• U.S. jobs report, Powell speech will be in focus this week. • Robinhood is a buy as it holds its first ever Investor Day event. • Dollar General is a sell with shrinking profit growth, soft guidance expected. • Looking for more actionable trade ideas? Subscribe here for up 60% off as part of our Black Friday sale!
U.S. stocks closed higher on Friday to cap off a winning week and month, as the blue-chip Dow Jones Industrial Average and benchmark S&P 500 both ended at new records.
For the week, the Dow added 1.4%, while the S&P 500 and the tech-heavy Nasdaq Composite each gained about 1.1%.
Source: Investing.com
Friday capped a strong month on Wall Street amid the post-election rally driven by President-elect Donald Trump’s victory. For November, the Dow Jones surged 7.5% and the S&P 500 jumped 5.7%, their biggest monthly gains of 2024. The Nasdaq advanced 6.2% for the period.
The coming week ahead is expected to be an eventful one as investors continue to assess the Fed’s outlook for interest rates. Fed funds futures are now pricing in around a 68% likelihood that the central bank will cut rates by 25 basis points at its December policy meeting, according to Investing.com’s Fed Monitor Tool.
Source: Investing.com
Most important on the economic calendar will be Friday’s U.S. employment report for November, which is forecast to show the economy added 202,000 positions, compared to jobs growth of 12,000 in October. The unemployment rate is seen inching up to 4.2% from 4.1%.
That will be accompanied by a heavy slate of Fed speakers, including Chairman Jerome Powell on Wednesday afternoon.
Elsewhere, the earnings schedule for next week includes reports from just a few noteworthy companies. These include Salesforce (NYSE:CRM), Okta (NASDAQ:OKTA), Ulta Beauty (NASDAQ:ULTA), Lululemon (NASDAQ:LULU), Dollar General (NYSE:DG), Dollar Tree (NASDAQ:DLTR), Kroger (NYSE:KR), and Chewy (NYSE:CHWY).
Regardless of which direction the market goes, below I highlight one stock likely to be in demand and another which could see fresh downside. Remember though, my timeframe is just for the week ahead, Monday, December 2 - Friday, December 6.
Stock to Buy: Robinhood
Robinhood (NASDAQ:HOOD) stands out as a top buy this week as the popular commission-free trading platform is set to host its highly anticipated Investor Day, where management will reveal its vision for the future.
Investors expect details on growth initiatives across brokerage, crypto, and global markets, as well as updates on new products such as Index Options, Futures, and the Robinhood Legend desktop platform.
These moves underscore Robinhood’s ambition to solidify its market position and attract a broader investor base.
Source: InvestingPro
It is worth mentioning that InvestingPro's AI-powered quantitative model rates Robinhood with a great ‘Financial Health Score’ of 4.0 out of 5.0. The company's strong momentum is supported by surging revenue and a resurgence in retail trading.
Post-election retail trading momentum and favorable regulatory tailwinds conducive to growth in cryptocurrency trading further support its bullish outlook.
In recent years, Robinhood has diversified its revenue streams, expanded internationally, and implemented cost-cutting measures, including a share repurchase program.
HOOD stock ended Friday’s session at $37.54, a tad below its record peak of $39.74 reached on November 25. At current levels, the Menlo Park, California-based retail brokerage firm has a market cap of $33.2 billion.
Source: Investing.com
Despite a 194% year-to-date rally, analysts see room for further growth, citing Robinhood’s undervalued valuation. As per data from InvestingPro, HOOD trades at a discounted 11x EV/sales ratio compared to peers like Interactive Brokers (NASDAQ:IBKR) (14.5x) and Coinbase (NASDAQ:COIN) (13.6x).
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Stock to Sell: Dollar General
In contrast, Dollar General faces mounting challenges. The discount retailer is set to release its Q3 earnings report on Thursday morning at 6:55AM ET, but expectations are grim. Declining foot traffic, rising costs, and shrinking margins are anticipated to weigh heavily on results.
Underscoring several challenges facing Dollar General, all 23 analysts surveyed by InvestingPro cut their profit estimates ahead of the report to reflect a 37% decline from their initial expectations.
Source: InvestingPro
According to the options market, traders are anticipating a swing of 10.3% in either direction for DG stock following the release.
Earnings have been catalysts for outsized swings in shares this year, as per data from InvestingPro. Notably, DG plunged 33% when the company last reported quarterly numbers in late August to suffer its eighth consecutive negative earnings-day reaction.
For the quarter, earnings per share are expected to fall 25.4% from a year earlier to $0.94, marking the company’s sixth consecutive quarter of double-digit profit declines. Revenue growth, while up 4.4% annually to $10.1 billion, has been insufficient to counteract falling margins and rising operational costs.
Dollar General’s forward outlook is equally concerning. Management is likely to deliver cautious guidance for the critical holiday season, reflecting weak consumer demand for discretionary goods and ongoing cost pressures. Despite initiatives like introducing new merchandise categories, the results have yet to show meaningful improvement.
The discount retailer’s once-reliable business model is faltering under the weight of declining customer traffic, increased costs, and stiff competition from industry giants like Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN).
DG stock ended Friday’s session at $77.27, not far from a recent 52-week low of $72.12, a level not seen since September 2017. At current valuations, Dollar General has a market cap of $17 billion, making it the largest dollar store chain in the country, ahead of Dollar Tree.
Source: Investing.com
Shares have plummeted 43.1% year-to-date, reflecting the growing pessimism surrounding the stock.
It should be noted that Dollar General currently has a below average InvestingPro Financial Health Score of 2.3 out of 5.0, highlighting its vulnerability to macroeconomic headwinds and its inability to keep pace with larger, more diversified competitors.
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Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF, and the Invesco QQQ Trust ETF. I am also long on the Technology Select Sector SPDR ETF (NYSE:XLK).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.
