Stocks on Wall Street ended Friday mixed, after trending down for the week. Major averages recorded a second consecutive week of losses to start the year as high government bond yields continued to weigh on the stocks of many leading technology companies.
DOW, S&P 500, NASDAQ, 10-Year Yield Chart
The next short holiday week is expected to be another busy week as fourth quarter earnings kick into high gear. Notable names expected to be reported include Netflix (NASDAQ:), Goldman Sachs (NYSE:), Bank of America (NYSE:), UnitedHealth (NYSE:), Procter & Gamble (NYSE:), as well as United Airlines (NASDAQ:) , and American Airlines (NASDAQ:).
Regardless of which direction the market goes, below we highlight one stock that is likely to be in demand in the coming days and another that could suffer new losses.
Remember, however, that our timetable is for the coming week only. a six-month high on Friday – could see further gains in the coming week as investors continue to pile into value names sensitive to the improving economic outlook.
The industrial giant, one of the world's leading manufacturers of construction, mining and energy equipment, is up more than 10% so far in January thanks to optimism about the global economy, which in turn has broadened rally has sparked in a wide variety of goods.
CAT shares ended Friday's session at $228.94, the best level since June 10, 2021. At current levels, the Deerfield, Illinois-based heavy machinery manufacturer has a market cap of approximately $123.8 billion.
The company reported solid results amid booming construction activity and a rebound in demand for raw materials. It is scheduled to release its final earnings before the US market opens on Friday, January 28.
Consensus estimates call for the company, which has surpassed Wall Street's earnings per share for six consecutive quarters, to report fourth-quarter earnings of $2.27 per share, a 7.1% improvement versus earnings per share of $2.12 in the same period a year ago.
Meanwhile, revenues are expected to grow 17.2% year-over-year to $13.1 billion, benefiting from higher sales volume driven by rising end-user demand amid the fading impact of COVID-related uncertainty.
In addition to the top-and-bottom numbers, investors hope Caterpillar's management will strengthen its outlook for the coming months, given the promising prospects for construction and mining equipment sales in the current environment.
Source: InvestingPro
Not surprisingly, CAT stocks are currently undervalued according to the InvestingPro models, earning about 4% gains relative to fair value of $238.26 per share.
Stock To Dump : Snap
Snap (NYSE:), whose shares have fallen steadily to new lows in recent sessions, is expected to experience another bleak week amid the negative impact of several factors affecting the parent company of social media messaging app Snapchat.
The Santa Monica, California-based tech company is down nearly 19% so far this month, a terrible start to the year after dropping 6% in 2021.
With the Federal Reserve becoming increasingly aggressive and government bond yields rising rapidly, unprofitable technology companies with skyrocketing valuations like Snap may continue to struggle.
In general, higher yields and expectations of tighter Fed policies weigh heavily on high-growth technology companies with high valuations, as it makes their future cash flows less valuable and hinders their ability to fund their growth.
SNAP fell to $36.56 intraday on Friday to hit its lowest level since October 21, 2020. It closed at $38.04, earning the social media company a valuation of $61.2 billion. Snap shares are currently close to 55% below their all-time high of $83.34, scaled September 24, 2021.
The social media company missed expectations in the last quarter after its advertising business was disrupted by privacy changes in Apple's iOS. It then reports financial results after the market closes on Thursday, Feb. 3, calling consensus for a loss of $0.09 per share for the fourth quarter, up from a loss per share of $0.08 in the same period and a year ago. Revenue is expected to increase 31.7% from the same quarter a year earlier to $1.20 billion.
Source: InvestingPro
In fact, InvestingPro models predict a 6.4% decline in SNAP stocks, bringing stocks closer to their fair value of $35.61.
