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"Morgan Stanley Reveals Its Top Picks for the Remaining Earnings Season"

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Stocks to Watch This Earnings Season

Merck, Pfizer, and Advanced Micro Devices

Pharmaceutical companies Merck and Pfizer, as well as chipmaker Advanced Micro Devices, are set to release their earnings next week. Despite Wall Street's lower expectations for this earnings season, Morgan Stanley believes these stocks could rise in the near-term. According to Morgan Stanley's estimates, second-quarter earnings are down 9% year to date with flat sales growth. However, the firm expects earnings to accelerate in the second half of the year and rebound in 2024. This anticipated rebound may serve as a catalyst for these stocks.

Amazon's Potential Catalysts

One of Morgan Stanley's top picks for this earnings season is Amazon. The firm believes that positive earnings revisions and the AWS Summit on cloud computing and artificial intelligence could drive the stock upward. Analyst Brian Nowak stated that upward revisions to North America profits, combined with a more durable consumer and potential reacceleration of AWS revenue, provide a favorable backdrop for Amazon. The stock has already gained more than 50% year to date and is set to report on August 3rd.

Yum Brands' Strong Fundamentals

Yum Brands, the operator of restaurant chains including Taco Bell and Pizza Hut, is another favorite name for Morgan Stanley this earnings cycle. Analyst Brian Harbour is overweight on Yum Brands due to its attractive valuation and strong fundamentals compared to other large franchised fast-food restaurants. Harbour believes that a better bottom line in the second quarter and stronger sales trends will reduce the risk of the company repeating its first-quarter miss. Yum Brands is expected to report on August 2nd.

Wix's Potential Tailwinds

Web development platform Wix could benefit from recent AI-coupled product announcements, according to analyst Elizabeth Porter. Porter noted that Wix has experienced recent underperformance but the impact from AI, insider buying, stability in web trends, and achievable Q2 revenue guidance create an undemanding set-up for the upcoming earnings report. Although there are concerns about the macro environment and competition in the AI space, Wix shares have already gained 11% year to date. The company is set to report on August 3rd.

Conclusion: Potential Impacts for New Businesses in the Stock Market

This earnings season presents a range of opportunities and potential outcomes for both established companies and new businesses looking to enter the stock market. The performances of Merck, Pfizer, Advanced Micro Devices, Amazon, Yum Brands, and Wix offer insights into broader market trends and investor sentiment. For new businesses, particularly those in the pharmaceutical and technology sectors, these earnings reports can provide valuable guidance. Positive earnings revisions and strong fundamentals, like those seen in Yum Brands and Wix, highlight the importance of profitability and stable sales in attracting investors. Furthermore, the anticipation of earnings acceleration and potential rebounds, as expected for Merck, Pfizer, and Advanced Micro Devices, can signal the resilience of certain industries and potential opportunities for new players in related markets. In particular, the focus on artificial intelligence and cloud computing in Amazon's earnings report highlights the growing importance of these technologies. New businesses operating in these areas could benefit from the positive sentiment surrounding AWS and the broader tech industry. However, it's important for new businesses to carefully evaluate the macro environment and competition within their respective markets, as highlighted in the concerns surrounding Wix. Despite its recent underperformance, the company's potential tailwinds from AI-coupled products demonstrate the need for innovation and differentiation in crowded sectors. Overall, this earnings season provides both cautionary tales and success stories for new businesses. By closely monitoring market trends and understanding the impacts on larger companies, entrepreneurs can adopt informed strategies to navigate the stock market and potentially attract investment. Article First Published at: https://www.cnbc.com/2023/07/26/morgan-stanleys-top-picks-for-the-rest-of-earnings-season.html

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