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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos – May 1, 2017 at 7:51AM

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Look for Apple, Activision Blizzard, and Facebook to make big moves over the next few trading days.

Stocks logged impressive gains last week as rising corporate earnings helped push both the Dow Jones Industrial Average (^DJI 1.26%) and the S&P 500 (^GSPC 1.44%) higher by more than 1%. The indexes are up about 6% for the year and are sitting just below record highs.

^DJI Chart

^DJI data by YCharts.

Investors can look forward to dozens of big-name earnings reports over the coming days, including a few notable announcements on the way from Apple (AAPL 1.56%), Facebook (META 1.97%), and Activision Blizzard (ATVI 0.83%).

Apple's iPhone plans

Apple announces its earnings results on Tuesday afternoon, and given that the company generates a significant portion of U.S. corporate earnings, the announcement could move the broader market. Investors have recently pushed the stock to new all-time highs following blowout quarterly results in late January that showed record revenue and surging profits for the consumer tech titan. The success of the iPhone 7 played a key role in Apple's boosting its earnings to $3.36 per share, in part thanks to rising average selling prices

The Apple iPhone SE model.

Image source: Apple.

For the current quarter, CEO Tim Cook and his executive team forecast revenue stopping at between $51.5 billion and $53.5 billion, which would ensure the company's second straight quarter of year-over-year revenue gains following three consecutive declines. Gross profit margin is likely to dip slightly to between 38% and 39% of sales. Besides core metrics like iPhone sales, services revenue, and profitability, investors will be closely following the Mac maker's outlook for the coming quarter ahead of an expected major upgrade to the iPhone this fall.

Facebook's advertising trends

Expectations are running high for Facebook's earnings report on Wednesday. Consensus estimates call for revenue to spike 45% higher to pass $7.8 billion. Profits should rise at the same pace to reach $1.12 per share. 

The social media titan has cautioned investors to expect slowing sales growth this year since it has reached the point where advertisement volume in its service can't increase without negatively impacting the user experience. In fact, this quarter's sales gains might look paltry compared to the 57% spike Facebook enjoyed for the full 2016 year. 

Still, that downshift doesn't mean the company is set for stagnation. Video is becoming a much more integral part of the service, and it should raise the value of ads both to users and to advertisers. For evidence of that trend playing out, look for Facebook to show continued increases in its user base even as operating margin improves. The company has successfully navigated several major challenges to its business model in the past, and CEO Mark Zuckerberg and his team aim to keep the positive momentum going as Facebook enters its sixth year as a public company.

Activision's digital revenue

Booming player engagement, a growing portfolio of hit brands, and seemingly endless opportunities for revenue growth have combined to push Activision Blizzard shares higher by 50% over the past 12 months. That rally raises the pressure on the video-game publisher to post head-turning numbers when it announces first-quarter results on Thursday afternoon. 

Two friends playing video games.

Image source: Getty Images.

Consensus estimates call for sales to jump 20% in the seasonally weak period to just over $1 billion. As it did late last year, Activision will likely benefit from growth in digital sales, which should push profitability higher.

Investors will be watching engagement metrics in core brands like Call of Duty, World of Warcraft, and the recently launched Overwatch for signs that gamers remain locked in its entertainment umbrella. Look for CEO Bobby Kotick to also update shareholders on the company's monetization initiatives in the mobile business it recently acquired from King Digital. 

Demitrios Kalogeropoulos owns shares of Activision Blizzard, Apple, and Facebook. The Motley Fool owns shares of and recommends Activision Blizzard, Apple, and Facebook. The Motley Fool has a disclosure policy.

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