Monday Morning Markets – The Week Ahead

Although earnings season has come to a crawl, there is still plenty to look forward to this coming week. A couple of high-profile earnings can lead to big moves and U.S. Retail sales will shed more light on the strength of the economy. 

Wednesday, September 11

Although earnings season has come to a crawl, the most anticipated quarterly results of the week belongs to Aurora Cannabis (TSX:ACB). It has been a rough six months for the marijuana industry and pot stocks have struggled to find a bottom.

For its part, Aurora has lost 22.66% of its value and it is trading at a 50% discount to its 52-week high of $16.24 per share. Will a strong quarter finally stem the tide of negativity?

Analysts are expecting the company to post a loss of $0.03 per share on revenue of $108.3 million. This would represent a massive 415% top line jump over the $19.15 million it posted in the fourth quarter of 2018.

All eyes will be on Aurora and expect results to have a significant ripple effect across the industry.

Thursday, September 12

Canada’s favourite discount retailer, Dollarama (TSX:DOL) is scheduled to report second quarter 2020 results before the open on Wednesday.

Analysts are expecting earnings of $0.43 per share and revenue of $939 million. This would represent growth of 7% and 8% over the second quarter of 2019.

After a tough 2018, Dollarama has had a bounce-back year. Its stock price is up 55% year to date. Investors should be cautious. Dollarama has strong momentum, but this is not the high growth stock it once was.

Slowing growth and increased competition provides a significant challenge for the company. As of writing, it is now trading inline with where it was last year. At 23 times forward earnings and a PEG of 2.26, the company isn’t cheap. Dollarama’s PEG ratio implies that its stock price is getting ahead of itself once again.

At these prices, shareholders are still expecting the company to grow by double-digits. A feat that is difficult to achieve in the current environment. It will take a strong quarter for Dollarama to maintain its upwards trend.

Friday, September 13

South of the border, U.S. Retail sales for August will be released. The expectation is for 0.2% growth month over month. Retail sales are an important economic indicator as it is a measure of consumer spending.

Strong U.S. numbers can help Canadian retailers such as Canada Goose Holdings (TSX:GOOS) and Aritiza (TSX:ATZ) which are actively expanding south of the border. The U.S. market is a key growth strategy for both of these retailers and a strong reading should be a benefit for both companies.