Expedia Group, the online travel facilitator, and Synopsys, which is revolutionizing its chip-design software with generative AI tools, lead this weekend's watch list of five stocks near buy points. Along with EXPE and SNPS, lifestyle and project-oriented social media site Pinterest, industrial pump maker Flowserve, and oil and gas equipment supplier Weatherford International round out the list.
Expedia stock is on the watch list of the IBD Leaderboard portfolio of elite stocks. Synopsys is part of the flagship IBD 50 list of leading growth stocks. SNPS stock, along with rival Cadence Design Systems, is part of the IBD Long Term Leaders list featuring companies with a track record of reliable earnings growth that make them conducive to buy on moderate pullbacks.
Stock Market Set-Up
Economic data in the past week were positive for Expedia and Pinterest, the two consumer-related names on the list. GDP data show personal consumption expenditures ending 2023 on a strong note. Real PCE grew at a faster-than-expected 2.8% annual rate in the fourth quarter, including a 0.5% monthly increase in December. Even better, the solid growth is coming amid falling inflation, which should allow the Federal Reserve to start cutting rates by May, if not March.
The monster rally since late October has driven the S&P 500 to multiple all-time closing highs since Jan. 19. However, despite the pretty ideal combination of growth and inflation in data released Thursday and Friday, both the S&P 500 and Nasdaq composite ended the week on a muted note. We'll find out in the coming week whether this was just a breather or a loss of momentum, with big tech companies due to report earnings and the Fed set to either support or quash market expectations of five or six rate cuts in 2024 with its Wednesday afternoon policy update.
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.
EXPE Stock
Expedia stock, after a period of underperforming rivals Airbnb and Booking Holdings, has had a renewed spring in its step since comfortably beating Q3 estimates on Nov. 2 with 33% EPS growth as revenue rose 9%.
The operator of multiple travel properties, including Vrbo and Hotels.com, got a big vote of confidence from Evercore ISI analyst Mark Mahaney on Nov. 17. He said Expedia was approaching a "fundamental inflection point," following the July launch of its One Key loyalty program across all its brands, which it recently consolidated on a single technology platform.
After Mahaney upgraded Expedia stock to outperform and boosted his price target to 200 from 135, a number of other analysts have followed suit.
EXPE stock dipped 0.2% to 151.93 in Friday stock market action, but rose 2.3% for the week, while bouncing after a test of its 10-week moving average. A move past Thursday's 153.57 high would break above the trendline from its Dec. 26 peak, providing an early entry opportunity.
A weekly MarketSmith chart shows that Expedia stock now has an official 155.84 buy point from a five-week flat base.
Travel stocks generally are showing strength, including Booking and Airbnb, but also Royal Caribbean, several hotel stocks and even airlines rebounding.
SNPS Stock
On Jan. 16, Synopsys announced a deal to buy engineering simulation software company Ansys for about $35 billion. The deal should expand Synopsys' total addressable market by 50% to $28 billion, but it will take over a year to begin to bolster earnings, the company said. Plus, the deal isn't seen closing until 2025.
Since Dec. 22, when The Wall Street Journal revealed the merger negotiations, Synopsys and rival Cadence Design Systems have diverged, with CDNS breaking out to a new high on Jan. 19.
SNPS stock reclaimed its 10-week and 50-day moving averages with some gusto early last week, but faded back to the key support levels by the end of the week.
A move past Wednesday's intraday high of 554.57 would offer an early entry. But that could turn into a proper handle after Tuesday. For now, SNPS has an official 573.77 buy point from a six-week consolidation.
PINS Stock
Pinterest was featured as Friday's IBD Stock Of The Day, as PINS stock rallied with help from a price-target hike from Evercore ISI's Mahaney. He touted the potential of Pinterest's partnership with Amazon that the digital pin board with 480 million users announced in April.
The partnership is part of Pinterest's push to drive more shopping directly from its platform. Mahaney noted "a significant ramp up in Amazon ads" over the past few months. He gave PINS stock a 50 price target, up from 45, keeping a buy rating.
PINS stock rose 1.9% to 37.70. While the stock gave back some gains after rising as high as 38.63, the rebound off its 10-week moving average and break of a trendline from its Jan. 10 high make it actionable now.
Pinterest's Q4 earnings are due after the close on Feb. 8. However, quarterly results from Facebook-parent Meta Platforms after Thursday's close and Snapchat-parent Snap on Feb. 6 could also impact PINS stock.
FLS Stock
Flowserve provides pumps, valves and seals to control fluids for oil and gas, chemical, power, water and general industry. More than half its sales come in the aftermarket.
The company is enjoying an earnings turnaround and sales acceleration after a few down years starting in 2020. In Q3, bookings fell 13% to $1.1 billion, but Flowserve's backlog rose 7% to $2.8 billion.
"We continue to believe we are in the early stages of a multi-year upcycle," CEO Scott Rowe said in the Q3 earnings statement. He cited Flowserve's positioning to benefit from investments in energy security and decarbonization, as well as aftermarket strength.
FLS stock slipped 0.9% to 40.49 on Friday, but continued to find support at its 21-day line and 10-week moving average. A move past Tuesday's intraday high of 41.43 would offer an early entry. Flowserve has an official 41.99 buy point from a five-week flat base that's just 7% deep. That's right next to the top of a prior flat base.
Still, there are a few dampening factors to keep in mind. Flowserve's Relative Strength line, the blue line in IBD charts that tracks its progress vs. the S&P 500, has been trending lower since the end of September. Its Accumulation/Distribution Rating is a worst-possible E, which is generally a negative indicator of institutional investor interest.
WFRD Stock
Weatherford International, after emerging from bankruptcy in late 2019 only to suffer through the oil and gas industry's hit from Covid in 2020, has been enjoying a dramatic sales and earnings recovery the past two years. In Q3, sales grew 17% as EPS surged 315%. Fourth-quarter earnings are due before the open on Feb. 7.
While Weatherford's results are driven in large part by broad industry trends, the company has been upping its game as well. In Q3, adjusted EBITDA margin rose to 23.2% from 22.8% in Q2 and 19.1% a year ago. The company is targeting EBITDA margins around 25%.
The improvement has come amid "structural changes in manufacturing, sourcing, logistics and our repair and maintenance operations" to drive efficiency, CEO Girishchandra Saligram said on the Q3 call.
Weatherford's Q4 earnings are due on Feb. 6. Industry peer NOV Inc. reports on Feb. 1
New technology launches also are helping to grow its market share and extend its reach, and there are more such launches in the pipeline.
WFRD stock is ranked No. 2 in the Oil&Gas-Machinery/Equipment industry group, based on technical and fundamental factors, according to IBD Stock Checkup.
WFRD dipped 0.1% to 99.14 on Friday but rose 4.1% on the week, making a strong move off its 10-week and 50-day lines and breaking above a trendline from its Dec. 27 high. That move still looks actionable.
WFRD has an official 100.93 buy point from a cup base that is still operative, though it's close to forming a new base with 102.64 buy point.
The RS line has lagged in the past few months, but Weatherford has outperformed most oil plays. Crude oil prices are rebounding, offering a possible tailwind.
