Please ensure Javascript is enabled for purposes of website accessibility

3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos - Jul 18, 2021 at 6:00AM

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

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

Stocks dropped last week, as both the Dow Jones Industrial Average (^DJI 1.27%) and the S&P 500 (^GSPC 1.73%) shed roughly 1%. That still left indexes near all-time highs, and up more than 13% so far in 2021.

Earnings season ramps up with many of the market's favorite stocks reporting results over the next few trading days. That list includes Netflix (NFLX 2.72%), Domino's Pizza (DPZ 2.01%), and Tractor Supply (TSCO 1.04%), whose announcements we'll preview.

A woman watches TV on her laptop in bed.

Image source: Getty Images.

Netflix's new outlook

The stakes are high for Netflix on Tuesday. The streaming-video giant significantly undershot management's subscriber forecast last quarter and could potentially announce its first ever back-to-back growth miss in its Q2 report this week.

That's not likely, though. Co-CEO Reed Hastings and his team back in April issued a modest forecast for the period, with user gains slowing to just 1 million compared to 10 million a year earlier during peak COVID-19 lockdowns. Hitting that goal would put Netflix at just 5 million subscriber additions in the first half of the year, compared with 13 million in the same period in 2019 and 26 million in that period last year .

Investors have stayed bullish on Netflix stock through this slowdown because of its industry-leading size and engagement metrics, rising profitability, and improving cash flow trends. Yet the company will need to show, through its updated outlook on Tuesday, that its early 2021 stumble was just a temporary hangover from the pandemic growth spike.

Domino's market share

Domino's steps up to the earnings plate on Thursday for its highly anticipated Q2 announcement. The pizza delivery leader has had a great run over the past few years, including by steadily winning market share for about a decade heading into the pandemic.

Yet COVID-19 sparked a flood of new entrants into the home delivery space –from restaurant chains like Darden Restaurants to third-party aggregators like Uber. This shift has Wall Street worried that the pizza chain's epic growth run might be ending.

Domino's has huge competitive assets it can lean on in this environment, though. Its blanket coverage of most geographies helps keep delivery times down, and customer satisfaction up, for example. And its highly efficient store base allows it to compete aggressively on price.

Look for these factors to help keep market share creeping higher for Domino's this week while the chain's improving cash flow gives executives more flexibility to ramp up dividends and stock buybacks in late 2021 and beyond.

Tractor Supply's margins

Tractor Supply was ideally situated for consumer demand changes that COVID-19 brought last year, but the rural-lifestyle retailer also created its own luck lately. Great execution around digital fulfilment and merchandising, for example, helped it dramatically expand its sales footprint in the past year. Comparable-store sales jumped 39% in Q1 after soaring 23% for the full 2020.

Monday's announcement should show slowing growth as Tractor Supply laps some of the strongest demand spikes of the earlier phases of the pandemic. But most investors who follow the stock are still expecting sales to rise.

Tractor Supply may show continued profitability boosts, too, as prices rise and more spending shifts toward the online channel. Finally, look for a potential outlook upgrade from CEO Hal Lawton if all of its new customers stayed engaged with the business during the peak spring selling season.

Demitri Kalogeropoulos owns shares of Netflix. The Motley Fool owns shares of and recommends Netflix. The Motley Fool recommends Domino's Pizza, Tractor Supply, and Uber Technologies. The Motley Fool has a disclosure policy.

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

Tractor Supply Company Stock Quote
Tractor Supply Company
$196.93 (1.04%) $2.03
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$33,761.05 (1.27%) $424.38
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$4,280.15 (1.73%) $72.88
Netflix, Inc. Stock Quote
Netflix, Inc.
$249.30 (2.72%) $6.60
Domino's Pizza, Inc. Stock Quote
Domino's Pizza, Inc.
$412.24 (2.01%) $8.11
Darden Restaurants, Inc. Stock Quote
Darden Restaurants, Inc.
$131.91 (1.29%) $1.68
Uber Technologies, Inc. Stock Quote
Uber Technologies, Inc.
$32.47 (0.71%) $0.23

*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 analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

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.