Stocks To Watch in July

The S&P 500 closed at a record high seven times in June as a string of earnings reports from the likes of Broadcom (AVGO) and Oracle (ORCL) showed demand for artificial intelligence (AI) and the wares that make it work remained as healthy as ever. 

Heading into the second half of the year, the tech sector has momentum on its side and Wall Street expects the largest names, including Microsoft (MSFT), Alphabet (GOOGL), and Amazon (AMZN), to continue reporting robust earnings growth.

Below, we look at a few companies with stocks that could see big moves this month.

Broadcom

Broadcom gained close to 21% in June after it reported a surge in AI revenue in its fiscal second quarter and announced a 10-for-1 stock split. 

Broadcom joins a growing list of companies splitting their stocks after a massive run-up in share price over the last year. Historically, stock splits are bullish for the companies that choose to undergo them, according to Bank of America research. Granted, stocks often get split because they’re already outperforming the market. 

Still, Broadcom’s split, which goes into effect on July 15, could be a boon for the stock. At least if it performs anything like Nvidia (NVDA), which surged to become the world’s most valuable company in the week after its 10-for-1 split in mid-June.

At the very least, Broadcom’s latest earnings report assured analysts that it is positioned to be a primary beneficiary of the AI revolution. Bank of America analysts after the report named Broadcom a “top 2 AI pick” and suggested it could join the $1 trillion club. Broadcom, with a market capitalization of about $750 billion, isn’t likely to reach $1 trillion in July. But if investors are as bullish on AI this month as they were in June, it could get closer.

Tesla

After a dismal start to the year, Tesla (TSLA) stock has regained some of its mojo in recent months. 

Shares tumbled in early April following reports that the company had scrapped long-held plans to develop a lower-priced electric vehicle. CEO Elon Musk denied the reports, and in the company’s first-quarter earnings, said the company was accelerating the production of new models. That announcement overshadowed an otherwise grim earnings report, and shares have since recovered about half of their year-to-date losses. 

Tesla will report second-quarter production and deliveries in early July. The company reported its first year-over-year decline in deliveries since 2020 in the first quarter of the year, and is expected to report another tough quarter as it continues to grapple with sluggish demand for EVs and intense competition with Chinese rivals.

Another disappointing delivery report could take some of the spring out of the stock’s step, and put pressure on the company to deliver progress on its robotaxi and low-price model initiatives when it reports earnings later in the month.

McDonald’s

Few companies have drawn the ire of cash-strapped consumers quite like McDonald’s (MCD) as of late. 

The fast food giant has become something of a punching bag for inflation-weary netizens ever since a tweet about an $18 Big Mac went viral last summer.

“Recently, we have seen viral social posts and poorly sourced reports that McDonald’s has raised prices significantly beyond inflationary rates. This is inaccurate,” wrote McDonald’s USA President Joe Erlinger in a corporate blog post in late May.

At the same time, the company has seen its customers reining in spending. McDonald’s reported a dramatic slowdown in comparable store sales in the first quarter, with CEO Chris Kempczinski noting that consumers “are more discriminating with every dollar that they spend.”

The company launched a $5 value meal in the last week of June in an effort to appeal to price-sensitive consumers. The promotion’s success won’t be evident in the quarterly results McDonald’s reports this month, but management may talk on the earnings call about how consumers have responded.

Boeing

It has been a rough year for Boeing (BA), and it could get worse in July. 

The Department of Justice (DOJ) has until July 7 to decide how to act on its determination in May that the company violated a deferred-prosecution agreement it entered in 2021 after two fatal 737 MAX crashes. The DOJ could press criminal charges or propose a new deal with stricter conditions, according to Bloomberg. The DOJ’s decision could remove some uncertainty hanging over the stock. 

Boeing’s production and deliveries have slowed dramatically this year as it has dealt with the regulatory and reputational fallout from a January incident in which a 737 MAX 9 lost part of its fuselage mid-flight. The company burned through $4 billion of cash in the first quarter, and is expected to report little improvement on that front when it publishes second-quarter earnings near the end of the month.

Spotify

Spotify (SPOT) is scheduled to report second-quarter earnings in late July, and is expected to report its second consecutive profitable quarter, something it hasn’t done since 2018. 

The music streaming company has approached profitability from multiple angles. It cut jobs three times last year, including announced layoffs affecting 17% of its workforce in December. Still, it has maintained double-digit active user growth and hiked prices. 

Wall Street will be looking closely at Spotify’s monthly active user growth for signs that subscribers are sticking around despite the higher prices. Evidence that Spotify is retaining subscribers could bode well for other companies in media streaming that make money from subscriptions, including Disney (DIS) and Warner Bros. Discovery (WBD). 

Investors will also be listening for updates on a new premium subscription tier that the company has reportedly been developing.