Popular US Stocks traded on POEMS in March 2022 April 13, 2022
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News headlines in March 2022
- FOMC raises the federal funds rate target range by 0.25%
- WTI futures reach 13-year-high of USD130.50
- VIX reaches a high of 36.45
- US 4Q21 GDP estimated at 6.9%
- US announces record release of oil from reserves
The three major US indices – the Dow Jones, S&P 500 and Nasdaq Composite – recovered some of the losses suffered in February. This quarter however, has been the worst for the S&P 500 in over two years.
|NASDAQ||DOW JONES||S&P 500|
|Month Open||13,716.70||33,813.48||4,363.14||Month Close||14,220.52||34,678.36||4,530.42||Monthly return||3.67%||2.56%||3.83%|
March 2022 marked the start of rate hikes1, the first since 2018, with the March FOMC increasing the federal funds rate target range by 0.25%, to a range of 0.25% to 0.5%. Given the currently strong US job market, the Fed’s main concern is to address the sky-high inflation. Thus, the committee signalled that rates may increase every upcoming meeting to curb the growth of inflation.
Russia’s invasion is causing cost push inflation across multiple products and one of them is oil2. West Texas Intermediate Crude Futures and Brent Crude peaked with results, unseen since July 20083 at USD130.50 and USD139.13 respectively. The oil prices subsequently withered as talks between Russia and Ukraine began. The possible slowdown of the Chinese economy is also expected to drive down the demand for oil.
Also with regards to oil, US President Joe Biden ended the month with an unprecedented announcement4 about releasing 1 million barrels of oil daily from the oil reserves until the end of the year. The announcement caused Brent crude oil and WTI futures to slide 4.88% and 6.99% respectively, closing at USD107.91 and USD100.28 for the day.
The Chicago Board Options Exchange’s CBOE Volatility Index – or VIX reached a high of 37.52 points, which is close to double the 2021 average of 19.71 points. This strongly suggests high levels of fear among market participants owing to the uncertain market environment. Towards the end of the month, the VIX was down to 20.56 points.
On 30 March 2022, the US Department of Commerce announced that its third estimate for the rate of growth in 4Q21 GDP was 6.9%5.
Here are some US stocks – not in any particular order of ranking – traded by POEMS customers in the month of March.
CrowdStrike Holdings, Inc (NASDAQ: CRWD)
CRWD delivered earning results that beat estimates this quarter. CRWD earnings per share (EPS) were USD0.30 against the estimate of USD0.20. Reported revenue was also higher than the estimate, at USD431.01 million against the expected USD410.968 million. For fiscal year 2023, the management forecasts earnings of USD1.08 per share and revenue between USD2.13 billion and USD2.16 billion6. CRWD opened March at USD201.33 and gained 12.79% to close at USD227.08.
Short-term uptrend; Ichimoku cloud turned bullish shown by the circled displacement and leading lines. Price trading above MA9 and MA26.
Salesforce.com Inc (NYSE:CRM)
CRM’s earnings beat estimates for this quarter. CRM opened the month at USD213.40 and dropped 0.51% to close at USD212.32. EPS of USD0.84 and revenue of USD7.33 billion both beat estimates of USD0.74 and USD7.24 billion respectively. The company’s updated targets for the 2023 fiscal year is between USD32 billion to US$32.1 billion, and expects US D1.5 billion in sales from Slack in 2023, which is the current focus for CRM.7
Range bound; resistance formed by outlier volume candle.
Sea Limited (NYSE:SE)
SE reported fourth-quarter results that missed earnings estimates but met revenue estimates. EPS was reported at -USD0.88 missing estimates of -USD0.87. Reported revenue was higher than the estimate. It was USD3.22 billion against the expected USD3.01 billion. For 2022, SE expects e-commerce revenue to be in the range of USD8.9 billion to USD9.1 billion, up 75% at the midpoint. However, digital entertainment revenue is expected to be between USD2.9 billion and USD3.1 billion, dropping from USD3.2 billion in the previous year.8 SE opened March at USD131.99 and fell 9.24% to close at USD119.79.
Based on Phillip Securities Research (PSR), SE is a BUY with a target price of USD196.
Victoria Secret (NYSE: VSCO)
VSCO cautioned investors of the upcoming challenges9. The reasons for the gloomy outlook are attributed to inflation and the ongoing Russia-Ukraine war. Regardless of the downcast outlook, the fiscal fourth quarter performance for VSCO was above expectations. Its EPS of USD2.70 and revenue of USD2.18 billion beat estimates of USD2.63 and USD2.14 billion respectively. VSCO opened this month at USD53.25 and lost 3.55% to close at USD51.36.
Short-term uptrend; MACD cross over with bullish momentum.
Futu Holdings Limited (NASDAQ:FUTU)
FUTU dropped 23.57% in March from its opening at USD42.60 to closing at USD32.56. FUTU failed to meet expectations this quarter. EPS was reported at USD0.39 missing estimates of USD0.56. Reported revenue at USD205.53 million was higher than the expected at USD187.454million. For 2022, FUTU expects operating revenues to increase by around HKD116 million from self-clearing migration, the majority of which will be translated into pre-tax profit. FUTU also expects client net asset new inflow to increase by 20-25%, versus the number at the end of last year.10
Range-bound; price trading above MA13 & MA15. However, short-term is trading below MA8.
Target Corporation (NYSE:TGT)
TGT had mixed earnings for this quarter. Its EPS of USD3.19 is higher than the estimates of USD2.86 with a revenue of USD31 billion, missing estimates of USD31.39 billion. TGT expects growth and sales to rise despite inflation in food and fuel prices. TGT forecasts revenue growth for the coming year in the low to mid-single digits and projected adjusted earnings per share to rise by high single digits. TGT opened March at USD226.83 and dropped 6.44% to close at USD212.22.11
Range-bound; price is currently trading close to the upper limit of Bollinger Band.
American Eagle Outfitters Inc (NYSE: AEO)
AEO expects its earnings to decline in the first half of 2022 due to higher freight costs12. AEO does not expect to maintain last year’s 10-year high earnings as the federal stimulus fades. The higher freight costs are due to congestion and tight capacity, and high freight rate levels are expected to continue into 2022. AEO reported net revenue of USD1.51 billion, which is in line with expectations, and an EPS of USD0.35. AEO opened this month at USD21.05 and lost 20.19% to close at USD16.80.
RSI indicates levelled strength, however price is trending lower. Bullish momentum comes in after breaking of USD20.
Dicks Sporting Goods (NYSE: DKS)
The holiday quarter was fantastic for DKS and it expects profit momentum to pick up13. DKS expects the baseline for future growth when emerging from the pandemic to be better than the forecast for 2022 earnings and same-store sales. Given that the world is trying to live with COVID-19, forecasting future growth is difficult, given the rising oil prices and high inflation levels. DKS’ EPS of USD3.64 and revenue of USD3.35 billion, beat estimates of USD3.43 and USD3.31 billion respectively. DKS opened this month at USD105.47 and lost 5.17% to close at USD100.02.
Range bound; Stochastic RSI showing levelled strength.
Best Buy (NYSE:BBY)
BBY shares rallied on the announcement of its earnings14. BBY’s reported performance was worse than expected. Its EPS of USD2.73 is according to expectations while its revenue was lower than expected. Its revenue was US$16.37 billion compared with expectations of USD16.6 billion. The disappointing results were due to shortage of staff and supply chain challenges. Despite the challenges, the management is confident that the sales gained during the pandemic will outlive the issues faced now. BBY opened this month at USD95.73 and lost 5.05% to close at USD90.90.
Gap Inc (NYSE: GPS)
GPS reported a better-than-expected performance for its fourth quarter15. Its loss per share of USD0.02 was lower than the expected USD0.14. GPS’ reported revenue of USD4.53 billion was higher than the estimated USD4.49 billion. GPS, like many other firms, is affected by supply chain issues. To circumvent the issue, the management team has started to diversify its port exposure and hold more inventories to offset longer transportation timeframes. For 2022, GPS is expecting to spend 25% less on air freight. GPS started the month at USD12.98 and lost 3.78% to close at USD12.49.
Bloomberg analysts’ recommendations
The table below shows the consensus ratings and average ratings of all analysts updated on Bloomberg in the last 12 months. Consensus ratings have been computed by standardising analysts’ ratings from a scale of 1 (Strong Sell) to 5 (Strong Buy). The table also shows a number of analysts’ recommendations to Buy, Hold or Sell the stocks, as well as their average target prices.
|Security||Consensus Rating||BUY||HOLD||SELL||12 Mth Target Price (US$)||Upside Potential*|
|CrowdStrike Holdings, Inc (NASDAQ: CRWD)||4.76||26 (89.7%)||3 (10.3%)||0||261.43||15.13%|
|Salesforce.com Inc (NYSE:CRM)||4.69||41 (85.4%)||7 (14.6%)||0||299.45||41.04%|
|Sea Limited (NYSE:SE)||4.68||30 (88.2%)||3 (8.8%)||1 (2.9%)||203.95||70.26%|
|Victoria Secret (NYSE: VSCO)||4.54||10 (76.9%)||3 (23.1%)||0||72||40.19%|
|Futu Holdings Limited (NASDAQ:FUTU)||4.48||23 (79.3%)||4 (13.8%)||2 (6.9%)||45.87||40.88%|
|Target Corporation (NYSE:TGT)||4.39||24 (72.7%)||8 (24.2%)||1 (3%)||274.56||29.38%|
|American Eagle (NYSE: AEO)||4.33||8 (66.7%)||4 (33.35%)||0||29.75||77.08%|
|Dicks sporting goods (NYSE: DKS)||3.96||13 (52%)||11 (44%)||1 (4%)||138.47||38.44%|
|Best buy (NYSE:BBY)||3.71||13 (46.4%)||12 (42.9%)||3 (10.7%)||122.82||35.12%|
|Gap (NYSE: GPS)||3||3 (13.6%)||16 (72.7%)||3 (13.6%)||18.7||32.81%|
*computed based on comparing target price with March’s closing price Source: Bloomberg
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Given the uncertainty faced by the Fed Officials, there are two factors that they need to consider moving forward. Firstly, how quickly should they raise interest rates to prevent the economy from growing further and yet, avoid an excessive slowdown in the economy? Secondly, has the sky-high inflation caused the inflation-adjusted borrowing cost to be low enough that the Fed need to raise interest rates much higher to curb growth?
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-  March 2022 FOMC Meeting: Fed Raises Interest Rates To … – Forbes.” 17 March 2022
-  Oil prices fall, continuing downward trend from last week | Reuters.” 14 March 2022
-  U.S. crude oil spikes to 13-year high of USD130 overnight, then … – CNBC.” 6 March 2022
-  Oil prices slide as Biden announces largest-ever Strategic Petroleum Reserve release” 31 March 2022
-  U.S. economic growth accelerates in fourth-quarter; corporate profits ….” 30 March 2022
-  CRWD Stock Jumps As Fiscal 2023 Outlook Handily Beats Estimates.” 10 March 2022
-  Salesforce (CRM) earnings Q4 2022 – CNBC.” 1 March 2022
-  SE Stock Down On Quarterly Earnings Miss | Investor’s Business Daily.” 1 March 2022
-  Victoria’s Secret refers to Ukraine war and inflation as it … – CNBC.” 2 March 2022
-  Futu Holdings Ltd (FUTU) Q4 2021 Earnings Call Transcript.” 11 March 2022
-  Target (TGT) Q4 2021 earnings – CNBC.” 1 March 2022
-  American Eagle warns of earnings hit due to higher freight costs.” 2 March 2022
-  Dick’s Sporting Goods (DKS) reports Q4 2021 earnings beat – CNBC.” 8 March 2022
-  Best Buy shares pop as investors bet pandemic gains will … – CNBC.” 3 March 2022
-  Gap (GPS) reports Q4 2021 narrower losses, projects revenue decline.” 3 March 2022
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About the author
Jonah Sim Hong Chee (Dealer) & Lee Ying Jie (Dealer) & Chan Zi Quan (Dealer)
Jonah Sim is a US Equity Dealer in the Global Markets Team and specializing in US and Canadian markets. He graduated from University of Essex with a bachelor’s degree in Banking and Finance.
Ying Jie is a US Equity Dealer in the Global Markets Team and specializing in US and Canadian markets. He is proficient in trading using Technical Analysis, placing emphasis on supply and demand, and price action.
Zi Quan is a US Equity Dealer in the Global Markets Team and specializes in the US and Canadian markets. He is an avid crypto fan and is adept in macro analysis.