5 Stocks To Watch Before The Market Opens Today
Estimize | Jan 24, 2017 12:50AM ET
Alibaba (NYSE:BABA): Alibaba , like its American counterpart Amazon (NASDAQ:AMZN), controls multiple entities ranging from a financial services arm to a cloud computing business. Many of these spinoffs make successful companies in their own right. Alipay or Ant Financial, a spinoff of Alibaba, is the largest online payment service provider in the region preparing to IPO in 2017 with a valuation north of $60 billion.
Meanwhile, AliCloud, the cloud computing arm of Alibaba, continues to make waves in China’s rapidly growing cloud computing industry. As part of the company’s larger strategy, Alibaba plans on leveraging its cloud services to diversify into multiple verticals including AI, machine learning and image recognition. Some of these tools are being used to help tackle the rampant counterfeiting problem taking place on the platform. Alibaba Cloud has scaled significantly in the region but globally it still can’t compete with Amazon Web Services or Microsoft (NASDAQ:MSFT) Azure.
The cloud service did score a huge victory at last week’s Davos event, agreeing to a 12 year partnership to provide the Olympics with cloud computing services. Gaining more publicity on the global stage will help narrow the gap between them and either of the cloud computing heavy weights.
As with most companies, a few near term headwinds could hamper this week’s financial report. Trump still remains committed to doing something about China, which could very well limit Alibaba’s U.S. expansion. Beyond geopolitical risks, increasing competition, currency headwinds and an overall weak consumer environment pose a threat to performance.
Johnson & Johnson (NYSE:JNJ): Trump’s to do list for his first 100 days in office includes repealing key legislation such as Dodd-Frank and Obamacare but also tackling the powerful drug manufacturing industry. Investors initially believed that Trump would sweep drug pricing issues under the rug, as many Republicans have, but it now appears Trump wants to police the pharmaceutical industry. For a company like Johnson & Johnson that could mean some pushback on any incremental increases it plans to pursue in the future, thereby putting pressure on top and bottom line growth. That said, J&J remains relatively insulated to Trump’s rhetoric compared to its peers, so any impact would largely be minimal. From a drug standpoint, new products like Imbruvica, Xarelto and Darzalex continue to outperform expectations while a robust pipeline bodes well for future results. Hepatitis C medication, Olysio, on the other hand, remains challenged largely due to increasing competition from Gilead Sciences (NASDAQ:GILD), Merck (NYSE:MRK), and great adoption of generic drugs.
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Verizon Communications (NYSE:VZ): The resurgence of T-Mobile (OTC:DTEGY) and Sprint (NYSE:S) in the last few years flipped the landscape of telecom upside down. That put pressure on Verizon to lower prices but also forced them to explore new businesses beyond just phones. Some of its new focuses include rolling out 5G networks, diversifying into broad based media and expanding Fios coverage and boosting IoT prospects. Verizon’s media business currently consists of its native Go90 app, AOL and the maligned purchase of Yahoo (NASDAQ:YHOO). The deal still remains in limbo given Yahoo’s failure to disclose multiple hacking scandals that started an SEC investigation. Meanwhile analysts expect phone sales to decline this quarter as phone subsidies become a thing of the past. Now that customers must pay for phones upfront it’s likely new phone sales start to suffer. Additional pressure from AT&T (NYSE:T), T-Mobile and Sprint hasn’t helped either. AT&T’s pending merger with Time Warner (NYSE:TWX) puts Verizon on the hot seat to make a big time acquisition of its own.
Lockheed Martin (NYSE:LMT): Trump’s intent to raise defense spending during his administration creates a potentially positive situation for industrial stocks like Boeing (NYSE:BA) and Lockheed Martin . But on more than one occasion Trump tweeted that he would not pay full price to reach that goal. The President’s hardened stance forced Lockheed to drop the price of F-35 fighter jets for the first time in company history. As of now the company is nearing a deal with the U.S. Department of Defense for almost $9 billion, bringing the price per F-25 below $100 million. Additional government contracts include one with the U.S. Army valued at $1.5 billion that will carry through the entire fiscal 2017. For the fourth quarter, analysts expect positive growth from Aeronautics and Missions Systems businesses while Missiles and Fire control segments will continue to pose a problem.
Polaris (NYSE:PII): In each of the past 4 quarters Polaris delivered negative growth on both the top and bottom line. Weak sales in off road vehicles, side by sides, ATVs and Snowmobiles continue to lag the performance of the overall industry. On the upside, high single digit motorcycle sales outpace the declines experienced by the broader sector. In the third quarter, management cut full year guidance in the range of $3.40 to $3.60 with sales expected to drop in the mid to high single digit range. Analysts expect today’s results to follow a similar theme as past quarters; motorcycle sales marginally higher and every other segment down.
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