market share to rivals such as Taiwan Semiconductor Manufacturing (NYSE:TSM), Advanced Micro Devices (NASDAQ:AMD), and Nvidia (NASDAQ:NVDA) in recent years.
I expect Carnival’s (NYSE:CCL) stock - which collapsed to a 30-year low on Friday - will suffer yet another difficult week as investors fret over the negative impact of several fundamental and macroeconomic headwinds plaguing one of the world’s largest cruise liners.
The struggling cruise operator delivered awful third quarter financial results last week, including a wider-than-expected loss, and shrinking revenue, which both fell significantly short of analyst estimates.
Carnival has now reported a loss for every quarter since Q2 of 2020, with losses wider than expected in all but one of those quarters. Revenue has now missed expectations for 10 straight quarters. Further fueling worries over its outlook, the cruise company forecast a loss in the fourth quarter and warned that bookings were below the historical range and at lower prices.
Another negative catalyst impacting the money-losing cruise line is its massive debt load and the growing risk that it might need to raise more capital to pay down its soaring interest expenses. Carnival has debt of about $34 billion as of the end of Q2, while its cash and cash equivalents on the books stood at $7.07 billion, reflecting the negative impact of rising fuel, food, labor costs, and cheaper fares.
The travel company is also having to deal with an economic slowdown and potential recession as the Fed raises rates to combat soaring inflation, which would likely weigh on consumer demand for cruises.
CCL shares sank 23% on Friday to end at $7.03, the lowest close since Oct. 15, 1992. Friday’s massive decline erased about $2.5 billion off Carnival’s market cap, earning the Doral, Florida-based cruise giant a valuation of $8.7 billion.
Year-to-date, Carnival’s stock, which is nearing its 1987 IPO price of about $4 a share, has lost more than half its value, tumbling 65% to significantly underperform the broader market. Even more alarming, shares are 78% below their post-pandemic peak of $31.52 touched in June 2021. Before the pandemic hit, CCL was trading at around $50 in January 2020.
Disclosure: At the time of writing, Jesse is short the S&P 500 and Nasdaq 100 via the ProShares Short S&P 500 ETF (SH) and ProShares Short QQQ ETF (PSQ). 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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