Markets

3 Things to Watch in the Stock Market This Week

Stocks rose last week, as both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) gained more than 1%.

Earnings season ramps up with a flood of fresh earnings reports over the next few trading days.

Let's take a closer look at a few highly anticipated announcements from this list, by Apple (NASDAQ: AAPL), McDonald's (NYSE: MCD), and eBay (NASDAQ: EBAY).

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Image source: Getty Images.

1. Apple's holiday outlook

Apple announces its fiscal fourth quarter results on Thursday, and expectations could hardly be higher heading into this week's report. The iPhone maker has refreshed its entire product lineup at an ideal time, given that demand for premium consumer electronics is soaring.

That stellar selling environment helps explain why most investors who follow the stock are looking for Apple to add an incredible $20 billion to its Q4 sales base, with revenue reaching $85 billion. Wall Street will be watching for confirmation of the popularity of new hardware products like the iPhone 13, and Apple's growing services offerings that carry much higher profit margins.

The big number to watch on Thursday will be Apple's outlook for the critical holiday shopping season. This forecast will incorporate the latest demand trends, but also any supply chain issues. CEO Tim Cook and his team tend to be conservative with their short-term predictions, though, and so investors shouldn't be rattled by a seemingly weak outlook on Thursday.

2. McDonald's customer traffic

McDonald's has some big questions to answer for investors in its Wednesday report. The fast-food titan returned to sales growth in the previous quarter, but COVID-19 challenges returned in many key markets in Q3. We'll learn this week whether Mickey D's lost its positive momentum from these outbreaks.

Keep an eye on customer traffic, which hadn't recovered fully even by mid-2021. McDonald's growth outlook will be especially bright if it can return to traffic gains even as its mobile ordering channel keeps expanding. But competition is heading up in that niche, and in the drive-through segment that the company dominates today. We'll get key updates on McDonald's competitive posture

3. eBay's take rate

eBay's stock has trounced the market so far in 2021, but that outperformance will be tested with its Wednesday earnings report. Most of the online marketplace's growth and financial metrics have been moving in the right direction lately. Its buyer base and sales volumes are much higher today than they were before the pandemic struck. eBay is also pushing into attractive new categories, including advertising and payments processing.

The best news is that those initiatives are raising the value that eBay can provide to its sellers, and that success is allowing it to charge more for its services. The company's take rate, or seller fees, rose to over 11% of sales in Q2 – a new high .

Look for eBay to work toward deeper engagement with sellers and buyers this quarter through improvements to the shopping and purchasing experiences. Management will also target several new attractive demand niches, such as collectable sneakers and luxury watches.

On the financial front, look for eBay to again announce industry-leading cash flow and operating margins, thanks to its asset-light operating model. That middleman selling approach restrains its growth potential but can lead to cash flow and profitability that's far above the rates experienced by more traditional e-commerce retailers.

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Demitri Kalogeropoulos owns shares of Apple and McDonald's. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends eBay and recommends the following options: long March 2023 $120 calls on Apple, short March 2023 $130 calls on Apple, and short October 2021 $70 calls on eBay. 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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