3 things to watch in the stock market this week
Shares jumped last week despite reports of a contraction in the US economy for two consecutive quarters. The Dow Jones Industrial Average (^DJI 0.97%) and the S&P 500 (^GSPC 1.42%) are both up more than 3% on hopes that the second half of 2022 will see a soft landing in corporate earnings, which Increasing for most of the last two. years.
Hundreds of companies will update investors on their 2022 outlook over the coming week, and collectively these announcements will answer many questions investors have about consumer spending and macroeconomic growth trends. Let’s take a look at three of these reports, Electronic Arts (EA -1.46%), Molson Coors (TAP 1.20%), and eBay (Ebay 0.87%).
1. EA’s audience size
Investors have some big questions in Tuesday’s fiscal first-quarter earnings report from Electronic Arts. There was a lot of good news in the last update from the video game giant. Net bookings grew at 18%, or as fast as they had grown in the earlier stages of the pandemic. The steady drumbeat of EA’s new content releases in hit franchises like Apex Legends and EA Sports helped keep audience size growing in early 2022.
That success has given investors a sense of the volatility in Tuesday’s report, which forecast revenues to drop about 1% compared to the sharply rising results from a year ago. The big question is whether the company can return to rapid growth after a slight decline in demand for digital content, as Netflix introduced in mid-July.
In any case, EA continues to be strong financially, with margin growth and cash flow improvements raking in over $2 billion per year. Assuming no major material delays, those gains should support solid investor returns from here on out.
2. Market Share of Molson Coors
Watch the volatility surrounding Molson Coors’ earnings update on Tuesday morning. The alcoholic beverage giant’s stock has rallied more than 20% in the market this year, while the S&P 500 is down more than 15%. That difference will be tested this week.
The owner of the Coors and Miller light beer brands announced in early May that sales volume had increased by 10%, allowing it to win market share against peers such as Anheuser-Busch, Constellation Brands, and Boston Beer. . Demand is leaning toward many of its flagship beer products, but the company is also succeeding in the premium niche that includes brands like Topo Chico, Simply Spiked, and Molson Ultra.
Investors would like to see more wins in these sectors on Tuesday. Molson would also ideally maintain its bright earnings outlook, which calls for modest profitability growth despite rising costs. If executives continue to offer higher margins this week, the stock will likely attract more attention from investors looking for a recession-proof business with solid pricing power.
3. eBay’s Buyer Pool
There has been a dramatic shift in sentiment about eBay’s business that can be traced directly to its growth hangover. After rising in the earlier stages of the pandemic, organic growth turned negative in recent quarters, and investors are not happy with that.
Check out more drops in Wednesday’s earnings update. eBay executives estimated organic sales to decline 9% in the quarter, with losses for the rest of fiscal year 2022 slashing.
Watch the buyer pool for signs of an imminent rally. eBay dropped 13% last quarter and 9% last quarter. The stock’s trajectory will likely depend on how successful the marketplace platform can be in slowing down and then reversing those losses over the next few quarters.
Dmitry Kalogeropoulos has positions at Netflix. The Motley Fool has posts and recommends the Constellation brand and Netflix. The Motley Fool recommends Boston Beer, Electronic Arts and eBay and recommends the following options: Short July 2022 $57.50 call on eBay. The Motley Fool has a disclosure policy.