Please ensure Javascript is enabled for purposes of website accessibility

3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos – Apr 30, 2018 at 5:35PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Apple is one of hundreds of companies set to post earnings results over the next few days.

Stocks didn't move much last week as modest declines kept both the Dow Jones Industrial Average (^DJI -1.23%) and the S&P 500 (^GSPC -1.57%) in slightly negative territory for the year.

^SPX Chart

^SPX data by YCharts.

Volatility could be coming, though. Hundreds of companies are set to post earnings reports over the next few days, including industry leaders McDonald's (MCD -0.70%), Apple (AAPL -1.65%), and Activision Blizzard (ATVI -1.13%). Below we'll highlight a few metrics to watch for in these reports.  

McDonald's customer traffic

McDonald's kicks the week off with its earnings report on Monday morning. The fast food titan managed an impressive operating rebound lately, with comparable-store sales spiking 5% in 2017 to put it back in the industry's lead spot. Earnings improved at a much faster pace, mainly thanks to a refranchising initiative that has lifted profit margins by 10 percentage points to a market-crushing 40% of sales.

CEO Steve Easterbrook and his executive team are hoping to get that margin up to the mid-40% range by 2019, and so investors should look for more progress on that score this week. Meanwhile, McDonald's plans to extend its recent market-share gains by pouring resources into a digital infrastructure that can support online ordering and home delivery. While those channels will be important, keep an eye on customer traffic this week. That this metric turned positive last year, to a 2% increase, following two consecutive years of declines. Looking ahead, the chain will need continued gains here to keep its stock rally going.

With the report being released before market open on Monday, it looks like McDonald's performed well in all of these areas. The stock surged nearly 6% by the time the market closed on Monday.

Apple's iPhone demand

Investors have high expectations for Apple's fiscal second-quarter results, due out after the market closes on Tuesday. After all, the consumer tech giant's most recent quarter contained several operating records including revenue and earnings per share. Those achievements came despite a slightly shorter selling period, too.

A father and his daughter looking at a smartphone.

Image source: Getty Images.

Executives' forecast for the current quarter was a bit underwhelming, with sales expected to come in between $60 billion and $62 billion as gross profit margin stops at roughly 38%. As for product updates, investors are eager to hear news on Apple's iPhone business and its growing services segment.

Details should be coming on recent device releases like the HomePod and Apple Watch, too. And CFO Luca Maestri might have market-moving news about Apple's capital return program following tax law changes that freed management up to make more aggressive moves with the tech titan's huge cash holding.

Activision Blizzard's gamer base

Video game specialist Activision Blizzard will announce its earnings results on Thursday afternoon. The company has a lot on its plate right now, including an aggressive push into casual gaming, the buildup of its esports league, and the rollout of a major new advertising platform.

Two young men playing a console game.

Image source: Getty Images.

But Activision's long-term business success is still driven by a few simple metrics. Audience size is one of those, and investors will be watching for signs of continued growth here after last quarter's modest rebound.

Engagement levels are important, too, given that they held steady at a record 50 minutes of daily gaming by a user base that's close to 400 million players. Finally, look for Activision to have found more ways to monetize that activity through surging digital sales that include full game downloads and microtransactions. These e-commerce initiatives are helping extend the useful life of each title that the company releases, and so future sales and profitability records are likely for this high-performing business.

Demitrios Kalogeropoulos owns shares of Activision Blizzard, Apple, and McDonald's. The Motley Fool owns shares of and recommends Activision Blizzard and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Stock Quote
$143.69 (-1.65%) $-2.41
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$29,942.96 (-1.23%) $-373.41
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,731.27 (-1.57%) $-59.66
McDonald's Stock Quote
$236.82 (-0.70%) $-1.68
Activision Blizzard Stock Quote
Activision Blizzard
$74.16 (-1.13%) $0.84

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.