1 Stock To Buy, 1 Stock To Dump This Week: Amazon, Twitter
Jesse Cohen | Jul 10, 2022 21:50
- Earnings, inflation, retail sales data to dictate market sentiment this week
- Amazon stock is a buy ahead of Prime Day
- Twitter is set to struggle as Musk terminates $44B buyout deal
- Inflation
- Geopolitical turmoil
- Disruptive technologies
- Interest rate hikes
Stocks on Wall Street ended mixed on Friday, but the major U.S. indices still managed to score weekly gains as the release of the latest U.S. jobs report helped ease fears of a recession.
The blue-chip Dow Jones Industrial Average rose about 0.8% for the week, the benchmark S&P 500 tacked on 1.9%, while the technology-heavy Nasdaq Composite jumped 4.6%.
The week ahead is expected to be another busy one, given the start of Wall Street’s second quarter earnings season, which sees names like JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Morgan Stanley (NYSE:MS), Delta Air Lines (NYSE:DAL), and UnitedHealth (NYSE:UNH) all report their latest financial results.
There is also key economic data on the agenda, including the latest consumer price inflation report and retail sales figures.
Regardless of which direction the market goes, below we highlight one stock likely to be in demand and another which could see further downside.
Remember though, our timeframe is just for the upcoming week.
h2 Stock To Buy: Amazon/h2Amazon (NASDAQ:AMZN) will be in focus this week, with the e-commerce giant’s annual Prime Day shopping extravaganza - which is expected to be one of the biggest shopping events in history - set to kick off at 3:00AM ET on Tuesday.
First held in 2015, the two-day event, which gives Prime members a chance to score special deals, will include discounts on more than two million items, according to the company.
While Amazon does not release official Prime Day sales figures, many are expecting online spending during this year’s event to eclipse last year’s record high despite lingering worries about inflation and the economy.
According to the digital research arm of software company Adobe (NASDAQ:ADBE), Amazon’s 2021 Prime Day raked in $11 billion in total sales, or 6.1% more than in 2020 during the two-day period.
“A large percentage of consumers are stating that they still plan to shop and spend big during the summer holiday sales season, especially around Prime Day,” Tory Brunker, Senior Director of Product Marketing at Adobe, said.
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AMZN stock - which just recently split 20-for-one after years of trading at more than $1,000 - ended Friday’s session at $115.54.
With a market cap of $1.18 trillion, the Seattle, Washington-based e-commerce and cloud giant is the fourth most valuable company listed on the U.S. stock exchange, trailing only Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and Google-parent Alphabet (NASDAQ:GOOGL).
Amazon shares have struggled mightily in 2022, tumbling almost 31% year-to-date as a potent combination of soaring inflation, and rising interest rates led to an aggressive reset in valuations across the frothy tech space.
However, the stock has been trading incredibly well lately, with chart technicals suggesting that Amazon stock looks ready to break out of its recent trading range after recapturing a key level.
AMZN shares, which managed to successfully hold above their May lows amid recent turmoil, are now back above the 50-day moving average, which usually signals more gains ahead in the near term.
h2 Stock To Dump: Twitter/h2Twitter (NYSE:TWTR) shares are expected to suffer another difficult week, with more wild swings on the horizon, as investors react to news that Elon Musk terminated his agreement to purchase the social media platform.
Musk filed notice with the Securities and Exchange Commission late Friday that he was pulling out of the $44 billion, or $54.20-a-share deal, claiming that Twitter had failed to provide information on the number of fake and spam accounts despite repeated requests.
"Mr. Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement," according to the filing .
In addition, Twitter "appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect."
Musk also claimed that Twitter breached their agreement by firing two key high-ranking executives without his consent as required by their contract.
Twitter's Chairman of the Board, Bret Taylor, said the company is committed to closing the transaction on the price and terms agreed upon with the Tesla (NASDAQ:TSLA) CEO, and that it plans to pursue legal action to make him honor the merger agreement in court.
Musk, who waived his right to due diligence on the deal when it was unveiled earlier this year, could be forced to pay a $1 billion breakup fee if he walks away from the proposed takeover, or forced to complete the deal under the specific performance clause.
TWTR shares ended at $36.81 on Friday and $35.00 after-hours, close to their lowest level since March and a steep discount to the $54.20 per share acquisition price.
At current levels, the San Francisco, California-based microblogging platform - which is down 14.8% year-to-date - has a market cap of roughly $28 billion.
According to regulatory filings, the estimated number of spam accounts on the microblogging site has held below 5% since 2013. In contrast, Musk has argued that it was around 20%.
Disclosure: I have no positions in any stocks mentioned.
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