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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos – Updated Apr 14, 2019 at 12:16AM

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Look for TripAdvisor, Activision Blizzard, and NVIDIA to take center stage as earnings season plows forward.

A late rally on Friday enabled stocks to continue their winning streak last week. The S&P 500 (^GSPC 2.59%) and the Dow Jones Industrial Average (^DJI) both eked out gains of less than 0.2% for the week. The moves left both indexes up roughly 8% since the start of 2019 but well off the all-time highs set in late September. 

Hundreds of companies will post fourth-quarter earnings results over the next few days, which should keep things interesting for investors. Let's look at the metrics that could send shares of Activision Blizzard (ATVI 0.03%), TripAdvisor (TRIP -0.36%), and NVIDIA (NVDA 3.07%) moving in the trading week ahead.

^SPX Chart

S&P 500 and Dow Jones Industrial Average Year-to-Date Performance, data by YCharts.

Activision Blizzard's life without Destiny

Activision Blizzard's impressive stock market run hit a speed bump in late 2018, thanks to challenges across key parts of the video game developer's portfolio. Investors had shrugged off what appeared to be temporary issues with the casual-gaming division early in the year, but they reacted harshly when Activision revealed bigger problems, including persistent audience and engagement losses in franchises such as Destiny. Those concerns were magnified when the company announced in early January that it was divesting itself of that brand. Rival Electronic Arts added to the dour mood by revealing a tough holiday quarter last week.

Given that negative context, investors will be looking for specifics about how Activision's management sees that Destiny move affecting results this year when executives issue their 2019 outlook on Tuesday. There's also lots of uncertainty to clear up about earnings in the key holiday quarter that just passed, since the period was packed with major game releases. Thus, any outperformance -- or execution missteps -- could have an outsize impact on whether Activision meets its 2018 profit forecast.

TripAdvisor's hotel business

TripAdvisor ended 2018 as one of the best-performing stocks in the S&P 500. However, that success was partly due to the travel specialist's slump in the prior year. Its earnings report on Wednesday should go a long way toward showing whether investors were closer to the target with their 2017 pessimism or their 2018 excitement.

The company has given shareholders plenty to celebrate lately, including several consecutive quarters of improving sales and profitability trends in the core hotel booking business. Executives predicted a return to modest growth in that division in the fourth quarter, following a 4% decline through the first nine months of the year. TripAdvisor's non-hotel offerings have quickly become an important pillar of growth, too, with revenue up 24% in the first nine months of 2018. Investors will be looking for continued strong growth in that segment.

The stock will probably react most directly to the outlook that CEO Steve Kaufer and his team issue on Wednesday. TripAdvisor hasn't been able to put together a complete showing of solid sales and profit growth in the past few years, but expectations are rising that it could finally deliver on those points in 2019.

NVIDIA's outlook

Many of the key questions about NVIDIA's fourth quarter were answered in the painful updated financial guidance that the chipmaker issued in late January, which contributed to a 28% stock-price decline over the past three months. In that release, CEO Jensen Huang and his team slashed their profitability forecasts because of lower-than-expected sales in both the gaming and data-center businesses. It was "an extraordinary, unusually turbulent, and disappointing quarter," Huang said at the time. 

An engineer works on a chip.

Image source: Getty Images.

On Thursday, investors will find out important details about the nature of those demand struggles, which management said were driven by economic issues in China and price sensitivity for its high-end gaming hardware. We'll soon learn how management plans to respond to these issues.

The bigger shareholder concerns center on NVIDIA's prospects for the coming year. Its outlook has declined in each of the past two quarters, after all. If that trend continues, then the slump might better be described as persistent rather than "extraordinary" or "unusual."

Check out the latest NVIDIA earnings call transcript.

Demitrios Kalogeropoulos owns shares of Activision Blizzard and TripAdvisor. The Motley Fool owns shares of and recommends Activision Blizzard, NVIDIA, and TripAdvisor. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.

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Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
$125.12 (3.07%) $3.73
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$28,725.51 (%)
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,678.43 (2.59%) $92.81
TripAdvisor, Inc. Stock Quote
TripAdvisor, Inc.
$22.00 (-0.36%) $0.08
Activision Blizzard, Inc. Stock Quote
Activision Blizzard, Inc.
$74.36 (0.03%) $0.02

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

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