Apple and MercadoLibre lead this weekend's watch list of five stocks near buy points that are showing relative strength in a tough market. Four of the five have already passed their second-quarter earnings tests, including AAPL, MELI, Allstate and Tenet Healthcare. Off-price retailer TJX rounds out the list.
MercadoLibre is part of the flagship IBD 50 list of leading growth stocks. With insurance stocks outperforming, the SPDR S&P Insurance ETF is part of the IBD Leaderboard portfolio of elite stocks.
The breadth of this group shows there are opportunities to be found, despite a challenging backdrop, but investors need to stay in a defensive stance, limiting any buys until the tenor of the market improves. The S&P 500 just suffered a 3.2% two-day decline, its worst since the banking crisis in March 2023, and now sits 5.7% off its record closing high. The Nasdaq has entered correction territory, falling 10% from its July 10 peak, while sliding 4.7% in its worst two-day stretch since Nov. 3, 2022.
Still, the market could turn more constructive if incoming data relieves sudden fears that the economy is heading for a sharp slowdown. It's possible that the reaction to Friday's jobs report was overstated, with weather likely exaggerating the softness. Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
Apple Stock
AAPL stock sidestepped the Nasdaq's 3.35% weekly loss, rising 0.9% to 219.86 on the strength of its Q2 earnings beat after Thursday's close.
Apple EPS rose 11% to $1.40, six cents ahead of estimates. Revenue grew 5% to $85.8 billion, $1.4 billion above forecasts, as hardware sales rose 2% to $61.6 billion and services revenue grew 14% to $24.2 billion.
Apple said Q3 revenue should grow at a similar rate to Q2's 5%, a bit ahead of 4.4% analyst forecasts.
Wedbush analyst Dan Ives raised his AAPL price target to 285 from 275, keeping an outperform rating, calling the positive September-quarter outlook "just the opening act." Ives noted that China sales should return to growth in Q3. But the big catalyst for Apple will be release of the iPhone 16 with artificial intelligence capabilities in mid-September.
AAPL stock has pulled back since peaking in mid-July, after a June 11 breakout launched it on an 18% run. Now Apple is finding support at its 21-day exponential average. The set-up isn't quite right for an entry. A pullback to the 50-day line could offer opportunity if the market cooperates.
MercadoLibre Stock
MELI stock surged 10.6% to 1,776.14 on Friday on the heels of better-than-expected Q2 results. Known as the Amazon of Latin America, the fintech and ecommerce play posted EPS of $10.48, up 103% from a year ago and nearly $2 ahead of estimates. Revenue grew 42% to $5.1 billion.
MercadoLibre said monthly users of its payment and other financial apps jumped to 52 million from 38 million. Ecommerce customers jumped 19% to 57 million, the fastest growth in nearly three years.
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"We are driving offline retail online by creating a superior experience for buyers and sellers, and this is the major source of our growth," the company said in a letter to shareholders. Management noted that relatively low ecommerce penetration in Latin America, saying MercadoLibre can be "the driving force of this structural growth opportunity."
MELI is within about 1% of an official 1,792.05 buy point from a cup-with-handle base. However, MELI already flashed an early entry opportunity as it cleared 1,764.50 and broke a trendline sloping down from its May 20 handle high.
Allstate Stock
Last week Allstate posted Q2 EPS of $1.61, crushing estimates by $1.24 as the insurer reversed a year-ago ago loss. Allstate generated $15.7 billion in revenue, an acceleration to 12% growth.
On July 18, BMO Capital upgraded ALL stock to outperform from market performing, nudging up its price target to 191. The analysts noted that moderating auto inflation has improved the risk-reward outlook, since repair costs tend to rise with vehicle prices.
BMO said that Allstate is emerging from a five-year transformation, including the implementation of a plan to improve its property-liability exposure, and can now play "customer acquisition offense."
ALL rose 4.5% to 176.82 on the week, closing just below a 177.37 buy point from a cup base. However, Thursday's move broke a trendline from a 179.93 intraday high on July 19 that began a sort of high-handle formation, offering an early entry above 176.44.
Tenet Healthcare Stock
Dallas-based Tenet Healthcare reported Q2 earnings of $2.31 per share on July 23. That was up 60% from a year ago and 22% above the analyst consensus, according to FactSet. Revenue inched up less than 1% to $5.1 billion, but edged past estimates of about $5 billion.
For the full year, Tenet raised its EPS outlook to a range of $10.41 to $11.12. That was above the prior range of $8.37 to $9.41.
Tenet also announced a new $1.5 billion share repurchase authorization, equal to just over 10% of its market cap.
As Deutsche Bank analyst Pito Chickering wrote in a May 30 note, Tenet is in the middle of a multiyear transformation "into a higher margin (ambulatory surgery center) ASC-centric company with improving financial flexibility."
Essentially flat revenue in Q2 reflected Tenet's sale of nine hospitals this year. The ambulatory care segment saw revenue grow 21% from a year ago amid growth in revenue per case, acquisitions and offering a greater breadth of services.
THC broke past a 142.35 flat-base buy point on July 24, hitting an intraday peak of 155 on Monday. However, THC fell 6.5% to 141.75 on the week, slipping just out of a buy zone but finding support at its 21-day average. The 142.35 buy point is still operative.
TJX
TJX was Friday's IBD Stock Of The Day, a day after Amazon warned that customers are increasingly looking for bargains. The off-price retailer continues to gain market share and is seen as a good bet amid challenging economic conditions.
In addition to TJ Maxx and Marshalls, the Framingham, Mass., retailer operates HomeGoods and Homesense chains. With mortgage rates now falling as the 10-year Treasury yield dives amid recession worries, the housing market could be a beneficiary. TJX is set to report Q2 results on Aug. 21.
Loop Capital in an early July note wrote that off-price retailers are seeing greater traffic, according to end-of-quarter store checks, while mall department stores look "rough." The firm noted that "limited" clearance sales suggest better performance. Loop Capital raised its price target on TJX stock to 125 from 115 and maintained a buy rating on the shares.
TJX went on a run, starting with a break above a 102.04 double-bottom buy point in late May. Its relative strength line, the blue line in IBD charts that tracks a stock's progress vs. the S&P 500, is on the cusp of an all-time high, validating its market leadership.
TJX rose 1.2% to 113.14 on the week. A weekly MarketSurge chart shows that TJX has etched out a three-weeks-tight pattern, with price changes of no more than 1.5% in back-to-back weeks. The 115.24 top of the three-weeks-tight pattern offers the next entry point. A move down to its 50-day or 10-week lines could also offer opportunity.
