Three Stocks to Watch for the Week of November 8th, 2021

With earnings season nearly over, the S&P 500, the NASDAQ, and the Dow rose for the fifth consecutive week, and all three indexes pushed their record levels higher. The NASDAQ added about 3%, outperforming its peers by a wide margin for the second week in a row. 

Last week the central bank soothed investors when it said the U.S. economy is now strong enough to handle an unwinding of pandemic stimulus.  The Fed plans to begin tapering its emergency bond-buying program later this month.  Market participants had been waiting for this moment for months.  With this overhanging worry in the rearview and a bevy of critical corporate earnings on the docket for this week, we could see some interesting movement. 

Our team has a few recommendations of stocks to watch in the coming days.  One of the companies we are looking at this week is at the forefront of a tech advancement that stands to be as big as the internet.  Keep reading for all of the details and find out how you can get in on this technology before it takes off.  

The Metaverse is still in its embryonic stages. Still, an increasing number of market participants are jumping in on the companies they believe will lead the way into this fantastic new iteration of the internet.  One company that is looking to pioneer the space is Nvidia (NVDA).  Revelations on metaverse progress could come this week during the Nvidia GPU Technology Conference (GTC), which kicks off tomorrow.  The GTC is a global AI conference that brings together developers, engineers, researchers, inventors, and IT professionals.

Specifically, NVDA investors will be looking for clues on the official launch of Nvidia’s Omniverse Enterprise, an open virtual platform that allows creators to collaborate in real-time physically accurate simulations/ 3D renderings.  Nvidia succinctly described Omniverse as a “platform for connecting 3D worlds in a shared virtual universe.” The key technology powering Omniverse is Nucleus – a database engine that allows client applications to share and modify 3D assets and scene descriptions.  Nucleus is based on Pixar’s open Universal Scene Description technology, which provides a common language for defining digital assets.

Nvidia released an open beta of Omniverse in December 2020 and announced the upcoming general availability of Omniverse Enterprise in April 2021. Omniverse Enterprise subscription starts at $9,000 per year for a workgroup of two creators, 10 reviewers, and 4 Nucleus subscriptions.

Wells Fargo analyst Aaron Rakers raised the firm’s price target on Nvidia to $320 from $245 while keeping an Overweight rating on the shares. The analyst sees Omniverse as a key enabler/platform for the development of the Metaverse across a wide range of vertical apps, including industrial, manufacturing, design and engineering, autonomous vehicles/robotics, and more. “Nvidia Omniverse Enterprise represents a significant platform expansion strategy for the company, which also entails a deepening recurring software story,” Rakers said, adding that the Omniverse Enterprise also “presents a halo effect to the company’s product portfolio.”

Shares of NVDA rose 16% last week, ahead of the conference. We’ll be tuning in for Nvidia Founder and CEO Jensen Huang’s keynote on Tuesday morning.   

Despite being a household name in the global travel industry, Airbnb (ABNB) has captured less than 1% of its total addressable market.  That leaves a lot of room for growth for the company that’s pioneering the hotel-to-homes shift.

CEO Brian Chesky appears to be optimistic about the company’s prospects.  In a recent interview, he identified a crucial travel pattern that could be long-term.  According to data from Airbnb’s most recent fiscal quarter, enthusiastic visitors are already taking short “staycations” fewer than 50 miles from home.  Furthermore, a quarter of these stays were for 28 days or more. This, according to Chesky, demonstrates customers’ rising interest in lengthier vacation stays. 

“The travel rebound that began earlier this year accelerated in the third quarter, resulting in Airbnb’s strongest quarter ever,” Chesky said during last Thursday’s earnings call. “Revenue and net income were our highest ever.  Adjusted EBITDA exceeded $1 billion, also our highest ever.  This summer, we reached a major milestone of 1 billion cumulative guest arrivals as more people got vaccinated and travel restrictions were relaxed.  Host earnings reached a record $12.8 billion in the quarter, and active listings continued to grow.”

ABNB topped consensus expectations of $0.75 in reported EPS for the third quarter and $2.05 billion in revenue when it reported $1.22 EPS and $2.24 billion in quarterly revenue.  

Airbnb provided its outlook for the fourth quarter, saying that it sees Q4 revenue in the $1.45 billion ballpark.  The company said, “In Q4, we continue to see the positive effect of travel restrictions being lifted and global vaccination progress on our growth in Nights and Experiences Booked for stays in Q4 and into 2022.  We expect Nights and Experiences Booked in Q4 2021 to significantly outperform Q4 2020 levels and approximate Q4 2019 levels.  In Q3 2021, our ADR declined from Q2 2021 due to the recovery of lower ADR regions, but we expect our ADR will be relatively stable in Q4 2021 relative to Q3 2021.  Consequently, we expect Q4 2021 GBV to be substantially above both Q4 2020 and Q4 2019 levels, and Q4 2021 GBV year-over-two-year growth to accelerate from Q3 2021.”

RBC Capital analyst Brad Erickson raised the firm’s price target on Airbnb to $195 from $170 and kept an Outperform rating on the shares.  The company’s Q3 earnings topped expectations, even though its bookings saw a slight miss amid an “uneven recovery in travel,” the analyst tells investors in a research note.  However, Erickson adds that he “remains encouraged” at indicators of the company’s FY22 growth like active listing growth and higher usage of flexible date booking, and “optimistic” for its future new product innovations to be announced.

Tractor Supply Company’s (TSCO) third-quarter top and bottom lines reflected strength against supply-chain challenges, marking the seventh straight quarter of an earnings surprise and the sixth consecutive sales beat.  The company delivered the sixth straight quarter of more than 10% increase in comparable-store sales (comps). Comps were driven by higher comparable average ticket and comparable average transaction count. It witnessed solid double-digit sales growth in the e-commerce business, delivering the 37th consecutive quarter of an increase.

TSCO is on track to build upon the “Life Out Here” lifestyle assortment and convenient shopping format to gain customers and market share. The strategy is essentially based on five key pillars — customers, digitization, execution, team members, and total shareholder return.  As part of the “Life Out Here” Strategy, the company provided long-term financial growth targets for three to five years after the normalizing of macro conditions from the impacts of the COVID-19 pandemic.

Driven by the solid performance in the first three quarters of 2021, management raised 2021 guidance. Management expects net sales of $12.6 billion, indicating an improvement from the previously mentioned $12.1-$12.3 billion. Comps are likely to grow 16%, up from 11-13% mentioned earlier.

Net income is now expected to be $972-$985 million for 2021, up from the earlier mentioned $895-$930 million. Earnings per share are expected to be $8.40-$8.50, implying a rise from $7.70-$8.00 mentioned earlier.

TSCO’s strength is evident in its past performance.  Shares of Tractor Supply have increased 11.1% over the past quarter and have gained 58.85% in the last year. On the other hand, the S&P 500 has only moved 5.71% and 40.08%, respectively.

Over the past two months, 13 analysts have made positive revisions to their earnings estimates for 2021, boosting the consensus EPS estimate from $7.88 to $8.46.  There have been no negative earnings estimate revisions over the past 60 days.  

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