Earnings season could turn an ugly corner.
Art Hogan, the long-term bull, warns of a storm of disappointing corporate guidance and lost revenue targets ahead.
“Fasten your belts,” chief market analyst at National Securities told CNBC’s “Trading Nation” on Friday. “This will be the first time in the cycle that you’ve actually heard more companies go down rather than steer them.”
Hogan cites headwinds associated with supply chain backlogs, inflation, and labor shortages.
“There’s going to be a real earnings season for the haves and the have-nots,” Hogan said. “They really have that pricing power.”
He cites Snap’s third-quarter results as an example of the problems ahead. Last Thursday, the social media giant reported a loss of revenue and a cut in guidance — citing an issue with its advertising activity and disruption to the global supply chain. Snap’s stock is down 27% since the announcement.
“Total demand is outstripping aggregate supply,” Hogan said. “If you don’t have things to sell, you’re probably not increasing your advertising budget.”
He urges long-term investors to resist the temptation to react to volatility and believes they should take a shrewd approach to investing, with growth on one side and cyclical growth on the other.
“Any earnings-reporting season is not the time to make a massive overhaul of your long-term investment plan,” he said. “But make sure you know what you have on your growth side, and make sure you pick companies that are actually sector leaders and are measured in P/E [price-to-earnings ratio] versus price to revenue.”
He believes that the pain will not flow until the end of the year. His target for the S&P 500 index for the year-end is 4,700, which means a 3% increase from Friday’s close.
“We have a long runway ahead of us, and I think a lot of the unmet demand this year is being dragged into 2022,” Hogan said.