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3 Things to Watch in the Stock Market Next Week

By Demitri Kalogeropoulos - Updated Feb 19, 2021 at 5:12PM

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

Stocks were flat after a volatile week this week. Both the Dow Jones Industrial Average (^DJI 0.08%) and the S&P 500 (^GSPC -0.40%) finished with a gain of less than 0.5%, leaving both indexes up slightly so far in 2021.

Earnings season continues with many of the market's favorite stocks reporting results over the next few trading days. That list includes Wayfair (W -11.37%), NVIDIA (NVDA -2.50%), and Home Depot (HD -0.01%), whose announcements we'll preview below.

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Image source: Getty Images.

Wayfair's profit outlook

Investors have high expectations for Wayfair's Thursday announcement. The home furnishings giant was a huge winner as spending flooded into its e-commerce site during the pandemic. Sales soared to $10.5 billion in the first three quarters of 2020 compared to $6.6 billion a year earlier.

Wall Street is looking for CEO Niraj Shah and his team to post a big finish to that fiscal year, with revenue rising about 48% to $3.74 billion over the holidays. That result would likely translate into more market share in a quickly growing industry.

We'll get some hints about future growth in this report, too, including average order size, order frequency, and the proportion of order volumes coming from existing customers. These factors all measure Wayfair's shopper satisfaction, which has been on the rise all year. Meanwhile, look for the retailer to forecast a second straight year of profitability even as growth is expected to slow in 2021.

NVIDIA's profit margin

NVIDIA announces its latest results next Wednesday afternoon, and the chipmaker should have good news for investors. Its prior report was a blockbuster, with sales jumping 57% overall thanks to booming demand across its portfolio. "NVIDIA is firing on all cylinders, achieving record revenues in gaming, data center, and overall," CEO Jensen Huang said in mid-November.

More records are on the way. NVIDIA forecast that sales will land at about $4.8 billion in the fourth quarter, translating into 55% gains year over year. Healthy profitability should amplify those gains so that earnings jump to around $2.80 per share compared to $1.89 a year ago.

Look for plenty of talk from the management team next week about the long-term growth prospects in gaming, artificial intelligence, autonomous driving, and chip technology licensing. NVIDIA will need wins across a few of these categories to earn its pricey valuation, but the business seems on track heading into 2021.

Home Depot's market share

It says a lot about the home improvement niche when investors can be disappointed with a 25% sales spike from the industry leader. But that's what happened with Home Depot in 2020 as rivals like Lowe's and Wayfair notched faster growth through the third quarter.

Home Depot might trail these peers again next week, though it entered the period with enough inventory to potentially close the gap. In any case, it will still add over $20 billion to its annual sales footprint. Home Depot also enjoys far higher profitability, cash flow, and capital returns than Lowe's.

These factors suggest that shareholders shouldn't worry too much about a year of slightly sluggish growth in 2020. And with aggressive pushes into niches like maintenance, repair, and operations, there's plenty of room for additional sales gains ahead.

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Stocks Mentioned

The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
HD
$295.99 (-0.01%) $0.04
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$32,223.42 (0.08%) $26.76
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,008.01 (-0.40%) $-15.88
NVIDIA Corporation Stock Quote
NVIDIA Corporation
NVDA
$172.64 (-2.50%) $-4.42
Lowe's Companies, Inc. Stock Quote
Lowe's Companies, Inc.
LOW
$194.73 (0.38%) $0.73
Wayfair Inc. Stock Quote
Wayfair Inc.
W
$50.81 (-11.37%) $-6.52

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

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