Earnings season may turn an ugly corner.
Long-term bull Art Hogan warns a storm of disappointing corporate guidance and missed revenue targets is ahead.
“Buckle your seatbelts,” the National Securities’ chief market strategist told CNBC’s “Trading Nation” on Friday. “This will be the first time in the cycle you’re actually going to hear more companies guide down than guide up.”
Hogan cites headwinds tied to supply chain backlogs, inflation and worker shortages.
“There’s going to be a real earnings season of haves and have nots,” Hogan said. “The haves really have that pricing ability.”
He cites Snap‘s third quarter results as an example of upcoming trouble. The social media giant reported last Thursday a revenue miss and it lowered guidance — citing trouble in its advertising business and global supply chain interruptions. Snap stock is off 27% since the announcement.
“Aggregate demand is outstripping aggregate supply,” said Hogan. “If you don’t have things to sell, you’re probably not increasing your ad budget.”
He urges long-term investors to resist the urge to react to volatility and believes they should take a barbell approach to investing, with growth on one end and cyclicals on the other.
“Any given earnings reporting season is not the time to make a broad sweeping change to your long-term investments plan,” he said. “But make sure you know what you have on your growth side, and make sure you’re picking companies that actually are sector leaders and are measured in a P/E [price-to-earnings ratio] versus price to revenues.”
He believes the pain won’t trickle into year-end. His S&P 500 year-end target is 4,700, which implies a 3% gain from Friday’s close.
“We’ve got a long runway in front of us, and I think a lot of demand that wasn’t satiated this year gets dragged into 2022,” Hogan said.
