3 Things to Watch in the Stock Market This Week

Stocks were little changed last week as earnings season heated up. The Dow Jones Industrial Average (^DJI 0.23%) and the S&P 500 (^GSPC -0.16%) are down 10% and 13% so far in 2022, respectively, but have rallied off of their lows in late June.

Hundreds of additional companies will update investors on their latest sales trends in the comping week. Let’s look at a few highlights from the long list of announcements on the way, from Disney (DIS -1.38%), Take-Two Interactive (TTWO -0.18%), and Fossil Group (FOSL 3.81%).

1. Disney’s digital profits

Disney’s stock has been one of the worst performers in the Dow this year, but shareholders are hoping for a change in fortunes starting on Wednesday. That’s when the entertainment giant announces results for the Q3 period that ended in early July.

The big concern going into that report is that Disney’s digital business will continue to drag down the wider company. The direct-to-consumer segment, home to Hulu and Disney+, reported a $900 million loss for the Q2 period and was the main reason why earnings overall fell by 10%.

Sure, rival Netflix (NASDAQ: NFLX) recently announced stabilizing growth trends and projected a brighter future ahead for subscriber gains in late 2022. But Disney’s challenge isn’t around growth as much as profitability. Investors are worried about whether the pivot to a direct relationship with content consumers will pay off for the business. Any new clarity on that point would move the stock over the next few days.

2. Take-Two Interactive’s release schedule

Take-Two Interactive, the video game developer behind global hit franchises such as Red Dead Redemption and Grand Theft Auto, reports its latest results on Monday afternoon.

It is clear from its prior earnings report, and from more recent ones from the likes of Microsoft, that the video game industry is seeing weaker demand as consumers shun some of the entertainment options they favored in earlier phases of the pandemic. The main question investors have about Take-Two is to what extent that slowdown will harm the business.

Management back in May projected that sales will rise by about 11% in the new fiscal year, even before adding in the revenue from the new Zynga acquisition. Take-Two is also aiming to significantly boost operating profit margin. We’ll learn this week whether that outlook remains bullish, mainly because the company is planning twice as many big title launches this year compared to last year.

3. Fossil’s new outlook

Investors have some big questions heading into Fossil’s Wednesday earnings announcement. The watch specialist’s prior update was solid, with revenue rising 10% after adjusting for currency exchange rate swings. Yet management at the time said several new headwinds began to pressure sales and earnings toward the end of the quarter, including inflation, the war in Ukraine, and pandemic lockdowns in China.

This week’s report will show whether Fossil was able to execute through those challenges. Most investors who follow the stock are looking for sales to rise by around by around 2% for fiscal 2022 while profitability shrinks slightly. CEO Kosta Kartsotis and his team might reduce those forecasts on Wednesday, though, if the company saw more demand pressures in a few key markets like Europe in Q2.

Demitri Kalogeropoulos has positions in Netflix and Walt Disney. The Motley Fool has positions in and recommends Microsoft, Netflix, Take-Two Interactive, Walt Disney, and iRobot. The Motley Fool recommends the following options: long January 2023 $115 calls on Take-Two Interactive, long January 2024 $145 calls on Walt Disney, and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.

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