Stocks fell significantly last week, as both the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) shed over 5% as COVID-19 outbreaks continued and several large tech companies fell following earnings reports. The Dow is down 7% so far in 2020 while the S&P is up slightly.
A few stocks will announce operating results over the next few trading days, including Wayfair (NYSE:W), Hershey (NYSE:HSY), and Electronic Arts (NASDAQ:EA). Let's take a look at the trends that might send their stocks moving this week.
Wayfair's profit margin
Few companies have enjoyed a bigger pandemic-related sales boost than Wayfair. The e-commerce retailer, which sells home furnishings, added over $2 billion to its sales footprint in the first half of 2020, equating to an over 50% spike year over year. Those gains were especially strong in the second quarter, which showed an 84% revenue surge.
Investors are looking for a slowdown when Wayfair reports earnings on Tuesday. Sales should grow by around 58%, as social distancing efforts eased in the summer months and the federal stimulus support wore off.
One of the big growth questions involves whether Wayfair can hold on to the millions of new customers it has acquired so far in 2020. Metrics like repeat order volume and average spending will help investors judge that potential. Meanwhile, keep an eye on adjusted profit margin. That figure jumped to 10% in Q2, or just above management's long-term goal for the business. It should fall into single digits this week, but CEO Niraj Shah and his team are aiming to keep Wayfair solidly profitable from 2020 on.
Hershey's market share
Investors aren't optimistic about Hershey's upcoming report on Friday. The confectioner has reported two consecutive quarters of slowing organic growth, after all, which has put it behind other consumer food giants like PepsiCo. Wall Street pros are predicting another weak sales outing for the third quarter, with revenue rising by less than 1% to $2.14 billion.
Hershey should see continued strength in some of its baking products and in its newly acquired snack food brands. Mints and gums, meanwhile, might lag again as people limit their social interaction time. But the stock's direction in late 2020 will likely be set by management's outlook. That forecast had been between 1% and 3% growth compared with 2019's 2% boost. Hershey pulled the prediction once COVID-19 struck, but it may reinstate its outlook on Friday.
Electronic Arts' holiday outlook
Electronic Arts' stock has outperformed the market since COVID-19 added a new premium to home-based entertainment options. That positive selling environment was evident in the video game publisher's fiscal Q1 announcement, which showed a 17% sales increase thanks to booming engagement in franchises such as Apex Legends, FIFA, and Madden NFL.
EA on Thursday is expected to show slightly weaker growth results but robust earnings and cash flow trends. The main question heading into this report is whether new content launches across its portfolio will allow sales to surge during the critical holiday shopping season.
Corresponding to EA's fiscal third quarter, that period will see the release of several highly anticipated titles, including the latest installments in the FIFA and NHL sports brands. Executives three months ago predicted those launches would help revenue reach $1.75 billion in Q3, or roughly 40% of EA's total for the year. All eyes will be on any update that management makes to that forecast on Thursday.