5 Things to Watch This Week: Disney, Dining Out, Surface Pro, Visa and DVDs
As always, there will be plenty of unpredictable events moving the market this week. But some items will come right on schedule: A major credit card marketer will tell us whether we've been choosing plastic over paper; the House of Mouse will tell us how much magic it has in its financials; and a growing restaurant niche will serve up two heaping helpings of quarterly results: Here are five things sure to help shape the week ahead on Wall Street.
1. Fast Casual is Ready to Serve: The restaurant industry has been redefined in recent years. One of the hottest trends is something called fast casual. We're talking about middle ground between fast food and casual dining.
Panera Bread (PNRA) and Chipotle Mexican Grill (CMG) are the niche darlings. Diners order at a counter, just as they do at a burger joint. However, the quality of the food is often comparable to a sit-down restaurant with table service. The prices split the difference. Panera and Chipotle are cheaper than trekking out to Applebee's or On the Border but they're not as cheap as McDonald's.
It's been a growing trend. Chipotle and Panera have been able to post consistently positive same-store sales even during the dark recessionary stretches when traditional chains have sputtered.
Investors will get a taste of how fast casual is holding up these days on Tuesday. Panera and Chipotle will be serving up their latest quarterly results.
2. A Second Chance to Surface: Microsoft (MSFT) hopes that its second wave of Surface tablets fares better than its freshman effort.
Surface Pro will hit the market on Saturday. Unlike last year's Surface, which runs the scaled back Windows RT mobile operating system, the new tablet runs the same Windows 8 Pro fueling traditional PCs. In other words, the new tablet should be able to run traditional Windows software.
That upgrade comes at a cost, unfortunately. Surface Pro starts at $899, far more than a $499 iPad or the many even-cheaper Android gadgets. Buyers should also know that running Windows 8 Pro also gobbles up a lot of precious storage space. Tech blog The Verge is reporting that Surface Pro requires more than 40 gigs for Windows 8 Pro, pre-installed apps, and recovery tools, leaving buyers of the entry-level 64 gigabyte model with just a little more than 20 gigabytes of usable space out of the box.
Microsoft still has a lot riding on the new model after analysts began slashing sales targets for the original. It won't go down without a fight.
3. Visa Wants to Charge Ahead: MasterCard (MA) reported better than expected results last week, so it's only natural to expect Visa (V) will do the same when it reports on Wednesday.
Visa and MasterCard are the country's two largest credit card marketers. Yes, marketers. Contrary to popular belief, they don't actually issue the cards or taking on any credit risks. Banking giants and other financial services providers are the ones typically taking on that role. MasterCard and Visa simply market the plastic and take their cuts on any transactional swipes.
Analysts see Visa earning $1.79 a share this quarter, well ahead of the $1.49 a share it earned during last year's holiday quarter.
4. DVDs are Dying: There isn't a lot of love for DVD rentals these days.
Blockbuster announced last month that it would be closing another 300 stores. Netflix (NFLX) reported strong growth in its streaming business, but its number of mail-based DVD renters declined 300,000 sequentially in its latest quarter.
It's against this backdrop that the only company growing renting optical discs -- Redbox parent Coinstar (CSTR) -- reports.
Wall Street sees profitability taking a hit, but they see Coinstar generating a 12 percent spurt in revenue growth. There's little reason to expect the DVD to bounce back. Redbox is even introducing a digital service that's currently in beta. However, the moment you see Redbox kiosks begin to post declines in revenue there won't be any doubt that the optical disc is dead.
5. Mickey Mouse Clubbed: Disney (DIS) has been a family entertainment juggernaut for years. It's not just its theme parks, movies, and Disney Channel cable properties. Disney also watches over ESPN and ABC. Its acquisitions of Pixar, Marvel, and more recently Lucasfilm have broadened its filmed entertainment offerings and the video games they sometimes inspire.
Despite all of Disney's great assets the market is braced for mixed results when it reports on Tuesday. Analysts see revenue inching up slightly but profitability going the other way.
Investors are hoping for a little pixie dust to make the financials fly.
Motley Fool contributor Rick Aristotle Munarriz owns shares of Walt Disney and Netflix. Motley Fool newsletters recommend Chipotle Mexican Grill, Netflix, Panera Bread, and Walt Disney. The Motley Fool owns shares of Chipotle Mexican Grill, MasterCard, Microsoft, Netflix, Panera Bread, and Walt Disney.
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