3 Things to Watch in the Stock Market This Week

Stocks jumped last week, despite news that the U.S. economy has now contracted for two consecutive quarters. Both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) gained over 3% on hopes that corporate earnings will see a soft landing in the second half of 2022 after soaring for most of the past two years.

Hundreds of companies will update investors on their 2022 outlooks in week ahead, and collectively these announcements will answer many questions investors have about consumer spending and broader economic growth trends. Let’s take a closer look at three of these reports, from Electronic Arts (NASDAQ: EA), Molson Coors (NYSE: TAP), and eBay (NASDAQ: EBAY).

1. EA’s audience size

Investors have some big questions heading into the fiscal first-quarter earnings report from Electronic Arts on Tuesday. The video game giant’s last update contained lots of good news. Net bookings grew at an 18% rate, or about as fast as they had grown in earlier phases of the pandemic. EA’s steady drumbeat of new content releases in hit franchises like Apex Legends and EA Sports helped keep audience size growing through early 2022.

That success has investors feeling playful heading into Tuesday’s report, with revenue projected to fall by about 1% compared to booming results a year earlier. The big question is whether the company can quickly return to growth following a slight pullback in demand for digital content, just as Netflix projected in mid-July.

In any case, EA is becoming financially stronger, with margins rising and cash flow improving to over $2 billion per year. Assuming no major content delays, those gains should support solid investor returns from here.

2. Molson Coors’ market share

Look for volatility around Molson Coors’ earnings update on Tuesday morning. The alcoholic beverage giant’s stock has trounced the market this year, up over 20% even as the S&P 500 fell by over 15%. That gap will be tested this week.

The owner of the Coors and Miller Light beer brands announced in early May that sales volumes jumped 10%, allowing it to win market share against peers such as Anheuser-Busch, Constellation Brands, and Boston Beer. Demand is tilting toward many of its core beer products, but the company is also succeeding in the premium niche that includes brands like Topo Chico, Simply Spiked, and Molson Ultra.

Investors will want to see more wins in these arenas on Tuesday. Molson ideally will also maintain its bright earnings outlook, which calls for a modest profitability increase despite soaring costs. If executives continue to project higher margins this week, the stock will likely attract more attention from investors seeking a recession-proof business with solid pricing power.

3. eBay’s buyer pool

There has been a dramatic shift in sentiment around eBay’s business that can be traced directly to its growth hangover. After soaring in earlier phases of the pandemic, organic growth turned negative in recent quarters, and investors aren’t happy about it.

Look for further declines in Wednesday’s earnings update. eBay executives projected organic sales would fall by as much as 9% this quarter, with losses moderating for the rest of fiscal 2022.

Watch the buyer pool for signs of an impending rebound. eBay shed 13% last quarter and 9% in the previous one. The stock’s trajectory will likely depend on how well the marketplace platform can succeed at slowing and then reversing those losses over the next few quarters.

Demitri Kalogeropoulos has positions in Netflix. The Motley Fool has positions in and recommends Constellation Brands and Netflix. The Motley Fool recommends Boston Beer, Electronic Arts, and eBay and recommends the following options: short July 2022 $57.50 calls on eBay. The Motley Fool has a disclosure policy.

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