Popular US Stocks traded in July 2022 August 15, 2022
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At a glance:
- Earnings results for Tesla, Netflix, Alphabet, Microsoft, Citigroup and so on
- Alphabet and Microsoft upside potential ~20%
- US Interest rate hike of 0.75%
- Inflation reached a new 41-year high
- US GDP fell for the second quarter
The three major US indices – Dow Jones, S&P 500 and Nasdaq Composite rebounded from the previous month’s low.
Major US Indices performance in the month of June 2022
|NASDAQ||DOW JONES||S&P 500|
|Month Open (July)||11,006.83||30,737.77||3,781.00||Month Close (July)||12,390.69||32,845.14||4130.90||Monthly return||12.57%||6.86%||9.25%|
The Federal Reserve implemented another interest rate hike of 75 basis points this July, unanimously agreed by all the officials. The latest hike has pushed the federal-funds rate to a range of 2.25% and 2.5%. During July’s meeting, Mr Powell mentioned that the pace of rate hikes may slow down to assess their impact on the economy.
Inflation has reached its highest in 41 years1. The latest consumer-price index (CPI) figure released by the labour department is 9.1% for June 2022, which is higher than the estimate of 8.8%. Despite the inflation level hitting a record high, the Fed is seeing signs of cooling in the economy, concurring that inflation does not need to be brought down by going into a recession.
The cooling down of the economy can also be seen in the falling Gross Domestic Product (GDP), which decreased by 0.9% at an annualised rate in the second quarter of 2022. The causes for the fall were decreased private inventory investment, residential fixed investment, and a decrease in federal government spending.
Here are some of the more popular US stocks – not ranked in any order – traded by POEMS customers in the month of July 2022.
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J P Morgan (NYSE: JPM)
JPM gained 2.41% in July. It opened at USD112.65 and closed at USD115.36. JPM posted results that were weaker than expected for this quarter. Earnings per share (EPS) was reported at USD2.76, missing estimates of USD2.88. Revenue was reported at USD31.63 billion, missing estimates of USD16.17 billion. The company did not provide any updates on guidance but CEO Jamie Dimon mentioned that some concerns had edged closer, and that some of the financial dislocations that he feared had begun to materialise2.
Citigroup Inc (NYSE: C)
C’s earnings per share and revenue beat estimates for this quarter. C opened this month at USD45.74 and gained 13.47% to close at USD51.90. EPS of USD2.19 and revenue of USD19.64 billion beats estimates of USD1.68 and USD18.22 billion respectively. Despite positive earnings, C remains the cheapest out of the six biggest US banks from a valuation perspective3. To help turn around, the firm announced plans to exit retail banking markets outside the US and set a “medium-term” target for returns on tangible common equity, a key banking industry metric, for 11 – 12%4.
Taiwan Semiconductor Manufacturing (NYSE: TSM)
TSM’s earnings beat estimates for this quarter. TSM opened this month at USD79.04 and gained 11.94% to close at USD88.48. The report tops earnings estimates with EPS of USD1.55 beating estimates of USD1.44 and revenue reported at USD18.16 billion beating estimates of USD17.68 billion. On a year-over-year basis, Taiwan Semiconductor earnings increased 67% while sales advanced 36%. The company’s forecasted revenue for the coming quarter is about USD19.8 billion to USD20.6 billion, higher than analyst expectations of USD18.66 billion5.
Morgan Stanley (NYSE: MS)
MS delivered earnings results that were below analysts’ expectations, hurt by weaker-than-expected investment banking revenue, a 55% decline. MS EPS was reported at USD1.39 against the estimate of USD1.53. Reported revenue was lower than the estimate, with a result of USD13.13 billion against the expected USD13.48 billion. The firm did not provide any guidance but has repurchased USD2.7 billion6 worth of its own stock during the latest quarter and its board has approved a new $20 billion multi-year common equity share repurchase program7. MS opened July at USD75.76 and gained 11.27% to close at USD84.30.
Netflix Inc (NYSE:NFLX)
NFLX reported mixed earnings for this quarter in the month of July. NFLX’s EPS of USD3.20 is higher than the estimates of USD2.94, while loss of subscribers is at 0.97 million compared to estimates of 2 million. However, revenue of USD7.97 billion missed estimates of USD8.035 billion8. For Q3, the firm’s revenue growth forecast of 5% translates to 12% YoY on a constant currency basis9. As for subscribers, it is set to increase by 1 million in the coming quarter. NFLX opened July at USD176.49 and gained 27.43% to close at USD224.90.
Tesla Inc (NASDAQ: TSLA)
TSLA reported mixed earnings this quarter in the month of July. EPS of USD2.27 beat estimates of USD1.81 while revenue of USD16.93 billion missed estimates of USD17.1 billion. Revenue from automotive made up USD14.6 billion, about 86% of the total revenue10. TSLA is expecting global pricing to increase due to backlog flows and is also expecting to be impacted by global cost increases11. Despite the rising cost environment, TSLA is still pushing for 50% growth this year. TSLA opened July at USD681 and gained 30.90% to close at USD891.45.
Bullish market structure as long as USD770 – USD810 holds
Alphabet Inc (NASDAQ: GOOGL)
GOOGL delivered earnings results that missed expectations this quarter. GOOGL EPS was reported at USD1.21, lower than the estimate of USD1.28. Reported revenue was USD69.69 billion, missing expectations of USD69.9 billion. Traffic acquisition costs (TAC) was reported at USD12.21 billion, lower than estimates of USD12.41 billion. For the upcoming quarter, the company did not provide a revenue forecast, but analysts expect growth for the year to be at 14% to USD293.9 billion. GOOGL opened July at USD107.93 and gained 7.77% to close at USD116.3212.
According to a Phillip Research report dated 28 July 2022, the target price was reduced to USD 139.00 (prev. USD144.00) with a Buy recommendation due to lower FY22 earnings forecast. This is broadly in line with the 53 analysts’ target price of USD144.60 compiled by Bloomberg (see table below). This represents an upside potential of around 20% from Alphabet July’s closing price.
Microsoft Corporation (NASDAQ: MSFT)
MSFT reported this quarter’s earnings that missed estimates in the month of July. With reported earnings per share and revenue of USD2.23 and USD51.87 billion, both lower than estimates of USD2.29 and USD52.44 billion respectively13. However, prices shot up after the company announced rosy guidance of double digit revenue and operating growth. For the upcoming quarter, MSFT called for USD49.25 billion to USD50.25 billion in fiscal first-quarter revenue with USD49.75 billion being the middle of the range to be 10% of revenue growth. They are also seeing larger and longer-term commitments and a record number of USD100 million-plus and USD1 billion-plus Azure deals. MSFT opened July at USD256.39 and gained 9.50% to close at USD280.74.
According to another Phillip Research report dated 29 July 2022, the Buy recommendation was maintained with a target price of USD332. Based on Bloomberg data, the consensus targeted price from 54 analysts is USD335.4 which represent an upside potential of around 20% from July’s closing price.
Vanguard S&P 500 ETF (NYSE-ARCA: VOO)
VOO is an exchange-traded fund (ETF) that attempts to track the performance of the S&P 500 Index14, which is the 500 largest US companies. VOO holds all stocks in the same capitalisation weighting as the index. VOO commenced on 31 August 1976 with an expense ratio of 0.03% and a year to date performance of -13.83% as of 28 July 2022. VOO opened at USD346.16 and gained 9.43% to close at USD378.79.
iShares Core S&P 500 ETF (NYSE-ARCA: IVV)
IVV is managed by BlackRock and aims to track the performance of the S&P 500 index15. IVV commenced on 15 May 2000 with an expense ratio of 0.02%16. As of 28 July 2022, IVV’s year to date return is -14.67%. This ETF is commonly used by investors for long term market growth. IVV opened the month at USD378.52 and gained 9.45% to close at USD414.28.
Bloomberg analysts’ recommendations
TThe table below shows the consensus ratings and average ratings of all analysts updated on Bloomberg in the last 12 months. Consensus ratings have been computed by standardising analysts’ ratings from a scale of 1 (Strong Sell) to 5 (Strong Buy). The table also shows a number of analysts’ recommendations to buy, hold or sell the stocks, as well as their average target prices.
|Security||Consensus Rating||BUY||HOLD||SELL||12 Mth Target Price (US$)|
|Alphabet Inc (NASDAQ: GOOGL)||4.85||50 (94.3%)||03 (5.7%)||0||144.60|
|Microsoft Corporation (NASDAQ: MSFT)||4.85||50 (92.6%)||4 (7.4%)||0||335.48|
|Morgan Stanley (NYSE: MS)||4.7||22 (71%)||9 (29%)||0||94.94|
|Taiwan Semiconductor Manufacturing (NYSE: TSM)||4.69||11 (84.6%)||2 (15.4%)||0||134.68|
|J P Morgan (NYSE: JPM)||4.10||18 (58.1%)||12 (38.7%)||1 (3.2%)||138.64|
|Citigroup Inc (NYSE: C)||3.89||13 (48.1%)||3 (48.1%)||1 (3.7%)||59.83|
|Tesla Inc (NASDAQ: TSLA)||3.61||26 (53.1%)||12 (24.5%)||11 (22.4%)||868.64|
|Netflix Inc (NYSE:NFLX)||3.31||15 (29.4%)||29 (56.9%)||7 (13.7%)||237.60|
To round up
From a technical analysis perspective, the market seems to be rebounding with the three major US indices achieving higher lows this month. The upward move can be attributed to the Fed hinting at an eventual slowdown in rate hikes and the earnings release of Tech giants – Amazon and Apple. With the market showing signs of a comeback, investors still need to exercise their own due diligence and to watch out for some potential black swan events.
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-  “U.S. Inflation Hits New Four-Decade High of 9.1% – WSJ.” 13 Jul. 2022
-  “JPMorgan (JPM) 2Q 2022 earnings miss – CNBC.” 14 Jul. 2022
-  “Citigroup (C) 2Q 2022 earnings beats – CNBC.” 15 Jul. 2022
-  “Citigroup return forecast underwhelms investors, shares slide – CNBC.” 2 Mar. 2022
-  “Taiwan Semiconductor Tops Second-Quarter Targets, Guides Higher.” 14 Jul. 2022
-  “Morgan Stanley (MS) 2Q 2022 earnings miss – CNBC.” 14 Jul. 2022
-  “Dividend Increase and Authorization of Common Equity Share ….” 27 Jun. 2022
-  “Netflix (NFLX) earnings Q2 2022 – CNBC.” 20 Jul. 2022
-  “FINAL-Q2-22-Shareholder-Letter.pdf.”
-  “Tesla grows revenue 42%, but automotive margins decline – CNBC.” 21 Jul. 2022
-  “Tesla (TSLA) Q2 2022 Earnings Call Transcript – The Motley Fool.” 21 Jul. 2022
-  “Alphabet misses on earnings and revenue for second quarter – CNBC.” 27 Jul. 2022
-  “Microsoft misses estimates but stock up 5% on rosy guidance – CNBC” 26 Jul 2022
-  “Vanguard S&P 500 ETF (VOO).”
-  “iShares Core S&P 500 ETF | IVV.”
-  “iShares Core S&P 500 ETF | IVV.”
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About the author
Global Markets Desk US Dealing Team
The Global Markets Desk US Dealing team specialise in handling the US Markets in the Global Markets Desk.
Their responsibilities and capabilities extend from managing and taking orders from clients trading in the US market, to content generation, Technical Analysis and providing educational content to POEMS clients.