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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos - Apr 26, 2020 at 3:04PM

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Some of the biggest growth stocks on the market will report earnings over the next few days.

Stocks declined last week after jumping in each of the prior two weeks. Both the Dow Jones Industrial Average (^DJI 1.27%) and the S&P 500 (^GSPC 1.73%) lost less than 2%, leaving the indexes down 17% and 12% so far this year, respectively.

Dozens of highly-anticipated earnings reports will be announced as first-quarter earnings season hits high gear over the next few trading days. That list includes announcements from tech giants Amazon (AMZN 2.07%) and Facebook (META 1.70%), along with fast-food titan McDonald's (MCD 1.12%).

Below, we'll take a look at the key trends that might send these stocks moving.

A man holding a cup of coffee and looking out the window

Image source: Getty Images.

Amazon's product sales

Amazon will post its results on Thursday afternoon, and expectations could hardly be higher for the tech giant. Its e-commerce merchandise sales likely began surging as social-distancing efforts swept through Europe and North America in March. Meanwhile, more time working and relaxing at home surely boosted demand for both its enterprise web services and its video streaming units. On average, analysts who follow the stock are predicting that sales will grow 22% to $73 billion. For context, revenue rose 17% in the year-ago quarter, to $59.7 billion. 

Investors have some big questions about the business, including how Amazon has managed its inventory as it prioritizes essential products while delivering other in-demand items like consumer electronics. Price gouging has been a major challenge, too. The company's second-quarter outlook might show whether management is striking the right balance and finding ways to keep its warehouses stocked as millions of consumers shift to almost exclusively shopping online.

Facebook's network stress

Facebook's results come out on Wednesday afternoon, and the social networking giant might reveal a lot about how people are adjusting to new ways of remaining connected. Usage of its core functions -- including the Facebook news feed, Instagram, and Facebook Messenger -- likely surged in recent weeks and supported higher user growth.

The company won't be profiting much from all of that increased engagement, though, since the online advertising market has collapsed. Facebook doesn't monetize many of these live-connection services, either. Yet there will be extra costs associated with moving all of that data through its network, so investors will be following operating margin this week.

Still, the real test for the business will be whether Facebook has a plan to hold on to most of its new users and maintain their connections to offerings such as Facebook Live, even after social distancing efforts are relaxed in the months ahead.

McDonald's to-go business

McDonald's has navigated plenty of volatility in a fast-food industry it has dominated for decades, but its Thursday earnings report might still be one for the books.

Thousands of its restaurants have been operating on a "to-go" or drive-thru-only basis for several weeks, which all but ensures far lower sales as customer traffic slumps. Mickey D's gets most of its revenue from franchisees, though, in the form of rent, royalties, and fees. On average, analysts are expecting revenue to fall a little more than 5% in the first quarter, to $4.7 billion.

We'll likely hear more about management's plan to support its partners through things like rent deferrals and royalty holidays as they wait for the industry to restart when the COVID-19 threat passes. More importantly, investors will learn how the chain fared in its home delivery offering, which had notched encouraging early results in the U.S. but has taken on a much bigger role since March.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Demitrios Kalogeropoulos owns shares of Amazon, Facebook, and McDonald's. The Motley Fool owns shares of and recommends Amazon and Facebook and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

McDonald's Corporation Stock Quote
McDonald's Corporation
MCD
$262.18 (1.12%) $2.90
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$33,761.05 (1.27%) $424.38
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,280.15 (1.73%) $72.88
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$143.55 (2.07%) $2.91
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
META
$180.50 (1.70%) $3.01

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

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