Stocks on Wall Street rose Friday, and for the first time on a closing basis, shares climbed above the 35,000 level as strong corporate earnings and signs of economic recovery fueled investors' risk appetite.
US stocks could face increased volatility in the coming week as the second-quarter earnings season kicks into high gear, with reports expected from mega-cap tech stocks including Apple (NASDAQ:), Microsoft (NASDAQ: ), Amazon (NASDAQ:), Google parent alphabet (NASDAQ:), Facebook (NASDAQ:), and Tesla (NASDAQ:).
To make the coming week even more interesting, other high-profile companies, such as Boeing (NYSE:), McDonald's (NYSE:), Caterpillar (NYSE:), General Electric (NYSE:), 3M (NYSE 🙂 , Visa (NYSE:), Mastercard (NYSE:), Pfizer (NYSE:), United Parcel Service (NYSE:), and ExxonMobil (NYSE:) will also report.
Add to that a major Federal Reserve and significant second-quarter growth numbers, and we're in for an interesting time.
That said, no matter how the markets react, we've highlighted one stock that is likely to be in high demand in the coming days and another that could suffer new losses.
Remember, however, that our timetable is for the coming week only.
Stock To Buy: Pinterest
Pinterest (NYSE:) will spark interest this week as Investors await the latest financial results from the social media network, which is expected to report earnings on Thursday, July 29 after the closing bell.
It has already surpassed Wall Street's earnings and sales expectations four times in a row, thanks to rapid user growth, which has translated into higher ad revenue.
Consensus calls for the tech company to achieve second-quarter earnings per share (EPS) of $0.13, significantly better than a loss of $0.07 per share in the same period a year earlier.
Revenues are expected to more than double from the same period a year ago, up 106% to $562 million, driven by strong advertiser demand and positive returns from continued international expansion.
As such, investors will focus on Pinterest's update on Global Monthly Active Users (MAUs) to see if it can maintain its rapid pace of growth even as the coronavirus-related restrictions disappear. Global MAUs rose 30% year-over-year to 478 million in the last quarter.
In addition, investors will want to pay close attention to comments from Pinterest management regarding their sales and user growth prospects for the third quarter.
Pinterest Daily Stock Chart
Pinterest, which was one of the big winners of 2020, has seen a slow rally this year, with stocks rising just 16.7% as investor sentiment cooled on some of the high-growth technology stocks that rallied during COVID-19 pandemic.
PINS shares — still up 213% in the past 12 months — ended Friday's session at $76.91, giving the San Francisco, California-based image-sharing social media platform a market cap of approximately $49 billion.
At current levels, it remains about 15% below the recent all-time high of $89.90 reached on Feb. 16.
Stock To Dump: Tencent Music Entertainment
Shares of Tencent Music Entertainment Group (NYSE:), the largest streaming music company in China, appear to remain under pressure amid concerns over the negative impact of the Chinese authorities' continued scrutiny to crack down on the country's tech giants.
TME shares – which are down 31% in the past month and 44% to date – ended at a new 52-week low of $10.78 at close of trading on Friday. It is now more than 66% below its all-time high of $32.20 on March 23.
At its current level, the Shenzhen-based online music streaming service — which debuted on the US stock market after going public at $13 a share in late 2018 — has a market cap of approximately $55 billion.
]Tencent daily stock chart
The latest negative news came after the Chinese State Administration for Market Regulation (SAMR) on Saturday ordered Tencent and its affiliates to relinquish their exclusive music licensing rights.
Tencent and its subsidiaries — which hold more than 80% of China's exclusive music copyright agreements — may no longer hold music licensing rights, the regulator said, while existing agreements must be terminated within 30 days.
It also fined the internet company for anti-competitive behavior in the Chinese digital music industry, in which a music copyright is the main asset, citing violations related to the acquisition of China Music in 2016.
Tencent Holdings Ltd ADR (OTC:) and Tencent Music Entertainment Group, the unit resulting from the acquisition, said they would abide by the decision and comply with all legal requirements.
The new policy is the latest in an ongoing months-long campaign by China's market regulator to rein in the country's tech giants, which have grown into some of the world's most valuable companies, such as Alibaba (NYSE:). . and Didi Global (NYSE:).
Ultimately, market players are concerned that policymakers in Beijing will further escalate their efforts to curb the country's wealthiest business leaders and introduce new restrictions intended for the government to regain control of the technology sector.
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Taking that into account, it appears that TME stocks will remain on the defensive in the coming days as the online music streaming platform faces severe regulatory challenges.
