3 Things to Watch in the Stock Market This Week

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Stocks fell hard last week, as both the Dow Jones Industrial Average (^DJI -2.77%) and the S&P 500 (^GSPC -3.63%) shed roughly 3%. Investors became more worried about issues like inflation and slowing economic growth, and they were disappointed by a few major earnings reports.

Earnings season continues at full speed in the coming days. Hundreds of companies will update investors on their 2022 outlooks in week ahead, and here we’ll look at highlights from the long list of announcements on the way, from Shopify (SHOP -3.71%), eBay (EBAY -3.44%), and DraftKings (DKNG -2.98%).

Image source: Getty Images.

1. Shopify’s outlook

Shopify stock has had a rough run since the e-commerce platform announced its last earnings results in February. Shares are down over 40% in the past three months and have slumped by nearly 70% so far in 2022.

Those trends set a low bar for Shopify’s Thursday announcement, which is expected to weaker operating results than shareholders have seen in a while.

Management in February projected slow sales growth in Q1, in part because the e-commerce industry received such a huge bump a year ago from COVID-19 lockdowns and government stimulus payments. The lack of a repeat this year should mean unusually low growth in metrics like sales volumes, subscription services, and earnings.

The big question is whether Shopify still expects these trends to improve throughout 2022. While the company’s spending is accelerating, investors aren’t sure that they’ll be a quick growth rebound ahead. That’s why Wall Street is acting more cautious about the stock heading into Thursday’s announcement.

2. eBay’s buyer pool

Investors have some big questions heading into eBay’s Wednesday afternoon announcement. The main one is whether the business has finally stabilized, given that its pool of active buyers has declined at an accelerating rate for three consecutive quarters. Sales volumes have been on a similarly poor trend as eBay deals with a growth hangover compared to earlier phases of the pandemic.

The good news is that the marketplace’s new revenue streams, advertising and payments, have helped protect overall revenue growth. eBay is also collecting some of its biggest seller fees to date, which is pushing profitability higher. But the company needs to deliver value for those services, which mostly comes from attracting more buyers to the platform. Watch for management to detail their plans for achieving that goal in 2022.

3. DraftKings’ losses

Online betting platform DraftKings steps up the earnings plate on Friday, and investors have low expectations about that report. Sure, the company is benefiting from an expanding market for sports betting and growing interest in the niche. These factors recently persuaded management to raise their sales and earnings outlooks.

But competition is rising, too. And DraftKings hasn’t demonstrated a path to profitability yet. In fact, net losses expanded in 2021 compared to 2020.

Investors had been more accepting of these losses back when the appetite for growth-focused stocks was higher. But DraftKings may need to show progress toward paring down those losses if it wants to start getting back into Wall Street’s good graces this week.