Investing

3 Things to Watch in the Stock Market This Week — The Motley Fool

Stocks posted mixed results last week as a few strong earnings reports sent the Dow Jones Industrial Average (DJINDICES:^DJI) higher by a full percentage point, even as the broader S&P 500 (SNPINDEX:^GSPC) barely budged. That performance left both indexes near all-time highs — up about 10% so far in 2017.

^DJI data by YCharts

Hundreds of companies will post second-quarter reports over the next few days, and a few — including Apple (NASDAQ:AAPL), Under Armour (NYSE:UA) (NYSE:UAA), and Tesla (NASDAQ:TSLA) — could produce big stock price swings for investors. Here’s what to look for in the reports.

Apple looks beyond the iPhone

Apple will post its earnings results after the closing bell on Tuesday in one of the season’s most anticipated reports. Investors are expecting a slight acceleration in growth from the consumer-tech titan. The midpoint of Apple’s guidance calls for $44.5 billion of revenue, for a 5% increase, compared with last quarter’s 4.6% uptick .

While the iPhone still dominates the business, faster growth is likely to come from other business lines in the fiscal third quarter. The services segment spiked 18% at the last check-in and should continue to show strong growth this week. Apple’s Mac lineup is also generating strong demand and increasing selling prices. 

CEO Tim Cook and his executive team will discuss a capital-return program that — by delivering over $200 billion to shareholders since 2012 — has made Apple one of the biggest dividend payers on the market. Yet the real market-moving news might be the company’s outlook for a fiscal fourth quarter that should include the launch of a new iPhone model just as the blockbuster franchise turns 10 years old.

Under Armour needs a rebound

Investors aren’t expecting much good news from Under Armour when it posts its fiscal second-quarter results before the market opens on Monday. Shares are down sharply this year, as its growth pace has been cut in half by a painful mix of slowing customer traffic at retailers and increased value-based competition.

Joggers running on the beach.

Image source: Getty Images.

The sports-apparel specialist’s most recent report showed just a 7% sales uptick to mark a dramatic break from the 20% gains investors had come to expect. Gross profit margin declined, too, as the company was forced to cut prices to manage bloated inventory levels. 

CEO Kevin Plank and his team have expressed confidence that this slump won’t last, though, and believe a heightened focus on product innovation will lead to faster growth and increased profitability. Management is calling for revenue gains to speed up to a 12% pace for the full year and, given rival Nike‘s recent comments noting a stabilizing U.S. industry, Under Armour has a good chance at posting improving trends this week.

Tesla talks up the Model 3

Tesla shares are trouncing the market in 2017 as excitement builds around the launch of its mass-market Model 3 automobile. You might call it a relief rally. Rather than stumbling through months or even years of production delays, the Model 3 was released roughly on schedule.

A white Model 3.

Model 3. Image source: Tesla.

But the first cars that rolled off the assembly line last week mark just the beginning of a long road toward sustainable profitability. That’s why Tesla’s quarterly report on Wednesday is likely to be scrutinized by investors looking for evidence that the company can ramp up production along its aggressive targets. It aims to reach a 5,000-unit-per-week production pace this year before doubling that efficiency sometime in 2018. 

In addition to the Model 3 updates, shareholders are counting on executives to show rising gross profit margin as manufacturing costs trend lower for both the Model X and Model S. Management is targeting accelerating growth in its recently acquired SolarCity business, too. Yet with all the optimism built into the soaring stock price, CEO Elon Musk and his team have a high bar to meet on Wednesday.

Demitrios Kalogeropoulos owns shares of Apple, Nike, Tesla, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool owns shares of and recommends Apple, Nike, Tesla, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool has a disclosure policy.

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