Travel stock Expedia (EXPE), Snapchat mobile app maker Snap (SNAP), business software giant ServiceNow (NOW), steelmaker Steel Dynamics (STLD) and mining and heavy construction equipment maker Caterpillar (CAT) are all nearing buy points.
It’s always a good idea to have a diverse group of leading stocks. That’s especially true in the current stock market rally. With ongoing sector rotation, focusing on just one group or theme can leave investors vulnerable to significant losses.
SNAP stock and Steel Dynamics have already reported earnings. ServiceNow and Dow Jones giant Caterpillar are on tap this week, with Expedia due the following week.
EXPE stock has a 188.03 buy point from a flat base, according to MarketSmith chart analysis. But investors could step in now as it bounces off the 50-day line. Expedia stock rose 2.1% to 177.50 for the week.
The relative strength line is not far from an 18-month high after outperforming for nearly a year. The RS line, the blue line in the charts provided, reflects a stock’s performance vs. the S&P 500 index.
Its RS Rating is a 91 out of a possible 99. Its EPS Rating is just 10, as the travel booking company’s profit was hit hard during the pandemic as air travel was mostly grounded and hotel bookings dried up.
Travel is expected to pick up as the vaccine rollout continues and people make plans for summer vacation. But most industry experts say an overall rebound isn’t likely until the second half of the year, and that’s if Covid variants don’t cause a setback.
Many Americans are planning road trips this summer, boosting car and RV rental bookings. Air travel is improving, but not likely to return to normal until much later. And while cruises are still docked awaiting guidance from the CDC and the federal government, advance bookings appear to be ticking up.
Expedia reports earnings in two weeks. Zacks Investment Research analysts expect the company to trim losses from the previous quarter to $2.52 a share, which still represents a 38% decline from the year-ago quarter. They see sales of $1.09 billion, an improvement from the previous quarter but still 51% lower year over year.
Shares are working on a 65.96 buy point from a cup-with-handle base. The maker of the popular social app Snapchat has an RS Rating of 93 and an EPS Rating of 73. Its relative strength line is trending higher.
SNAP stock rose 0.1% to 61.30 last week, closing back above its 50-day and 200-day lines. On Friday, shares jumped 7.45% to 61.30 in a wild session. SNAP stock hit 63.20 right after the open, but quickly slashed gains before rebounding gain.
SNAP stock had a strong finish, but Friday’s action teaches a key lesson. In the first five minutes, shares jumped, perhaps just flashing an early buy point from a trend line starting from the late February peak. SNAP stock never topped that five-minute high.
If SNAP stock can get above Friday’s high, aggressive investors could start a position.
Snap reported better-than-expected first-quarter earnings late on April 22. Revenue and user growth were the strongest in years.
Refinitiv had expected a 6-cent loss per share, but Snap broke even. Revenue came in at $770 million vs. views for $743.8 million. Snap recorded 280 million global daily active users for the quarter, vs. a FactSet forecast for 275 million. Average revenue per user totaled $2.74, slightly above views for $2.72.
Snap CEO Evan Spiegel said in remarks to analysts after the earnings report that the company is “excited to build on our investments in augmented reality, mapping and content to drive our ongoing growth.”
The Santa Clara, Calif.-based company makes a cloud computing platform to help companies manage digital workflows for enterprise operations.
Shares are closing in on a buy point of 560.89 from a cup-with-handle base. ServiceNow’s relative strength line is rising again, after sliding in February.
NOW stock has an RS Rating of just 57, but its EPS Rating is 96 out of a possible 99. ServiceNow reports first-quarter earnings Wednesday after the market close. Analysts see ServiceNow earnings of $1.34 a share, 28% above the year-ago quarter, and sales of $1.33 billion, a 27% increase.
NOW stock fell 0.8% to 552.70 for the week, but rose slightly for the last three sessions.
On March 23, ServiceNow signed an agreement to acquire Intellibot, a robotic process automation (RPA) company based in Hyderabad, India.
Intellibot extends ServiceNow’s core workflow capabilities by helping customers automate repetitive tasks for intelligent, end‑to‑end automation, the company said in a statement. ServiceNow intends to build Intellibot’s capabilities natively into the Now Platform to enable customers to more easily integrate with both modern and legacy systems to drive productivity and strengthen existing artificial intelligence and machine learning efforts.
In fiscal 2020 ServiceNow posted $4.29 billion in subscription revenue, a 32% year-over-year increase. The company has nearly 6,900 enterprise customers worldwide.
ServiceNow stock is on IBD Leaderboard and IBD Long-Term Leaders.
Steel Dynamics Stock
The stock is in a five-weeks-tight pattern with a buy point of 52.69. That entry follows an earlier buy point of 42.20 from a cup base in February.
Steel Dynamics first-quarter earnings and sales topped estimates. Earnings surged 139% vs. a year earlier while sales jumped 38% $3.5 billion.
STLD shares bounced 3.1% to 51.89 on Friday, edging up 0.8% for the week.
Steelmakers have seen their stocks rise amid an economic recovery and hopes for the passage of Biden’s $2 trillion infrastructure bill. They’ve also been benefiting from skyrocketing steel prices as producers scramble to bring factories back online after idling them during the pandemic.
Demand is expected to outstrip supply for several more months. In addition, Trump-era tariffs meant to protect U.S. steelmakers are keeping prices high. So far, Biden has not signaled he would remove the tariffs. But industry watchers say these price levels can’t be sustained much longer. Makers of autos, appliances and other end products are pressuring the administration to remove the tariffs, as the cost of their products also rise when raw materials like steel are expensive.
The price of U.S. hot rolled coil in March was around $1,280 per short ton, a 20% month-over-month increase. Prices appear to be flattening so far in April.
The manufacturer of construction and mining equipment is nearing a buy point of 237.88 from an ascending base on a daily chart or a flat base on a weekly chart. Its relative strength line is taking a breather after surging in February.
Shares have traded tightly for several weeks, finding support at their 21-day line. Last week, Caterpillar stock also found support at its 10-week line. CAT stock fell 1.4% to 230.11 for the week, but edged up 0.5% on Friday.
Caterpillar’s RS Rating is 81, while its EPS Rating is 58, since its earnings have shrunk the last four quarters on a year-over-year basis. But analysts expect the company to post EPS of $1.93, a 21% year-over-year increase when it reports first-quarter results early Thursday. Sales are seen coming in at $11.05 billion, a 4% increase.
Analysts see Caterpillar earnings up 41% in 2021 and 31% in 2022.
Management is hopeful that the economic recovery will spur demand for its heavy machinery. Caterpillar sales are often seen as a bellwether for the broader economy. The hot housing market and booming Chinese and U.S. economies bode well for sales of Caterpillar’s construction and mining equipment.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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