3 Things to Watch in the Stock Market This Week

A Friday rebound wasn’t enough to put stocks into positive territory last week, as both the Dow Jones Industrial Average (^DJI 2.15%) and the S&P 500 (^GSPC 1.92%) shed less than 1%. The indexes are off their lows for the year but remain in deeply negative territory so far in 2022.

Second-quarter earnings season might accelerate those declines or lessen them if good news arrives about consumer spending in the face of inflation. With that in mind, let’s look at three big reports on the way this week, from Netflix (NFLX 8.20%), Domino’s (DPZ 1.87%), and Boston Beer (SAM 0.55%).

1. Subscriber losses at Netflix

Netflix shocked Wall Street with its last earnings report and sent the wider tech market reeling. Expectations aren’t much better ahead of this Tuesday’s upcoming report.

The streaming-video giant is expecting to report subscriber losses of around 2 million to easily mark its worst growth quarter since pivoting to its original and exclusive content strategy more than 10 years ago. Part of that slump can be blamed on a growth hangover following booming gains in 2020 and 2021. But Netflix is also losing market share to cheaper-priced rivals that have flooded the market lately.

In response to that shift, look for co-CEO Reed Hastings and his team to talk up their new ad-supported selling model that’s currently being developed. We’ll also learn on Tuesday whether the new season of Stranger Things helped persuade more users to stick with the platform, with help from Netflix’s staggered content release schedule that pushed the finale into the start of fiscal Q3.

2. Sales volumes at Domino’s

Demand for home delivery has rarely been higher, but Domino’s is struggling to remain on top of that expanding market. The pizza delivery leader said in its last report that sales fell in the U.S. market for only the second time in the past decade, in part because of soaring competition in the space.

Thursday’s earnings report will show whether Domino’s has returned to its steady growth profile now that comparisons are getting easier with the prior-year period. The fast-food chain is still among the most efficient in the industry, thanks to its relatively small stores that focus on to-go and takeaway orders.

The stock might begin recovering if sales trends stabilize. But those improved growth trends will need to be paired with steady profitability and continued positive cash flow for investors to really feel comfortable that the business is back on firmer footing following a post-pandemic slump in early 2022.

3. Seltzer sales at Boston Beer

Wall Street hasn’t been kind to Boston Beer’s stock this year, even compared with peers such as Constellation Brands. That’s mainly because the beer giant was far more exposed to the hard seltzer niche, which has fallen out of favor following a demand surge in earlier phases of the pandemic. Boston Beer noted a 7% drop in depletions, a measure of consumer sales, in its last report in late April.

This Thursday’s update should show improving trends, as management is targeting a return to growth for the full 2022 year. But that annual forecast could receive a big update this week, reflecting the latest sales for the Truly franchise.

Boston Beer is also predicting a big hit to its profitability as it continues to adjust to a tougher selling environment. The stock isn’t likely to get back into Wall Street’s good graces until that gross profit margin trend begins recovering, perhaps by late 2022.

Demitri Kalogeropoulos has positions in Netflix. The Motley Fool has positions in and recommends Constellation Brands, Domino’s Pizza, and Netflix. The Motley Fool recommends Boston Beer. The Motley Fool has a disclosure policy.

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