September is usually a quieter month for the stock market. The markets are closed on Labor Day, people are focused on getting back to work and school after vacation, and there's only a trickle of earnings reports.
However, considering the wild ride the stock market's taken over the past few months, there might still be a lot of nail-biting in September. And the few companies reporting earnings this month could also tell us some important information about the overall state of spending in the U.S.
I would choose Costco Wholesale (COST 0.84%), Netflix (NFLX -0.08%), and Walt Disney (DIS -0.55%) as the top U.S. stocks to watch this month.
1. Costco
Costco has held out as a retail chain still posting double-digit sales growth despite inflation, rising costs, and global economic challenges. It's expected to release fourth-quarter earnings later this month, but since it's one of the few companies that posts monthly updates, we already know a lot about what's going on there, and it looks good. These are the monthly sales growth rates for the past four months:
| Metric | August 2022 | July 2022 | June 2022 | May 2022 |
|---|---|---|---|---|
| Sales growth, YoY | 11.4% | 10.8% | 20.4% | 16.5% |
Data source: Costco monthly reports. YoY=year over year.
Fourth-quarter sales growth looks to be in line with the past few quarters. But there's a lot that's not reported monthly, and we'll find out more about cost control, profitability, segment performance, and other important information in the upcoming quarterly release.
Costco has an edge when there's inflation or a recession because it offers rock-bottom pricing. Customers flock to Costco when prices are rising and every penny counts. Costco also takes a fee for membership, which provides some padding regardless of spending, both for the top and bottom lines.
In other words, Costco is a no-brainer stock to own at any time, but especially in tough times. That's why Costco stock has gained more than 230% over the past five years. Investors will be watching to see how well it's continuing to perform in the current economy in a few weeks.
2. Netflix
Netflix is going through a lot of changes these days. As it has approached saturation in its core North American markets, and even in global markets, it's changing its operating model and adding services to capture a different market and increase revenue.
The streaming leader lost about one million subscribers in the second quarter, to less than 221 million, after it had already started to lose subscriptions in the first quarter. Rival Disney just edged it out, with total subscribers for all of its streaming channels stretching above 221 million.
Netflix already felt the pressure of new companies entering the streaming industry in droves last year, and it has acquired several gaming companies to drive revenue in that space. Its first response was to up its content spending to stay competitive, but it has quickly backed down from that approach in light of waning revenue growth.
Sources told The Wall Street Journal that Netflix is cutting spending in all sorts of areas, from laying off workers to reduced content spending, to become more fiscally responsible in this atmosphere. What's been getting the most attention, though, is Netflix's launch of an ad-supported tier, which should be ready early next year.
In the meantime, Netflix news seems to be coming out on a regular basis as it struggles to maintain its viewer base and figure out a way forward. Investors should keep watch this month as management moves into the next part of its story.
3. Walt Disney
Disney may be one of the reasons Netflix is struggling, but that doesn't mean it's sitting around enjoying its success. With all of the new players in streaming, Disney is also working to stabilize its lead, in addition to operating in a new normal for its parks and experiences segment, which has changed due to the pandemic.
The third quarter (ended July 2) showed a continued recovery with revenue increasing 26% year over year to $21.5 billion, finally exceeding the 2019 number. It added more than 15 million subscribers to its streaming channels, more than 14 million of those to Disney+.
Disney+ continues to be an important element of Disney's growth strategy as it launches in more global markets. It was recently rolled out in 53 new markets for a total of 155 markets. And as Netflix joins other streaming companies with its ad-supported tier, Disney is doing that too. It has some advantage there, because as a traditional media company, it's quite experienced with ad-supported channels. The ad-supported tier is set to launch in December.
The company just had a Disney+ day this past Thursday, with several premieres as well as events across the Disney universe. It looks like this is in preparation for the rollout of the ad-supported tier, and investors will want to take note of how it goes in the lead-up to the launch.
