3 Things to Watch in the Stock Market This Week

This article was originally published on this site

Stocks soared last week as the U.S. presidential election moved closer to a conclusion. Both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 index (SNPINDEX: ^GSPC) gained over 7% over the five trading days. The Dow is now roughly flat for the year, while the S&P is up 9%.

© Provided by The Motley Fool 3 Things to Watch in the Stock Market This Week

A few widely followed companies will announce earnings results over the next few trading days, including Beyond Meat (NASDAQ: BYND), McDonald’s (NYSE: MCD), and DraftKings (NASDAQ: DKNG). Below we’ll take a look at the key trends that might send the stocks for these three companies moving this week.

1. Beyond Meat’s competitive outlook

Investors are optimistic heading into Beyond Meat’s Monday earnings report. The plant-based meat substitute maker announced strong sales growth in the early days of the pandemic, revealing in August that second-quarter revenue jumped 69% year over year as sales to retailers offset plunging demand from restaurant chains.

© Getty Images A woman shops in the meat section of a grocery store.

Since then its growth prospects have remained impressive. Beyond Meat recently announced expanded distribution of its core products through Walmart, for one. It also added Beyond-branded sausage links to its portfolio, which joined plant-based sausage patties and meatballs as popular 2020 launches.

Load Error

Those actions have investors predicting continued strong sales growth through the rest of the year. But Beyond Meat will also have to contend with extra competition from traditional meat producers like Tyson Foods and retailers like Kroger as it seeks to maintain its early lead in this attractive food niche.

2. McDonald’s operating margin

Investors already know that McDonald’s will have some good operating news to announce on Monday. The fast-food titan said in a mid-quarter update that it returned to sales growth in the core U.S. market in recent weeks following a 9% year-over-year decline in fiscal Q2.

But this week’s report will add important context to that revenue figure, including the breakdown between customer traffic, which fell, and average order spending, which is surging.

Meanwhile, Starbucks said in late October that profitability fell due to the shift in demand toward delivery services and the aggressive use of promotions aimed at keeping customers engaged with the brand even as they stay closer to home. McDonald’s will likely announce some similar margin pressures as it looks ahead to a potential full-growth rebound in late 2020 or early 2021.

3. DraftKings’ demand trends

Investors have endured a roller-coaster ride with DraftKings’ stock heading into Friday’s earnings report. The volatility is likely to continue for this unproven consumer discretionary stock.

Besides the share price surge through most of the year, major investor concerns include a surprising decline in viewership for sporting events in recent months and the potential for further event pauses due to COVID-19 outbreaks. And DraftKings’ business would be heavily impacted by a recession, should one take hold in the U.S. market.

Executives won’t have much clarity to offer about the wider economic environment on Friday, but look for CEO Jason Robins and his team to explain how they see sports viewing demand, and growing market access, impacting the business into early 2021. Management should also update investors on their plans for using the cash they raised from a recent stock offering as part of DraftKings’ big-picture strategy to build a profitable sports-betting business.

Demitri Kalogeropoulos owns shares of McDonald’s and Starbucks. The Motley Fool owns shares of and recommends Beyond Meat, Inc. and Starbucks. The Motley Fool recommends the following options: short November 2020 $85 calls on Starbucks. The Motley Fool has a disclosure policy.

SPONSORED:

10 stocks we like better than Beyond Meat, Inc.

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Beyond Meat, Inc. wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of October 20, 2020

 

Continue Reading