Three Top Earnings Plays This Week

Monthly options expire at the end of this holiday-shortened trading week, hopefully generating much-needed volatility after a long string of low volume narrow range sessions. Major benchmarks are nearing overbought technical readings last hit in February 2020, just before all hell broke loose as a result of the pandemic. While it isn’t wise to expect a repeat any time soon, broad-based complacency has generated ideal conditions for a major shakeout.

Dow component Walmart Inc. (WMT) is the only U.S mega-cap on this week’s top earnings list, followed by China’s Baidu Inc. (BIDU) and Canada’s Shopify Inc. (SHOP). In case you hadn’t heard, the much smaller SHOP has been an absolute monster, rising 365% since the last trading day of 2019.  Three major hotel chains also step to the plate, telling us how many folks gave up overnight travel when the second wave erupted in October.

Shopify

Shopify is expected to report a Q4 2020 profit of $1.21 per-share on $913.3 million in revenue. The e-commerce juggernaut has been grinding through a ferocious uptrend since coming public at 16 in 2015 and is now trading just shy of the $1,500 level. However, the stock has gained a phenomenal 34% in just the last two weeks, setting off all sorts of overbought signals that raise odds for an aggressive ‘sell-the-news’ reaction, especially during options expiration.

Walmart

Wall Street analysts are looking for Walmart to post a Q4 2020 profit of $1.51 per-share on $147.1 billion in revenue, better than the $1.38 earned in the same quarter last year.  The stock posted a respectable 21% return in 2020 but all those gains were booked between March and the end of August. Shareholders have pulled up stakes and walked away since that time, rotating their profits into COVID-19 recovery plays.

Baidu

Baidu should report Q4 2020 earnings of $16.73 per-share on $30.1 billion in revenue, much worse than last year’s $26.54 per-share. However, the stock just broke out to an all-time high, underpinned by the formation of an intelligent electric vehicle company that’s forced Wall Street to reprice the search provider at a higher multiple, in line with other manufacturers. Look for traders to jump on any updates regarding that initiative.

For a look at this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.