3 things to watch on the stock market this week



Stocks edged down last week, both Dow Jones Industrial Average (DJINDICES: ^ DJI) and the S&P 500 (SNPINDEX: ^ GSPC) withdrew from historic highs. Despite strong earnings reports from retail giants, including WalmartInvestors became more nervous about the health of the economic expansion as the number of COVID-19 cases skyrocketed across the country.

The earnings season continues with several big name earnings reports over the next few trading days. Let’s take a closer look at three major announcements from this list, by Palo Alto Networks (NYSE: PANW), Ulta Beauty (NASDAQ: ULTA), and Difference (NYSE: GPS).

Image source: Getty Images.

New perspectives from Palo Alto Networks

Look for potentially large price swings in Palo Alto Networks shares around its earnings release Monday afternoon. The cybersecurity specialist has trailed the market so far in 2021 despite impressive operating results.

Sales jumped 24% in the fiscal third quarter that ended in late April, and management credited a new persistent emphasis on safety that is fueled by the shift to a work-from-home model.

CEO Nikesh Arora and his team predicted consistent sales gains for this quarter, with revenue rising about 23% to $ 1.7 billion. The big concern ahead of Monday’s announcement is whether management is predicting a sharp slowdown for the new fiscal year that has just started. If Palo Alto Networks sees an attractive sales environment for its cloud services instead, then the stock could reclaim some of the ground it has lost to its cybersecurity peers in recent months.

Ulta Beauty customer traffic

Investors are feeling confident ahead of the Ultra Beauty earnings report on Wednesday. Sales trends have improved dramatically for the beauty retailer, and Wall Street expects even better gains to come.

New CEO Dave Kimbell said in early May that Ulta’s surprise return to record sales levels had a lot to do with its leadership position in certain popular niches. It has also helped makeup and skin care companies launch a flood of innovative products in the category. “Sales were strong across all channels,” he said at the time, “with consumers increasingly comfortable shopping” in person.

We will find out this week whether that trend has reversed somewhat with the emergence of new COVID-19 epidemics. But the outlook for Ultra Beauty should continue to target a return to annual sales growth this year after a brutal 2020 fiscal year.

Gap margins

Gap stock is having a fantastic 2021 so far, and investors are hoping Thursday’s earnings report doesn’t spoil the party. The clothing seller revealed booming sales in the first quarter, which were up double digits from the 2019 period before the pandemic.

Margins are also increasing, as high demand reduces the need for promotions. People were eager to spend in many categories of clothing, including athleisure.

GPS Operating Margin Graph (TTM)

GPS operating margin (TTM) given by YCharts

This week’s announcement is expected to show many of the same high marks Wall Street has loved about this stock in recent reports. Sales are expected to exceed $ 4 billion, most investors predict, and profits are expected to turn sharply negative from losses last year.

Still, concerns about the resurgence of a virus slowing the economic rebound persist. Look for questions about this risk of dominating Gap’s earnings call this week, even if its broader growth trend remains strong.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.



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