Profit Pregame

Here’s Why You Can’t Find a PS5 — And What That Means For Your Portfolio

The gaming rush…

Gaming was already a popular hobby for many – but with the pandemic keeping people across the globe locked inside their house – the industry has exploded over the last few months. And companies have taken advantage of this boom in business. From new systems to brand new, highly anticipated games – the demand has been better than ever – especially for these two products…

The PlayStation 5 and Xbox Series X launched recently, and within a matter of hours – the two consoles were wiped from the shelves. And even as retailers did their best to stock the shelves, both products eventually sold out. And now, customers are scrambling to find one, but that’s revealing itself to be a difficult task.

We predicted this would be the case given the pandemic has slowed production – we knew that the companies would struggle to meet the great demand. But analysts also have another theory as to why the sellout happened so quickly. Most think that Sony (SNE) and Microsoft (MSFT) purposefully limited how many units were produced. And that is because both consoles’ profit margin is “thin or even in the red.” They wouldn’t want to overproduce the products, given they aren’t making much money on them.

While it may be easy to think these companies are a no brainer investment – especially with the Christmas season approaching. But good sales don’t always translate to revenue if the profit margin isn’t there. With that said, I’ll be sure to keep you updated on how this situation progresses. So stay tuned…

The earnings report to watch:

It’s another week of earnings reports.

And I know you don’t have time to be sifting through all the numbers and news.

So, here’s the one I’ll be focusing on, and I think you should too:

American Eagle Outfitters (AEO)…

Surprised to see a retail stock here? You shouldn’t be. Truthfully, I like to keep my eye on every sector, even those that aren’t doing so great.

Now, AEO is scheduled to report earnings on Tuesday, and analysts have a sour outlook for the popular retail brand. Wall Street is expecting a year-over-year decline in earnings for the company. As far as the specifics – earnings are expected to come in at $0.33, which is a 31.3% decline year-over-year. Revenues are also expected to be down, coming in at $1.05 billion.

Now, these numbers might now look great, but if AEO tops expectations, we could see the stock move higher still. But truthfully, I plan to keep the same outlook I have for a while – I’m keeping out of retail for now. This sector has a long way to go before it finds the kind of stability I like to invest in.

Trading tip of the week…

This tip might sound a bit confusing but just hear me out…

When it comes to scoring big in the market – sometimes your best bet is to trade against the trend. I know trends are easy to follow. Especially when it seems like it’s all the guys on the TV can talk about. But here’s the thing – when it comes to a trend being publicized, it’s usually too late to get a piece of the pie.

And here’s an even more critical realization – a trend can only extend so far. And if you get caught up in it too late – you could deal with the heavy blow of a trend reversal. And there’s nothing like a trend reversal to really hurt your bottom dollar.

With that said, we’re seeing a very bullish, optimistic market – but I’ve said it once, and I’ll repeat it, you should remain cautious being “long” in this market. Because while the market has continued to persist and stay healthy, the disconnect from the economy is a red flag. So, be careful with the current market climate and stick to your trading plan.

Something BIG is Happening…

As devastating as the Covid-19 pandemic has been to our country, some industries have thrived…

Gaming companies like the ones mentioned above, home entertainment, and home fitness are just a few of the best examples I can think of off the top of my head.

But according to my friend and colleague, market expert Shah Gilani, one particular side effect of the pandemic is setting a wealth surge of over $350 billion in motion.

Now is your chance to claim your stake before this once-in-a-generation opportunity truly takes off!

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