The three major U.S. equity indexes closed higher Friday. The Nasdaq jumped 3.3%, the S&P 500 rose 2.5% and the Dow Jones industrials were up 1.8%. Friday’s report on personal consumption bolstered hope that U.S. inflation may have reached its peak. Tech and consumer cyclical stocks both added 3.4% to lead all 11 sectors. This week’s big economic report comes Friday, when the report on May payrolls is released. Economists currently expect the economy to have added about 325,000 in the month, down from 428,000 in April.
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Before markets opened Tuesday morning, KE Holdings beat top-line and bottom-line estimates but issued downside guidance for the current quarter. An announced $1 billion share buyback program, still to be approved by shareholders, carried the day. The stock traded up 7% in Tuesday’s premarket session.

After markets close Tuesday afternoon, ChargePoint, HP, Nordic American Tankers and Salesforce will be reporting quarterly results. Tech companies Hewlett Packard Enterprise, Pure Storage and UiPath take their turns in the earnings spotlight on Wednesday.

Here are two specialty retailers on deck to report quarterly results after markets close Wednesday.

Chewy

Chewy Inc. (NYSE: CHWY) is a pure-play e-commerce provider of pet supplies and a subsidiary of privately held PetSmart. Over the past 12 months, the stock has dropped by more than 63%. Since posting a 52-week high in mid-August, the stock is down nearly 72%.

Chewy’s failure to post a profit in seven of the past nine quarters and a consensus outlook for eight more quarters of losses are not what investors want to hear about right now. Add to that what can only be called modest sales growth, and it is not difficult to see why investors have been bailing out.

Analysts remain slightly bullish on the stock. Of 23 brokerages covering the company, 10 have a Hold while 13  have a Buy or Strong Buy ratings. At a recent share price of around $27.10, the upside potential to a median price target of $55.00 is 103%. At the high price target of $108.00, the upside potential is nearly 300%. Some rethinking may be in order.

Revenue in the first quarter of fiscal 2023 is forecast to come in at $2.41 billion, which would be up about 1.0% sequentially and 12.6% higher year over year. Analysts are expecting an adjusted loss per share of $0.13, compared to the prior quarter’s loss of $0.15 per share and the year-ago loss of $0.09 per share. For the full fiscal year, analysts forecast a per-share loss of $0.45, compared to last year’s loss per share of $0.17, on sales of $10.28 billion, up 15.6%.
Chewy is not expected to post a full-year profit until fiscal 2025. The current consensus estimate (from just two analysts) calls for a profit of $0.33, a multiple of 82.2 times the stock’s current price. The 52-week trading range is $22.22 to $97.74. The company does not pay a dividend, and the total shareholder return for the past year is negative 64%.
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GameStop

Video gaming retailer GameStop Corp. (NYSE: GME) has watched its share price fall by around 43% over the past 12 months. It has been worse. In mid-March, the stock traded down nearly 68%, and earlier this month the shares were trading down 63%.

The recent increase has almost nothing to do with the company’s performance. It is all about a potential stock split, an NFT and cryptocurrency wallet, and a potential short squeeze. Given the CEO’s reluctance to spell out how he plans to make GameStop profitable, it is hard to see any fundamental reason to hold the stock.

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Just three analysts have had anything to say on the stock. Two rate the stock at Sell and one has a Hold rating. At a share price of around $137.20, the stock trades well above its median price target of $26.50 and more than four times its high price target of $30.00.

First-quarter revenue is forecast at $1.32 billion, down almost 42% sequentially but up 3.1% year over year. Analysts expect GameStop to report an adjusted loss per share of $1.22, compared to the prior quarter’s loss of $1.86 and the year-ago loss of $0.45. For the full 2023 fiscal year ending in January, analysts are forecasting an adjusted loss per share of $5.28 compared to the prior-year loss of $4.56 per share, and sales of $6.26 billion, up 4.1%.

GameStop is not expected to post a profit in either fiscal 2023 or 2024. Based on estimates of GameStop’s enterprise value ranging between $6.00 billion and $6.75 billion for the two fiscal years, the sales to enterprise value multiple is around 1.5. The stock’s 52-week range is $77.58 to $344.66, and GameStop does not pay a dividend. Total shareholder return for the past year is about negative 46%.

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