The broader U.S. market averages pushed fractionally higher last week, after action was abbreviated by a holiday on Monday. Energy stocks led the way higher, while the Consumer Discretionary sector lagged.
The majority of the gains were realized on Friday. The May employment report offered something to make all investors happy. The headline unemployment rate fell to 5.8%, as the U.S. economy added 559,000 non-farm payrolls last month.
The latter figure was below expectations, but strong enough to support the notion of a sustained economic recovery. At the same time, it suggested that the pace of expansion is not so high it warrants the Federal Reserve to back away from its accommodative monetary policy measures.
Elsewhere, on Thursday the Institute for Supply Management (ISM) said that its services index increased to a record 64 in May. Earlier in the week, the ISM said that its manufacturing index also moved higher last month. The two reports showed that 34 of 36 U.S. industries grew in May.
The Week Ahead
Next week will be relatively quiet on the earnings front, with popular trading vehicle Gamestop (GME) headlining the reporting calendar. On the economic front, the focus will shift back toward inflation.
The consumer price index (CPI) will be reported on Thursday. It is expected to show accelerated growth in May, both with and without volatile food and energy prices.
Following the snap-back recovery in stocks last year from Pandemic lows, we believe that investment gains will be harder to come by in 2021.
As a result, deciding what and when to buy can be challenging for any investor. However, the fact remains that attractive investments are out there if you’re willing to dig a little deeper.
One such Technology name is worth a closer look and is our Stock of the Week.
Stock of the Week: Semtech (SMTC)
The company makes semiconductors for a wide variety of electronic products. Customers have become particularly excited about the company’s “LoRa” product. It is used as part of the Internet of Things ecosystem.
The stock gained nearly 7% last week and we believe this momentum can continue into the second half of 2021. Here’s why:
Semtech delivered quarterly results on Wednesday that surpassed expectations. The company earned $0.53 a share in the April quarter, as revenue increased 28% from a year ago, to $170.4 million of revenue.
Upside in the period was driven by record demand for Wireless and Sensing products, such as LoRa. In addition, management boosted guidance for both sales and profit in the July quarter.
Following the results, the stock was upgraded at Roth Capital, from Neutral to Buy. Analyst Scott Searle set a price target of $83, representing 23.4% upside potential.
Searle is rated in the top-4% of the over 7,500 analysts tracked by TipRanks, which adds weight to the call.
In the meantime, Semtech has more cash than debt on the balance sheet. It used its free cash flow to buy back $25 million worth of shares in the most recent quarter.
It’s additionally worth noting that the company carries a Smart Score of 8/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.
On top of the positive aspects mentioned already, the Smart Score indicates that shares have seen improving sentiment from financial bloggers and individual investors.
FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.
