Generally strong earnings results from the biggest technology companies overshadowed news that might otherwise have sent stocks lower last week. First Quarter GDP data released on Thursday showed that economic growth slowed markedly from the previous quarter and fell short of most economists’ forecasts. By Friday’s close, more than 50% of the S&P 500 reported Q1 2023 earnings, and 80% of those beat EPS expectations, per data from FactSet. The major indexes managed to eke out modest weekly gains of around 1% for a positive close to April. The S&P 500 added 1.5%, the Dow rose 2.5%, and the Nasdaq posted a tiny monthly gain.
Next week will be busy on the earnings front, with reports from Starbucks, Apple, and Berkshire Hathaway, among others, expected. Still, focus will shift to the Federal Reserve for the announcement of its next move on interest rates on Wednesday. Market participants expect the Fed to lift its key benchmark by a quarter of a percentage point to a range of 5.00% to 5.25% in what will likely be the Fed’s final rate hike of the current tightening cycle.
Anyone who keeps up with digital currency markets has heard about the major event slated for April 2024. Our first recommendation this week is a leveraged asset that’s set to benefit and is gaining attention from institutional investors ahead of this once-every-four-years event.
Microstrategy (MSTR)
Bitcoin is up 76% since the start of the year, and it may be just getting started as the highly anticipated 2024 “bitcoin halving” draws near. Cloud-based service provider, Microstrategy, has been gaining attention from institutional investors who cannot invest directly in cryptocurrencies.
The bitcoin halving, which occurs every four years, reduces rewards for successfully mining new bitcoin by 50%. The aim is to reduce the supply of Bitcoin over time. Before the last halving, on May 11, 2020, the price of Bitcoin increased by 19% from the same day a year earlier. Bitcoin’s price reached record highs after each of the last three halvings; its price has tended to bottom out and start to rally 15 months prior to each halving. The next halving event is slated for April 2024.
Microstrategy offers “the most attractive means” through which equity investors can take advantage of the event, according to Berenberg Capital Analyst Mark Palmer, who cites its correlation of 0.90 to the crypto asset to support his stance. Year-to-date, MSTR stock has risen by 126.44%. Wall Street’s consensus rating for the stock is a Moderate Buy, with an average analyst price target of $415.00, implying an upside potential of 26.38% from current levels. Microstrategy is scheduled to report first-quarter earnings on May 1 after the market close.
Our following recommendation is an oil and gas midstream company, which like Microstrategy, is one to watch in the coming days ahead of its Q1 earnings report.
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ONEOK (OKE)
ONEOK not only posted strong growth in the fourth quarter but expects higher 2023 results. In Q4, ONEOK posted adjusted EBITDA growing by 14% year-over-year. For 2023, it expects adjusted EBITDA of $4.575 billion at the midpoint. This year, it will support its growth by allocating capital to high-return organic projects that will lead to more substantial earnings as the company realizes high returns. This should enable ONEOK to increase its dividend, currently an impressive 5.81%.
OKE is set to report first-quarter 2023 earnings on May 2, after the market close. This oil and gas midstream company’s first-quarter earnings are likely to have benefited from long-term natural gas storage contracts and expansions, as well as rising natural gas and NGL production volumes. OKE is definitely a ticker to keep an eye on as its earnings date nears.
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Axsome Therapeutics (AXSM)
Axsome Therapeutics has two approved drugs on the market. Sunosi, a dopamine-norepinephrine reuptake inhibitor and the only one of its kind to treat narcolepsy, and Auvelity, a fast-acting oral treatment for depression, also the first of its kind. The latter launched in October and is being evaluated to treat agitation in people with Alzheimer’s disease and to help people quit smoking.
Share price sank more than 10% last month following the release of disappointing fourth-quarter earnings. The company incurred an adjusted loss of $1.28 per share and generated $24.4 million in revenues. Spending was up 227% year over year. But this increase was due to higher commercial activities for Sunosi and Auvelity, including sales force onboarding and marketing spending, which should pay off in the coming quarters.
Other potential tailwinds include Axsome’s two other drugs — AXS-07 for treating migraines and AXS-14 for fibromyalgia — that it plans to submit for FDA approval this year.
The stock is down 19% year to date but is up 78% over the past 12 months. Given the potential of Axsome’s therapies, the company’s $2.7 billion market cap may not adequately reflect its long-term potential.
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