Stocks declined again last week as investors worried about slowing economic growth, inflation, and rising interest rates. Both the Dow Jones Industrial Average and the S&P 500 fell by 3%, although a late rally kept the S&P 500 just above bear market territory, defined as a 20% drop from the previous high point.
Several big companies will update investors on their 2022 growth trends, so let's look at a few highlights, from Zoom Video Communications (ZM 1.46%), Ulta Beauty (ULTA 0.13%), and Best Buy (BBY -0.30%).
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1. Zoom's engagement
Zoom was one of Wall Street's favorite stocks in the earlier phases of the pandemic, but that optimism has faded in 2022. Investors are worried that the video communication specialist, which enjoyed fantastic growth as people sought digital meetings because of COVID-19, won't have a second act for growth ahead.
Zoom's Monday earnings announcement might clarify that outlook. Heading into the report, most investors are expecting sales gains to slow to 10% this year from 55% in 2021. That deceleration should show up in changes to Zoom's customer base, particularly for smaller businesses.
The company could still have a bright future as it capitalizes on the shift toward hybrid work. But that expansion path is likely to include a growth hangover at least through the rest of 2022.
2. Ulta Beauty's customer traffic
Investors have high expectations heading into Ulta Beauty's earnings report on Thursday. The beauty products retailer entered the first quarter with strong momentum, and management raised its 2022 outlook following solid demand trends through late January.
A lot has changed in the months that followed, though, including soaring inflation and slowing economic growth. We'll learn this week whether Ulta navigated through those challenges and continued posting a healthy balance between rising customer traffic and increased average spending per visit.
Most investors are expecting Ulta to boost sales at a solid clip in 2022 as profitability falls slightly but stays well ahead of the 8% rate the company saw before the pandemic. Staying on that impressive growth path should help the stock continue beating the market from here.
3. Best Buy's outlook
Following soaring demand for consumer tech in 2021, Best Buy is bracing for a year (or more) of slower growth ahead. That weakening selling environment should be clear from the retailer's Tuesday morning earnings report, which is expected to include falling sales and earnings.
Best Buy is still in a far stronger position than it was before the pandemic, and a continued flood of tech launches over the next few quarters should help it return to growth following the first-quarter decline. It is going up against an unusually strong year-ago period, after all, when financial stimulus and an intense focus on home technology devices boosted sales.
Executives are likely to project modest annual sales declines for the current fiscal year. But the big question heading into Tuesday's report is whether management still sees a gradual return to steady sales growth and increasing profitability in the years that follow.
