There is little sign that investors will get relief from the ongoing U.S.-China trade dispute next week after both sides signaled that they are ready to escalate their fight.
Sentiment turned sour on Friday after media reported that trade talks between the U.S. and China had stalled after President Donald Trump put Chinese telecommunications company Huawei and its affiliates on a business blacklist and banned it from dealing with U.S. companies.
The latest actions on the trade front make it difficult to predict which direction the markets will be headed in the coming weeks. There's a lot at stake if China retaliates against U.S. companies after Trump’s crackdown on Huawei.
Amid this ongoing worry, investors will also receive some important earnings results from big retailers. Here are three stocks that we believe will be most worth watching:
1.Target
Big-box retailer Target (NYSE:TGT) will report first-quarter earnings on Wednesday, May 22, before the market opens. Following a strong showing by its retail peers, including Walmart (NYSE:WMT), the chances are that Target will report another strong quarter.
Analysts are expecting earnings per share of $1.43 as compared with $1.22 a year ago with revenue of $17.5 billion, according to Investing.com's estimate. Target said in March that profit for this fiscal year will be between $5.75 to $6.05 a share, while comparable sales will increase by a low- to mid-single-digit percentage.
The retailer has been benefiting from its restructuring moves in recent quarters that involved remodeling hundreds of stores, introducing new private brands, and improving its online channels. The result has been that Target delivered strong comparable sales growth in each quarter of 2018, with online sales surging above 25% each year during the past five years.
Weakening consumer environment, the U.S.-China trade war, and a possible deterioration in gross margins are some headwinds that could keep shares under pressure despite the upbeat earnings outlook. On Friday, Target stock closed at $70.89, after rising more than 7% this year.
2. Best Buy
Best Buy Co Inc (NYSE:BBY) is another retail stock which will come under investor scrutiny next week as the retailer reports its first-quarter earnings on Thursday, May 23, before the market opens.
Best Buy stock has had a strong rally this year, surging more than 30%, as the company benefits from its expanding services business and its increasing assortment of smart-home devices, like door locks and cameras, along with appliances, video games and wearable devices. Its stock closed at $68.93 on Friday.
But that growth momentum may come under pressure with Apple Inc. (NASDAQ:AAPL), the company’s largest supplier, predicting a slowdown in its sales this year and the U.S.- China tit-for-tat tariffs pushing the cost of electronic products higher.
For Q1, the company is likely to report $0.87 earnings per share, up from $0.82 a year ago. Revenue is likely to remain flat at $9.1 billion, according to Investing.com estimates.
3. Tesla (TSLA)
Tesla Inc. (NASDAQ:TSLA) continues to keep investors on edge, with a flurry of bad news hitting its stock last week. The stock plunged 7.6% on Friday after Elon Musk called for “hardcore” scrutiny of the company’s expenses and a report by the National Transportation Safety Board raised questions about the safety of its autopilot driver assistance system.
In an email sent to his global staff, Musk said that he and new Chief Financial Officer Zachary Kirkhorn will review “literally every payment” that leaves the company’s coffers to confirm that expenditures are critical, according to Bloomberg News.
Tesla has been facing a cash-flow crunch after the demand for Model 3 Sedan dwindled in the first quarter. The automaker reported a 31% decline in Q1 vehicle deliveries and burned nearly $1 billion in free cash.
Another setback that sent the company’s shares tumbling to two-and-half-year low on Friday was a report by the safety regulator saying that Tesla’s autopilot driver assistance system was engaged during a fatal crash in March. The latest crash occurred in Delray Beach, Florida, and involved a Model 3 -- the third such accident in the U.S.
The news is bad for Tesla’s future growth plans and will likely keep its shares under pressure. Musk announced last month that Tesla will have one million robotaxis on the road by 2020.