Stocks rose last week, as both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) gained less than 0.5%. The boost was enough to put the Dow back into positive territory for the year while the S&P 500 is up about 8%.
Earnings season hits a higher gear with hundreds of companies set announce operating results over the next few trading days. That list includes Netflix (NASDAQ: NFLX), Procter & Gamble (NYSE: PG), and iRobot (NASDAQ: IRBT), and below we’ll take a look at the key trends that might send their stocks moving this week.
Netflix’s cash trends
Most investors’ attention will be on Netflix’s growth numbers when the company announces third-quarter earnings on Tuesday. The streaming video giant has gained a record number of subscribers through the first half of the year as COVID-19 placed a huge new premium on around-the-home entertainment.
Management said back in July that much of that growth was simply borrowed from future quarters. But investors aren’t feeling as conservative, choosing instead to believe that Netflix will sail past its official outlook that called for just 2.5 million new users.
Tuesday’s report will also include fresh cash-flow metrics. Wall Street was shocked to see Netflix jump into positive cash flow last quarter.
That was a temporary condition driven by the global pause in new content production during COVID-19 lockdowns. But investors are still excited about Netflix’s march toward sustainable cash flow, which might be accelerated by increased user engagement and increased monthly fees.
Procter & Gamble’s organic growth
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Investors are looking forward to Procter & Gamble’s Tuesday report as demand likely remained elevated for staples like diapers, paper towels, and laundry care over the last few months. Those trends helped the industry leader trounce growth targets for the fiscal year that it closed in June, with organic sales rising 5% overall.
Executives predicted slower gains ahead in fiscal 2021 thanks to the combination of increased competition, weak economic growth, and elevated inventories in consumers’ homes. We’ll get our first update to that outlook — calling for sales to rise between 2% and 4% — on Tuesday.
CEO David Taylor and his team might describe an intense competitive environment with rivals like Kimberly-Clark working hard to chip away at its market share leads in niches like premium diapers. P&G’s long streak of defending against these types of threats helps explain why many investors consider it a safe stock to hold during turbulent economic times like these.
iRobot’s holiday forecast
iRobot has taken shareholders on a roller coaster ride this year, with shares plunging by nearly 40% before surging to over 70% gains. The robotic cleaning device stock is on the positive side of that trend heading into Tuesday’s report as profit expectations bubbled higher in recent weeks.
CEO Colin Angle said in late July that there’s been a large demand uptick as consumers around the world started focusing more on home maintenance. That shift was especially pronounced in the U.S., where shoppers flocked toward premium products that are priced at $500 or above.
Tuesday’s report might include more evidence of that shift, but the big question heading into the announcement is whether retailing partners — especially Amazon — are making major orders ahead of the holiday shopping season.
Looking further out, investors are eager to hear whether iRobot is still predicting a significant hit to profitability in 2021 as it works to shift production outside of its current base in China.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Demitri Kalogeropoulos owns shares of Amazon and Netflix. The Motley Fool owns shares of and recommends Amazon and Netflix and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.
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