Stocks ended their losing streak in a big way last week, as both the Dow Jones Industrial Average (^DJI 1.76%) and the S&P 500 (^GSPC 2.47%) gained 6%. The rally was sparked by some well-received earnings reports suggesting continued economic growth and robust consumer spending.
Investors will be getting more updates in the week ahead, including from Okta (OKTA 5.97%), Ambarella (AMBA 9.92%), and Chewy (CHWY 6.15%). Let’s look at these upcoming reports, and how they might move the stocks over the next few days.
Image source: Getty Images.
1. Okta’s profitability
There are high expectations around Okta’s sales growth trends when the company reports earnings results on Thursday. Management back in early March projected that the digital identity management specialist’s sales are likely to rise 55%.
That outlook hasn’t dimmed much despite slowing economic growth, especially given that peer Palo Alto Networks just raised its short-term sales outlook while citing robust demand for cybersecurity services.
Investors are demanding more than just growth these days, though. Okta reported an expanding operating loss last year, after all, and projected another loss for the current year as it works to integrate the new Auth0 business into the portfolio.
Okta’s stock might not get back into Wall Street’s good graces until management can show that it is steadily moving toward profitability, perhaps starting later this year.
2. Ambarella’s order backlog
Investors have big questions heading into Ambarella’s Q1 earnings report on Tuesday afternoon. The semiconductor specialist announced strong growth in the previous quarter as clients in the autonomous driving and security camera niches spent heavily on its low-power video processing platforms.
However, supply chain issues had started causing delays in its order pipeline, CEO Fermi Wang said back in late February. The main concern is that these supply issues worsened over the next several months.
Ambarella is targeting a much larger sales base over time, thanks to its push into the expanding computer vision space. This shift also could lift profit margins, since it involves more complex semiconductor design.
Sure, Ambarella faces big, cash-rich rivals in this area. But if the company can continue delivering valuable tech to its manufacturing partners, it could build an impressive earnings stream over the next several years.
3. Chewy’s renewal rate
Investors have abandoned Chewy’s stock in 2022 as part of a bigger move away from companies that had seen huge growth in earlier phases of the pandemic. Chewy also gave shareholders specific reasons to worry when it reported surprisingly weak sales growth last quarter from elevated churn, meaning fewer customers remained committed to its auto-ship subscriptions.
Executives explained at the time that the slowdown was probably due to a temporary quirk associated with the pandemic, and not to market share losses. This week’s report will be the first big test of that optimistic forecast.
Chewy might scale back its 2022 outlook for the same reason other e-commerce retailers have reduced expectations in recent weeks. But its long-term future will remain bright so long as pet owners stay engaged in its service. Signs of that strength will show up in metrics like gross profit margin, average order spending, and Chewy’s renewal rate.
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