5 Things to Watch This Week: Apple, Netflix, McDonald's, Trains, and Microsoft
From the country's most valuable technology companies reporting their latest financials to the world's top burger flipper proving that a short-lived slump was merely a fluke, there will be plenty of news waiting to break in the coming days. Let's go over some of the items that will help shape the week that lies ahead on Wall Street.
1. Apple Has Plenty to Prove: It's been a rough few months for Apple (AAPL). The stock has shed nearly 30 percent of its value since peaking at an all-time high just four months ago.
Analysts are scaling back their sales projections on iPads and iPhones. Industry trackers show Android devices continuing to gobble up market share at Apple's expense.
It's against this backdrop of concern and mortality that Apple steps up on Wednesday to shed some light on its fiscal first quarter financials. The holiday quarter should have been a reasonably healthy one for Apple. The report will include the first full quarter of sales of the iPhone 5 and the popular iPad mini.
Investors will still want to keep an eye on margins. Some believe that the iPhone 5 costs more to make than the iPhone 4S did a year earlier, potentially stinging profitability if Apple can't make it up in volume. The same can be said about the aggressively priced iPad mini.
2. I've Been Working on the Railroad: There's still a thriving railroad industry, and that's even without a Dagny Taggart anywhere in sight.
Transporting goods by rail may seem old-fashioned. People prefer to get around faster by plane. However, when it comes to shipping goods when cost is a bigger factor than time, rail transporters are still rolling along, and their value proposition gets even stronger when gasoline prices head higher.
We'll get a great snapshot of the industry this week, as CSX (CSX), Norfolk Southern (NSC), and Union Pacific (UNP) all pull into the depot with their latest quarterly reports. Analysts are bracing for a mixed picture. They see CSX and Norfolk Southern posting slightly lower earnings, but Union Pacific should come through with a slight bottom-line uptick.
3. Hard Times for Mr. Softy: The holiday quarter was supposed to be special for Microsoft (MSFT). The world's largest software company introduced Windows 8 and Windows Phone 8 in late October.
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The new PC operating system was built from scratch to take advantage of the growing trend for touch-centric devices. The new mobile operating system was supposed to be the company's best shot at gaining relevancy before Android and Apple's iOS corner the market.
Well, third-party reports aren't very encouraging. Research firms Gartner and IDC point to at least a 5 percent decline in worldwide PC shipments this past quarter, suggesting that the debut of Windows 8 was a non-event. There have been some reports of success with the Lumia line of Windows-powered smartphones, but certainly not enough to concern Android and Apple.
Analysts aren't very optimistic. They see Microsoft posting a quarterly profit of $0.75 a share on Thursday, just shy of the $0.78 a share it posted a year earlier.
4. Billions and billions swerved: McDonald's (MCD) has been a consistent winner for investors. Even during the darkest recessionary stretches, the world's largest restaurant chain produced steady sales growth.
The success of its Dollar Menu helped draw in cost-conscious consumers, just as the introduction of fancy coffee drinks and premium chicken-based offerings attracted new customers looking for more than just cheap burgers.
McDonald's shocked the market this past quarter. It posted its first month of declining comparable-store sales since 2003. Mickey D's will now get a chance to shed some light on what happened -- and what it sees happening in the near future -- when it reports its latest quarterly results on Wednesday.
5. Streaming Along: Netflix (NFLX) shares may have peaked two summers ago, but the service is as popular as ever. Sure, DVD-based subscribers are dropping like flies, but there are now nearly 30 million streaming customers worldwide.
Netflix reports on Wednesday, and it has already braced the market for red ink.
Netflix is losing a lot of money as it expands into overseas markets, and all of those content deals to keep its streaming options fresh don't come cheap.
The market has gradually come to embrace Netflix's plans to sacrifice near-term margins for subscriber growth. There is no service that is even close to Netflix in terms of premium streaming subscribers. The stock has nearly doubled off its summertime lows. Expect volatility on Thursday after Wednesday night's report.
Motley Fool contributor Rick Aristotle Munarriz owns shares of Netflix. The Motley Fool recommends Apple, McDonald's, and Netflix. The Motley Fool owns shares of Apple, McDonald's, Microsoft, and Netflix.
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