Top Stocks of the Week: REITs Rebound

The S&P 500 rose 0.8% to 4,568 last week, rising for the fifth straight week. The November surge brought the benchmark closer to its all-time high of 4,797 on January 3, 2022. Other major indexes also rose last week, with the Dow Jones Industrial Average rising 2.4% and the Nasdaq Composite rising 0.4%. The S&P 500 is up 19.7% YTD, the Dow is up 9.4% YTD, and the Nasdaq is up 36.7% this year, approaching bull market territory.

As earnings season comes to a close, several strong earnings reports and some positive Fed commentary gave the S&P 500’s top three stocks a boost last week.

One . Boston real estate up 17.8%

boston real estate (NYSE:BXP) is a real estate investment trust (REIT) that specializes in commercial real estate, particularly office buildings. It is the largest listed office REIT in Korea with real estate in major cities such as Boston, Los Angeles, New York, Seattle, San Francisco, and Washington DC. Commercial real estate is a very difficult market for a number of reasons, not the least of which is high interest rates.

Most of last week’s surge occurred on Friday, as on that day alone the stock gained about 12% of its 17.8% weekly gain. The main catalyst is likely to be Federal Reserve Chairman Jerome Powell’s speech at Spelman College in Atlanta. Prime Minister Powell conveyed the market’s positive opinion on the direction of inflation and the Federal Reserve’s inflation reduction strategy, further sparking speculation that the interest rate tightening cycle may have ended.

In particular, Powell told the audience that core inflation has been at 2.5% for the past six months and that “it is welcome that the inflation numbers have come down over the past few months.” There may be no market segment more receptive to low interest rates than the depressed commercial real estate industry. So Boston Properties and other office REITs surge.

2 . NetApp, up 16.5%

netapp (NASDAQ:NTAP), a provider of data storage and cloud services, surged 16.5% last week, with most of the gains coming after it released its fiscal second-quarter earnings report on Nov. 28. Quarterly revenue was down 6% year-over-year. At $1.56 billion for the full year, this was above the high end of the company’s full-year guidance range. The Public Cloud business was the best performer, with revenue up 8.5% year over year and annual revenue run rate of $609 million, up 1% year over year.

NetApp’s non-GAAP operating margin also hit a record 27% for the quarter, and its consolidated non-GAAP gross margin was a record 72%. In fiscal 2024, the company’s operating profit margin is expected to be 26% and gross profit margin to be 71%.

For the third quarter, NetApp forecast earnings per share (EPS) to be between $1.17 and $1.27, up from $1.10 in the second quarter, and expected full-year EPS to be between $4.15 and $4.35, up from previous guidance.

NetApp received several analyst upgrades following last week’s earnings report. Bank of America, Morgan Stanley, TD Cowen, Wells Fargo, Barclays and Evercore ISI were among the companies that raised their price targets.

3. Salesforce (15.9% increase)

The third largest change last week was sales (NYSE:CRM) rose 15.9%. Like NetApp, the main catalyst for Salesforce, a provider of enterprise customer relationship management software, was its earnings report. Salesforce reported its third-quarter results on Wednesday, and the results were better than analysts expected.

Salesforce reported an 11% increase in revenue for the quarter, to $8.7 billion, and net income of $1.2 billion, or $1.26 per share, up from $210 million a year earlier. Salesforce has seen success over the past year by integrating artificial intelligence (AI) CRM into a single platform.

“Over the past year, we have transformed our company, enabling us to deliver another quarter of strong profitable growth, with GAAP operating margins of 17.2% and non-GAAP operating margins of 31.2%,” said Amy Weaver, President and CFO of Salesforce.

The market also reacted favorably to the company’s fiscal 2024 guidance. The guidance called for revenue growth of 11% and EPS of $3.99 to $4 per share, which was higher than previously expected.

A deeper dive is needed

Keep in mind that this is a weekly snapshot, so you’ll need to research each stock in more detail. Of the three, Boston Properties was the weakest because the commercial real estate market had not yet recovered and the jump was speculative.

NetApp and Salesforce are definitely stocks worth looking into further, with NetApp having a higher valuation. Meanwhile, Salesforce has enjoyed great growth but is also very valuable.