Investors finally saw an up week last week, as both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) rebounded following big declines through most of January. The Dow gained 1% and the S&P 500 was up 0.4%. Both indexes remain lower so far in 2022.
Earnings season continues in the week ahead, and below we’ll look at a few highlights from the long list of announcements on the way. Electronic Arts (NASDAQ: EA), Starbucks (NASDAQ: SBUX), and Meta Platforms (NASDAQ: FB) are among the most anticipated earnings reports to watch.
1. Meta Platforms’ spending plans
Facebook owner Meta Platforms will announce its fourth-quarter results, along with its new outlook, on Wednesday afternoon. The social media giant is expected to reveal a solid 20% sales boost that nevertheless would constitute a slowdown compared to the prior quarter’s 35% gain. Facebook likely benefited from steady user growth, which helped it overcome challenges, including reduced advertising effectiveness on many Apple smartphones.
Watch for CEO Mark Zuckerberg to talk up management’s plans for building up their virtual and augmented reality platforms. Executives will break out sales and costs from that division for the first time this week.
Investors are excited about the potential for booming demand in this space, which might start showing up in sales of the latest Oculus headsets. But Meta Platforms might temper that enthusiasm by describing aggressive plans for spending in the year ahead — on everything from data centers to expanded salaries for in-demand engineers.
2. Starbucks’ customer traffic
Investors have some big questions heading into Starbucks’ Tuesday earnings announcement. The coffee giant returned to record operating territory in fiscal 2021, with comparable-store sales rising 20% through late September. Customer traffic was modestly positive, and average spending per visit soared as more people took advantage of drive-thru and home deliveries.
Executives said in late October that comps should rise by about 8% in fiscal 2022, helping overall sales rise by significantly more than management’s long-term goal of between 8% and 10% annual gains. We’ll learn on Tuesday whether the omicron variant threatens that forecast.
Meanwhile, Starbucks has warned investors to expect lukewarm earnings this year that, ideally, will lay the groundwork for more margin expansion ahead. “Fiscal 2022 will be a pivotal year of investment,” CFO Rachel Ruggeri said in the most recent conference call. Tuesday’s announcement should include new details around the path that profitability will take over the next full year.
3. Electronic Arts’ outlook
A lot has happened since Electronic Arts’ last earnings report three months ago. Microsoft struck a $70 billion deal to purchase its key rival, Activision Blizzard, for one.
That acquisition helps confirm what EA has been saying for years — that the video game business is an especially attractive niche in the digital content space. On Tuesday, investors should hear more on that topic as EA reveals sales and earnings growth on top of huge gains a year ago.
The short-term outlook has risks, too, ranging from a potentially soft reception to EA’s latest release in the Battlefield franchise. If the title didn’t sell as well over the holidays as executives had hoped, management might pull back their 2022 forecast slightly.
Still, the video game giant’s portfolio is wide enough to handle a few disappointments in any given year, while still generating significant cash flow, earnings, and growth in the gamer base.
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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Demitri Kalogeropoulos owns Activision Blizzard, Apple, Meta Platforms, and Starbucks. The Motley Fool owns and recommends Activision Blizzard, Apple, Meta Platforms, Microsoft, and Starbucks. The Motley Fool recommends Electronic Arts and recommends the following options: long March 2023 $120 calls on Apple, short January 2022 $115 calls on Starbucks, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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