Please ensure Javascript is enabled for purposes of website accessibility

3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos - Feb 7, 2021 at 10:15AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Twitter is one of several top stocks set to announce earnings results over the next few trading days.

Stocks jumped last week, as earnings season kicked into high gear and the world made progress toward ending the COVID-19 pandemic. Both the Dow Jones Industrial Average (^DJI 1.61%) and the S&P 500 (^GSPC 1.99%) gained over 3% to bounce back into positive territory for 2021.

Earnings season continues this week, with many of the market's favorite stocks reporting results in the next few days. That list includes Walt Disney (DIS 2.28%), PepsiCo (PEP 0.68%), and Twitter (TWTR 6.35%), whose announcements we'll preview below.

Woman with headphones watching laptop in bed

Image source: Getty Images.

Disney's new show

Disney's Thursday report kicks off a new fiscal year for the entertainment giant, which took some big hits related to the global pandemic in 2020. Sales for the 12-month period ended in early October were down 6% as booming growth in the streaming service failed to offset plunging demand at theme parks, film studios, and cruise lines. Disney's profits were severely affected by consumer spending shifts, with operating income falling 45% last year to $8.1 billion.

The possible coming end to the COVID-19 threat has Wall Street hopeful that Disney will achieve a robust recovery soon. Meanwhile, Disney+ gives the company a viable platform it can use to market its own intellectual property, with an attractive bonus of rising fees over time. Netflix is showing how that approach can create massive cash flow under the best-case scenario.

Disney executives will discuss their 2021 plans for their competitive platform this week, while likely sounding cautious about the eventual recovery in other parts of its entertainment empire.

PepsiCo's cash haul

PepsiCo's business was dramatically reshaped by the pandemic, but you wouldn't know that by just glancing at its recent results. The beverage and snack food giant is on pace to grow organic sales by nearly 5% in 2020, after all, matching the strong rate it achieved in 2019.

That success explains why investors are more optimistic about PepsiCo's business right now than about rival Coca-Cola, which also reports earnings this week. Pepsi got a lift from its food segment that Coke couldn't match. Its beverage volume has been stronger, too, as it relies less on away-from-home purchases.

These assets should allow Pepsi to take a bold approach to growth in 2021, including more brand acquisitions. But investors on Thursday will be just as interested in the prospect of rising cash returns that the company should target through higher stock buybacks and a dividend that was recently boosted by 7 %.

Twitter's engagement metrics

Investors are looking forward to the results due out from Twitter on Tuesday afternoon. Like many digital media businesses, the platform has enjoyed strong growth through the pandemic. User and engagement metrics each spiked over the first nine months of 2020, and advertising dollars quickly followed. Twitter's third-quarter sales were up 14%.

The following quarter was a volatile one for the business, which included major disinformation challenges related to the presidential election. Yet, in October, CEO Jack Dorsey and his team predicted that Twitter could maintain its positive momentum through election-related challenges.

We'll find out this week whether politics contributed to a significant hit to engagement levels, or if Twitter instead grew sales by at least 18% in the fourth quarter, just as Wall Street is predicting.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Twitter, Inc. Stock Quote
Twitter, Inc.
TWTR
$39.52 (6.35%) $2.36
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$32,637.19 (1.61%) $516.91
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,057.84 (1.99%) $79.11
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$105.61 (2.28%) $2.35
Pepsico, Inc. Stock Quote
Pepsico, Inc.
PEP
$170.11 (0.68%) $1.14

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
332%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.