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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos - May 9, 2021 at 6:00AM

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Disney is one of several popular stocks set to announce earnings results over the next few days.

Stocks rose last week, as both the Dow Jones Industrial Average (^DJI 0.53%) and the S&P 500 (^GSPC -0.03%) gained more than 1%.

The flood of earnings reports continues with many of the market's favorite stocks reporting results over the next few trading days. That list includes Disney (DIS 0.65%), Electronic Arts (EA 2.77%), and The Trade Desk (TTD -2.37%), whose announcements we’ll preview.

A roller coaster in action.

Image source: Getty Images.

1. Disney's park attendance

Disney is on deck for its fiscal second-quarter earnings report on Thursday afternoon. The entertainment giant’s business took a big hit from the pandemic, which crimped demand for its theme parks, cruise ships, and film releases. Yet the stock has been soaring as investors bet on an epic rebound once the COVID-19 threat passes.

We might start seeing hints of that recovery on Thursday. Investors are looking for sales declines to moderate to about 12%, compared with 22% last quarter. But the pockets of good news, including booming demand for Disney+ and resumed theme park operations in key markets around the world, might steal the show this week.

Finally, look for CEO Bob Chapek and his team to issue a cautiously optimistic outlook for the second half of fiscal 2021 as vaccines help put an end to the intense social-distancing restrictions that have harmed Disney's business since late February 2020.

2. The Trade Desk's outlook

Investors have high expectations heading into The Trade Desk's first-quarter report on Monday. The advertising platform provider notched some of its fastest growth of the year in late 2020, with sales jumping 48% as adjusted operating margin soared to 48% of sales from 39% a year earlier. CEO Jeff Green summed up the favorable selling environment well, saying, "Marketers are being more deliberate and data-driven, and [so] they are gravitating to the advertising opportunities of the open internet."

That positive momentum is expected to continue into early 2021. Most investors who follow the stock are looking for sales to rise 35% to about $217 million, a target that sits on the high end of management’s mid-February outlook. But the stock's trajectory this week will depend on the updated forecast that Green and his team issue for the second quarter that began in April.

3. Electronic Arts' audience

Investors have become more cautious about Electronic Arts stock in recent weeks on worries that its strong growth run might be coming to an end. Millions of people turned towards digital entertainment last year as at-home time spiked, but there are already signs of a pullback now that travel restrictions are lifting. Netflix announced surprisingly weak user growth last month, for example, as demand waned following a record 2020.

EA might not face quite the same slowdown since it released a steady stream of new content, while Netflix's releases were delayed due to production challenges during COVID-19. That's why investors are looking for the video game developer to announce steady growth as sales surpass $6 billion for the fiscal 2021 year. EA's live services are expected to continue pushing margins higher, too, even as its portfolio of hit franchises grows. 

The company is celebrating a second straight year of growth in the Apex Legends brand and a seventh straight year of gains for The Sims. That stability implies many more years of solid returns for investors who buy and hold this video game stock.

Demitri Kalogeropoulos owns shares of Netflix and Walt Disney. The Motley Fool owns shares of and recommends Netflix, The Trade Desk, and Walt Disney. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.

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Stocks Mentioned

The Trade Desk Stock Quote
The Trade Desk
TTD
$73.62 (-2.37%) $-1.79
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$34,092.79 (0.53%) $180.35
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,295.78 (-0.03%) $-1.36
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$125.07 (0.65%) $0.81
Electronic Arts Inc. Stock Quote
Electronic Arts Inc.
EA
$135.24 (2.77%) $3.64

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

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