Top stocks of the week: REITs bounce back

The S&P 500 finished higher for the fifth week in a row last week, climbing 0.8% to 4,568. The November surge has inched the benchmark closer to its all-time high of 4,797 on Jan. 3, 2022. The other major indexes were up last week too, as the Dow Jones Industrial Average gained 2.4% and the Nasdaq Composite rose 0.4%. The S&P 500 is nearing bull-market territory as it is up 19.7% year to date, while the Dow is up 9.4% YTD and the Nasdaq has gained 36.7% this year.

While earnings season is winding down, a couple of strong earnings reports and some positive Federal Reserve commentary fueled the top three stocks on the S&P 500 last week.

1 . Boston Properties, up 17.8%

Boston Properties (NYSE:BXP) is a real estate investment trust, or REIT, that specializes in commercial real estate, or more specifically, office buildings. It is the largest publicly traded office REIT in the country with properties in major cities like Boston, Los Angeles, New York, Seattle, San Francisco, and Washington, D.C. You don’t need me to tell you that commercial real estate has been an extremely challenging market for many reasons, not the least of which is high interest rates.

Last week’s surge came mostly on Friday, as the stock gained about 12% of its weekly 17.8% gain on that day alone. The major catalyst was likely a speech made by Fed Chair Jerome Powell at Spelman College in Atlanta. Powell delivered what the market perceived as positive comments about the direction of inflation and the Fed’s strategy in lowering it, fueling greater speculation that the rate-tightening cycle may be over.

Specifically, Powell told the audience that core inflation has run at 2.5% over the past six months and that the “lower inflation readings of the past few months are welcome.” There may be no segment of the market that would embrace lower rates more than the beaten-down commercial real estate industry — thus, the surge for Boston Properties and other office REITs.

2 . NetApp, up 16.5%

NetApp (NASDAQ:NTAP), a data storage and cloud services provider, soared 16.5% last week, with most of the gains coming after it released its fiscal second-quarter earnings report on Nov. 28. While its quarterly revenue was down 6% year over year to $1.56 billion, it was higher than the top end of the company’s mid-year guidance range. The public cloud business segment was the top performer, with revenue rising 8.5% year over year and an annualized revenue run rate of $609 million, up 1% year over year.

NetApp’s non-GAAP operating margin also hit a record 27% in the quarter, while its consolidated non-GAAP gross margin also set a record at 72%. For the 2024 fiscal year, the company’s operating margin is expected to be 26%, while the gross margin is projected at 71%.

For the third quarter, NetApp guided for earnings per share (EPS) between $1.17 and $1.27, up from $1.10 in Q2, while for the full year, the company projects EPS of $4.15 to $4.35, which is higher than the earlier guidance.

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

3. Salesforce, up 15.9%

The third-biggest mover last week was Salesforce (NYSE:CRM), which jumped 15.9%. Like NetApp, the major catalyst for Salesforce, a provider of customer relationship management software for businesses, was its earnings report. Salesforce released its third-quarter earnings on Wednesday, and the results were better than analysts expected.

Salesforce saw its revenue climb 11% to $8.7 billion in the quarter, while its net income was $1.2 billion, or $1.26 per share, up from $210 million a year ago. Salesforce has been successful over the past year, integrating AI (artificial intelligence) CRM onto a single platform.

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

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

A deeper dive is in order

Keep in mind that these are weekly snapshots, so each stock should be examined in more detail. Of the three, Boston Properties is the most tenuous as the commercial real estate market has not yet recovered and the jump was more speculative.

NetApp and Salesforce are certainly stocks worth doing a deeper dive on, with NetApp being more favorably valued. Meanwhile, Salesforce has enjoyed big growth, but it also has a sky-high valuation.