Stocks fell hard last week as both the Dow Jones Industrial Average (^DJI 1.73%) and the S&P 500 (^GSPC 1.67%) shed more than 2%. Indexes are still having an above-average year, though, with gains of 14% for the Dow and 22% for the S&P so far in 2021.
Earnings season powers on over the next few days. Let's preview three highly anticipated announcements on the way, from Five Below (FIVE 2.25%), Ulta Beauty (ULTA 2.17%), and Okta (OKTA 7.75%).
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1. Okta's contracts
The investment picture has become cloudier at Okta, but investors are hoping for some clarity this week. The digital identity management software giant will announce fiscal third-quarter results after the market closes on Wednesday, Dec. 1.
Back in early September, Okta announced strong growth in both its core business and its recently acquired Auth0 segment. Shareholders are hoping to see lots of new customer additions in each of these segments on Wednesday. Ideally, Okta will once again raise the short-term outlook management issued, this time calling for a 50% sales increase for the full 2021 year.
Beyond that outlook update, look out for any integration challenges around the Auth0 merger. Executives said in September that this move was off to a good start, but margins are still likely to be pressured by some of the new revenue lines. The hope is that net losses this year will pave the way for expanding profits beginning as early as fiscal 2022.
2. Five Below's margin
Five Below has some big questions to answer for investors in its Wednesday earnings announcement. The retail chain posted a head-turning growth figure three months ago when second-quarter fiscal 2021 sales jumped 52% compared to the same period in 2020 and 21% compared to 2019, before the pandemic struck. But will that positive momentum hold through the second half of the fiscal year ?
Most investors who follow the stock believe it will. Sales should expand about 15%, according to Wall Street pros, to $562 million in Q3. That boost will depend on the chain continuing to stock the right kind of on-trend merchandise that resonates with its younger shoppers. We'll also learn whether these customers continued to spend freely, even on products priced as high as $10.
Good news on Wednesday would set Five Below up for a strong holiday season. But management sees a much longer runway for growth ahead as the chain works to double its store base to about 2,500 locations over time.
3. Ulta Beauty's holiday outlook
Ulta Beauty steps up to the earnings plate on Thursday afternoon, and there are some good reasons for investors to follow the Q3 report. The retailer's stock has been rebounding thanks to news that the makeup and beauty products industry is booming. The sales acceleration caught management by surprise last quarter, in fact, as sales soared to $2 billion.
Investors are hoping that Ulta can continue to balance its goal of keeping lighter inventory levels while satisfying booming demand for skin care and hair care products. The chain's long-term outlook envisions double-digit annual earnings growth, in part thanks to rising profitability.
That optimistic forecast depends on Ulta's continued success connecting with customers through the online sales channel and through smaller footprint locations within Target stores. We'll get a key update on those growth initiatives on Thursday -- right in the middle of the key holiday shopping season.
