Buy 1 stock, sell 1 stock at market open: GameStop, Lululemon

Stocks on Wall Street closed sharply higher on Friday, ending their longest weekly loss in decades, as worries about the Federal Reserve’s overly aggressive interest rate hikes peaking and fading gave investors buying sentiment.

The benchmark index rose 6.5%, its best week since November 2020. The blue chip rose 6.2%, while the tech-heavy index outperformed, rising 6.8%.

S&P 500, Nasdaq and Dow Jones

S&P 500, Nasdaq and Dow Jones

The big event for markets in the holiday-shortened week will be Friday’s U.S. report, which is expected to show solid job growth, albeit at a slower pace from April’s strong growth.

U.S. stocks will be closed on Monday for Memorial Day.

The next four-day trading week will also include the likes of Salesforce (NYSE:), Chewy (NYSE:), Crowdstrike Holdings (NASDAQ:) and HP (NYSE:) as the first-quarter earnings season has come to an end.

Regardless of where the market goes, below we highlight one stock that may be in demand and another that may fall further.

But remember, our schedule is only for the upcoming week.

Stocks to buy: GameStop

Shares of GameStop (NYSE: ) fell for their best week in two months as one of the largest video game retailers in the U.S. prepares to release its latest financial results after the market closes, with further buying likely in the coming days Event Wednesday, June 1.

Consensus estimates call for the Grapevine, Texas-based company to report a loss of $1.22 per share, compared with a loss of $0.45 per share in the year-ago period, primarily due to higher costs associated with its turnaround efforts and ongoing supply chain issues .

Led by Chewy co-founder Ryan Cohen, GameStop has been ramping up spending to position itself for the digital age by shifting its slowing brick-and-mortar business to e-commerce.

This includes launching a redesigned app, attracting new members to its rewards program, and hiring executives with experience in e-commerce, operations and blockchain gaming.

Revenue is expected to rise about 3% to $1.316 billion. Investment Professional+.

GME Earnings Forecast

Source: InvestingPro+

Beyond the top and bottom line numbers, investors will be eager to hear comments from GameStop executives on the company’s transformation and what new products it plans to launch to boost its digital business.

The company last week launched a marketplace for non-fungible tokens (NFTs) as well as a digital wallet to accompany its NFT trading platform as a way to move beyond its traditional video game business.

Depending on where the options market moves, traders expect GME stock to see considerable post-earnings volatility following the report, with a move that could imply about 20% in either direction.

GME daily chart

GME stock, at the center of an epic 2021 “meme stock” trading frenzy, closed at $137.21 on Friday. Currently, the video game retailer has a market cap of $10.4 billion.

The popular meme stock has gained about 77% since falling to a 52-week low of $77.58 on March 14. Despite the recent rebound, the GME is still down 7.5% so far this year, about 72% below its record peak. $483.00 in late January 2021.

Inventory Dump: Lululemon Athletica

Shares of Lululemon Athletica (Nasdaq: ) tumbled last week to the lowest level since May 2020, as investors braced for disappointing profit and sales growth, the casual apparel retailer slumped on June 2. Another challenge is expected after it announced first-quarter earnings on Thursday. The end of the bell.

According to InvestingPro+, consensus Earnings per share for the first quarter are expected to be $1.43, up 23.2% from $1.16 a share in the year-ago quarter, but down from 30.6% profit growth in the previous quarter.

Sales for the period are expected to rise about 25% year over year to $1.546 billion, down from 23% growth in the previous quarter.

LULU Earnings Forecast

Source: InvestingPro+

Perhaps more importantly, Lululemon’s outlook for the rest of the year will be in focus as the sportswear company grapples with lingering macroeconomic headwinds such as supply constraints, rising inflationary pressures and rising fuel and freight costs.

Executives’ comments about the health of the U.S. consumer will also be under scrutiny as shoppers spend less on non-essential items like yoga gear and activewear as gas and food prices rise.

The results show that options traders are pricing in a sharp rise in LULU stock, likely an implied move of about 9.4% in either direction.

LULU daily chart

Lululemon fell to a two-year low of $251.51 on May 25 before a modest recovery to close Friday’s session at $293.65. At current valuations, the Canadian sportswear maker is worth about $37.6 billion.

Shares of LULU are down 25% year-to-date, underperforming the broader market over the same time period. Currently, it is about 40% below its all-time peak of $485.83 reached in November 2021.

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