Stocks dropped again last week as investors processed hundreds of fourth-quarter earnings reports and the prospect of rising interest rates ahead. Both the Dow Jones Industrial Average (^DJI -0.33%) and the S&P 500 (^GSPC 0.12%) shed over 1%, and the indexes are down 4% and 7% so far in 2022, respectively.
Earnings season continues the week ahead, and below we'll look at a few highlights from the long list of announcements on the way. Shopify (SHOP -1.25%), Garmin (GRMN -0.35%), and Nvidia (NVDA -0.12%) are among the most anticipated earnings reports to watch.
1. Shopify's outlook
Shopify announces its latest results after the market closes on Wednesday. Judging by the slumping stock price since its last report, investors are bracing for some potentially bad news from the e-commerce giant.
Sales trends aren't the problem. Most investors expect Shopify to announce sharply higher revenue even compared to booming results from a year ago. Still, executives said in October that the company will likely add far fewer new merchants as compared to those days when all of commerce was moving online.
The big question is whether Shopify will offer a weak outlook for 2022. While CEO Tobi Lütke and his team are bullish about the long-term market opportunity, the next year might be characterized by slowing growth as people return to in-person commerce. Costs are surging at the same time, implying a tough earnings year ahead. But investors should stay focused on the wider outlook for this growth stock, which dominates a growing market niche.
2. Garmin's holiday sales
Garmin steps up to the earnings plate on Wednesday. Look for the tech device giant to have some good things to say about how it closed out fiscal 2021.
Sales have been booming across Garmin's main niches, including smart watches, marine navigation, and aviation GPS platforms. This growth likely continued in the key holiday shopping period, notwithstanding supply chain challenges. Garmin is expecting to show accelerating revenue growth for 2021, its seventh consecutive year of solid gains.
Profitability is a different story, as operating margin is falling due to extra spending and higher costs. Look for Garmin to potentially forecast another slight decrease in 2022, offset mainly by higher prices and new savings. Shareholders should still have plenty to celebrate on Wednesday, including strong cash flow and market share gains in attractive niches like aviation. These steady wins have delivered solid returns for investors over the past decade and are ultimately the main factors influencing the stock price.
3. Nvidia's forecast
Nvidia's shares have dropped from all-time highs, which could mean large price swings associated with Wednesday's earnings announcement. The chip giant had lots of good news for investors at its last update, highlighted by a 50% year-over-year sales boost. Nvidia is getting growth from several of the tech world's most exciting spaces, including gaming, computing infrastructure, and autonomous vehicles. These wins have many investors wondering if it's the perfect stock for gaining exposure to the metaverse.
That optimism will be put to the test on Wednesday, when Nvidia reveals whether it achieved its bullish Q4 outlook that called for another roughly 50% sales spike and expanding profit margins. Hitting those figures, plus an outlook that implies steady momentum into early 2022, would likely send the stock higher.
On the downside, shareholders could be surprised to hear a cautious short-term forecast that's weighed down by issues like supply shortages and spending increases.
Any drop due to short-term challenges like those, though, might be welcome for investors who have been waiting for a better entry point for Nvidia shares.