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3 Things to Watch in the Stock Market This Week

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

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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.

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Stocks Mentioned

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

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

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