So we’re exactly halfway through 2020 and we’ve already suffered a world war scare, a global pandemic, civil unrest, the end of the longest bull run in history, and the fastest bear market. Let’s hope the second half is a bit better.
As we know, the stock market is all about looking forward and though the Dow (NYSEARCA: DIA), S&P 500 (NYSEARCA: VOO), and Nasdaq (NYSEARCA: QQQ) have just enjoyed their best quarter in decades, this is no time to rest on our laurels. With coronavirus cases gaining an unfortunate second wind, unemployment at record highs, companies like Apple (NASDAQ: AAPL) shutting up shop once more, and industry leaders such as Nike (NYSE: NKE) pulling fiscal guidance, there is a lot of uncertainty ahead.
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However, the world will roll on and much like the first half of the year, there will be winners and losers on Wall Street. For every Zoom (NASDAQ: ZM) and Netflix (NASDAQ: NFLX) there will be a Macy’s (NYSE: M) and Disney (NYSE: DIS). That’s why we’re going to take a look at 2 companies that investors should take note of this July for very different reasons.
Stock to buy: FedEx
After its earnings report for Q1 back in March and suspended 2020 outlook, analysts began to worry about FedEx (NYSE: FDX). Fast forward four months and the company beat estimates despite a “significant impact” from the coronavirus pandemic. On the last day of Q2, just after the bell, FedEx reported adjusted earnings of $663 million, or $2.53 a share, with sales falling slightly to $17.4 billion from $17.8 billion a year ago, compared to analyst EPS expectations of $1.58 on sales of $16.4 billion, which CEO Frederick Smith put down to a “Herculean” effort from the logistics giant.
Smith gave a more optimistic outlook going forward, stating: “FedEx is well-positioned to support and benefit from the reopening of the global economy,”. On top of this, the company has proven that it can adapt to a pandemic scenario, as despite its commercial business falling due to business closures, its residential deliveries have boomed. Smith went on to iterate that the company had been forced to root out inefficiencies and that it was operating with massively improved capacity.
There was a lot of pessimism surrounding FedEx and its ability to weather the ‘coronastorm’, but many of these doubts have been laid to rest going into Q3. There were concerns over growing competition from Amazon (NASDAQ: AMZN) and UPS (NYSE: UPS), but FedEx announced a team-up deal with Microsoft (NASDAQ: MSFT) in May to tackle this very problem. The deal will see the pair improve shipping for commercial customers by combining FedEx’s logistics with Microsoft’s cloud and AI expertise.
With plans in place to take on rivals, proof that it can survive an onslaught of coronavirus expenses, and a rise in residential deliveries alongside commercial reopenings, FedEx’s could be worth taking a chance on this month.
Stock to avoid: AMC Entertainment
The largest cinema chain in the U.S. is in a bit of a bind right now. A month ago, things were looking up for AMC (NYSE: AMC) as coronavirus cases were declining and cinemas were preparing to reopen. Now, its biggest upcoming releases — including ‘Mulan’ and ‘Tenet’ — have seen their already delayed schedules pushed back once more to August.
For an industry that was in decline long before the coronavirus pandemic, it is estimated that the cinema industry will now face a $5 billion+ overall loss in 2020. It’s going to be even harder to get people into seats too as the prospect of catching an infection seems high in a close-quarter, indoor cinema. Even cutting capacity and forcing mask-wearing will eat into earnings as people will either not want to go, or when they do, be unlikely to buy food or drinks, a cinema’s biggest margin profit maker.
As infection rates soar across the U.S. once more, it seems only a matter of time before cinemas are forced to push back their reopen dates. Even with its 40% decline YTD, it looks like AMC will fall even further before this pandemic settles down.
AMC is expected to report Q2 earnings on July 9, where analysts anticipate a loss per share of $4.17 on paltry revenue of just $16,69 million versus $941.5 million in Q1.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in stocks mentioned above. Read our full disclosure policy here.
Editor at MyWallSt
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.