1 Stock to Buy, 1 Stock to Sell This Week: Tesla, Levi Strauss

• The US jobs report, Powell’s speech will be in focus this week.

• Tesla is a buy with better-than-expected Q3 deliveries.

• Levi Strauss is a sell with disappointing earnings on deck.

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U.S. stocks ended Friday with the Dow Jones industrial average closing at a fresh record high as traders digested subdued inflation data that boosted hopes of another broad interest rate cut at the Federal Reserve’s policy meeting in November.

All three major U.S. stock indexes posted their third straight week of gains, with the Dow and the benchmark S&P 500 both up about 0.6 percent for the period. The tech-rich Nasdaq Composite advanced nearly 1 percent on the week.

Source: Investing.com

Next week is expected to be an eventful one as investors continue to assess the Fed’s prospects for rate cuts. Markets are pricing in a cut of at least 25 basis points in November, with expectations for a 50 bps cut a 48.1% chance, according to Investing.com’s Fed Monitor.

The highlight of the economic calendar will be Friday’s US employment report for September, which is expected to show the economy added 144,000 jobs, compared with an increase of 142,000 jobs in August. The unemployment rate is holding steady at 4.2%.

Ahead of the jobs report, ISM manufacturing and services PMIs will also be closely watched.

Source: Investing.com

This will be accompanied by a host of Fed speakers, including Chairman Jerome Powell on Monday morning.

Elsewhere, next week’s earnings schedule includes reports from just a few noteworthy companies. These include Nike ( NYSE:NKE ) , Carnival ( NYSE:CCL ) , Levi Strauss ( NYSE:LEVI ) and Constellation Brands ( NYSE:STZ ) .

Regardless of which way the market is headed, below I highlight one stock that could be in demand and another that could see another decline. Remember though, my time frame is only for next week Monday, September 30 – Friday, October 4.

Stock to buy: Tesla

The main catalyst driving Tesla ( NASDAQ:TSLA ) stock this week is the highly anticipated release of its third-quarter delivery numbers, which are expected to be announced Wednesday morning.

The electric vehicle company’s performance in the third quarter should show an improvement after a turbulent first half of the year, in which demand was hit by slowing growth in key international markets.

Wall Street analysts forecast 462,000 vehicle deliveries for the quarter, up 6% from Q3 2023. That would mark the EV maker’s third-best quarterly total, after a record 484,507 in Q4 2023 and 466,140 in Q2 2023.

The story continues

Tesla’s strong delivery numbers are fueled by growing demand, particularly in China, where government subsidies and low-cost financing have supported sales.

Tesla makes the Model 3, Model Y, Model X and Model S, as well as the Semi and Cybertruck. The Model Y crossover accounts for the majority of sales. The Austin, Texas-based company is widely recognized as a global leader in the electric vehicle market, with a dominant market share in the US and China.

Investors will also be closely watching Tesla’s Robotaxi event on Oct. 10, where updates on the company’s self-driving technology and artificial intelligence will be shared. This event is likely to generate buzz around Tesla’s AI capabilities and future business opportunities, including autonomous transportation services.

Source: Investing.com

Shares of TSLA rose 9.3% last week to end Friday’s session at $260.46 per share, its highest closing price since July 10. Shares are up 4.8% year to date.

At current levels, Tesla has a market cap of $812 billion, making it the world’s most valuable automaker, bigger than names like Toyota ( NYSE:TM ) , Volkswagen ( ETR:VOWG_p ) , General Motors (NYSE:GM) and Ford. (NYSE:F).

Source: InvestingPro

It’s worth noting that Tesla has an above-average “Financial Health Score” of 3.0 out of 5.0, as assessed by InvestingPro’s AI-powered models, highlighting its strong fundamentals, technical strength and market leadership in electric vehicles and automation based on artificial intelligence. .

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Stock for sale: Levi Strauss

Contrary to Tesla’s optimistic outlook, Levi Strauss is struggling with falling demand amid a difficult economic context.

The iconic denim apparel company is expected to report weak earnings for its third quarter financial report, which is due after the market closes at 4:10 PM ET on Wednesday.

Investor sentiment around Levi Strauss remains bearish, with analysts cutting profit forecasts ahead of the earnings release. According to InvestingPro, all 12 analysts covering LEVI have cut their earnings estimates over the past 90 days, reflecting growing concerns about the company’s outlook.

Market participants expect a sizeable swing in LEVI stock after the update drops, according to the options market, with a possible implied move of around 9.2% in either direction. The earnings have been the catalyst for huge swings in the stock this year, according to data from InvestingPro, with Levi Strauss shares falling 15% when the company last reported quarterly numbers in late June.

Source: InvestingPro

Analysts are forecasting earnings per share of $0.31, up slightly from $0.28 a year ago, while revenue is expected to rise 3% to $1.55 billion.

Despite these modest growth figures, Levi Strauss has been hit hard by weakening consumer demand as inflation continues to squeeze household budgets around the world. With higher living costs and inflation lingering longer than anticipated, many consumers are pulling back on discretionary spending, including clothing purchases.

With that in mind, I think there is a growing downside risk for the company to cut its full-year earnings and sales growth prospects amid a deteriorating retail environment.

Source: Investing.com

Shares of LEVI closed Friday at $21.65, the highest level since June 26. The stock has gained 30.9% in 2024. At the current valuation, San Francisco-based Levi Strauss has a market cap of $8.5 billion.

It should be noted that Levi Strauss’ near-term outlook for profitability and free cash flow looks risky, according to InvestingPro, which flags the high earnings multiple as a cause for concern.

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Disclosure: As I write, I am long the S&P 500 and the Nasdaq 100 through the SPDR® S&P 500 ETF and the Invesco QQQ Trust ETF. I’m also long the Technology Select Sector SPDR ETF (NYSE:XLK).

I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing assessment of risks to both the macroeconomic environment and the financial condition of companies.

The opinions 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.

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