October is the month of tricks or treats, and investors are hoping for more of the latter. The fourth quarter will have plenty of newsy nuggets coming their way as the new month plays out, and that includes the start of earnings season in a couple of weeks.
Netflix (NFLX 0.33%), Activision Blizzard (ATVI 0.10%), and Chipotle Mexican Grill (CMG -0.38%) have a lot riding on earnings and product releases in October. Let's take a deeper dive to see why these are three stocks to watch this month.
Netflix reports its third-quarter results after the market close on Oct. 16, and it's safe to say that a lot of investors will be watching after its last belly flop. Shares of the leading premium streaming service took a hit after it missed its target for net subscriber additions. Netflix didn't even come close, forecasting 5 million more paid streaming members worldwide but only tacking on 2.7 million more users than the platform had three months earlier.
A big price hike kicked in during the quarter that likely scared away both existing and potential price-sensitive customers. The new higher monthly rates might have chased away some customers during the third quarter that ended on Monday, and the launch of two prolific streaming services next month might also weigh on Netflix's ability to build out its audience. With guidance calling for 158.56 million streaming paid memberships for the quarter -- an ambitious increase of 7 million given the flurry of headwinds -- it's easy to be concerned. The silver lining here is that a lot of the negativity when it comes to Netflix is already priced into the shares. The stock has surrendered 26% of its value since announcing its poorly received second-quarter financials, down a sharp 37% since peaking 16 months ago. Even a mediocre report could trigger a rally.
There was a time when the video game giant lived and died by Call of Duty releases, a holiday gifting staple for diehard gamers. The annual fourth-quarter releases of the combat simulator still matter. The first-person shooter has been the top-selling console franchise worldwide in 9 of the past 10 years. Unfortunately for Activision Blizzard, it's a relative victory instead of an absolute one. Sales of the franchise peaked with Call of Duty: Modern Warfare 3 in 2011, selling more than 30 million units. It's been largely downhill ever since.
When Call of Duty: Modern Warfare hits the market on Oct. 25, it will be lucky to sell half as many copies as the franchise was selling eight years ago. A lot of things have weighed on the gaming industry, but the biggest challenge is that mainstream casual gamers have simply moved on. When they fire up their Xboxes or PlayStations, it's to load up streaming apps. Less sophisticated mobile apps scratch the fading gaming itch, but Activision Blizzard is hoping that today's launch of Call of Duty: Mobile gets smartphone jockeys back into the fray. Between the mobile release on Oct. 1 and the traditional annual installment rolling out three weeks later, this is going to be a big month for Activision Blizzard's classic franchise.
Chipotle Mexican Grill
This month marks four years since the first of the foodborne illness outbreaks that slammed Chipotle Mexican Grill. The first reports surfaced in late October of 2015, and from the stock's peak during the summer of that year to its trough in early 2018, it would go on to shed more than two-thirds of its value. The turnaround has been remarkable, more than tripling to make up all of that ground and hit all-time highs this summer.
Bringing in an outsider -- from Taco Bell, of all places -- to lead the turnaround just as the stock was bottoming out last year seems brilliant in retrospect. Being years removed from any major outbreaks also helps, but the real driver these days is Chipotle embracing third-party apps that take on the burden of delivery to boost take-out sales. Restaurant stocks in general are benefiting from the hot delivery trend on someone else's dime.
Momentum is back at Chipotle, and comps rising 10% in its latest quarter -- largely the handiwork of digital sales that have nearly doubled to clock in at more than 18% of total sales -- is setting the right tone. This script is flipped from the scene at Netflix, where expectations are already low. Chipotle is going to need another blowout performance when it steps up after the Oct. 22 market close with its third-quarter results.