The 4 big themes to watch for this earnings season

The U.S. earnings season is once again upon us as the world’s largest and most influential companies pull the curtain back on Wall Street. 

Running from October until mid-November, investors will get a first-hand glimpse into which businesses have thrived and which have just survived over the previous quarter.

As the world reemerges from the global pandemic, it will also be the best forward indicator the market is going to get on how well different industries and stocks might adapt to the ‘new normal’.

These are the major themes to watch.

1. Are travel stocks taking off again?

After spending the better part of last year cooped up at home, there’s more than a few people planning to take advantage of open borders and free travel when they can.

While the rest of the world is a few steps ahead of Australia in normalising international and domestic trips, there’s plenty of interest in how major airlines and travel companies are navigating the recovery.

This earnings season, investors will be able to gauge just how far along they are, and how much more upside we may see yet.

From hotels and booking sites to tour companies and theme parks, earnings over the September quarter will indicate how much pent-up demand there really is and how many people might still be biding their time.

Travel stocks right now remain a mixed bag. Booking Holdings, which owns flight search engine Kayak as well as online travel agency Booking.com, is already up 25% on its pre-pandemic high. Delta Airlines on the other hand, has fallen almost 6% since reporting last week.

Stocks to watch: United Airlines (Oct. 19), American Airlines & Southwest Airlines (Oct. 21), Spirit (Oct. 27), Marriott International & Booking Holdings (Nov. 3), TripAdvisor (Nov. 9), Disney (Nov. 10), Airbnb (expected in November)

2. How are people splurging?

Just as lockdowns pulled the handbrake on travel, they also redirected spending elsewhere. The trends that emerged are now well-known. 

If gyms and social calendars were going to empty, then the appetite for activewear and dumbells was going to jump.

As bricks-and-mortar stores drew their shutters, online retailers couldn’t handle customer deliveries fast enough.

But even as consumer spending rises, the next phase of the recovery isn’t quite so clear cut. Are consumers going to rush back to their pre-pandemic shopping habits in a bid for normalcy, or are they changed forever? 

While the jury is still out, the verdict will have enormous ramifications. Remember, consumer spending is 70% of the entire U.S. economy and all eyes will be on how this earnings season plays out.

Stocks to watch: PayPal (Oct. 21), American Express (Oct. 22), Visa (Oct. 26) Ebay, McDonald’s, GM & Amazon (Oct. 27), Shopify & Starbucks (Oct. 28), Chevron (Oct. 29), Square & Uber (Nov. 4), DoorDash (Nov. 9), Alibaba (expected in November)

3. Is tech in trouble?

Last year was a big year for big tech. Our lives became overwhelmingly digital and tech companies you’d never heard of before suddenly became synonymous with half our waking life (hello, Zoom).

But how much did the pandemic simply forward demand for tech and is there still some room to go higher? As people get out and about, and workers return to the office, doubts may creep in about whether or not some valuations can be justified. 

Meanwhile, for those who need them, the ongoing chip shortage remains a major threat to future growth. Threatening to cut iPhone production by as many as 10 million units this year for example, it’s something the market will be keeping a very close eye on.

Stocks to watch: Netflix (Oct. 19), IBM (Oct. 20), Snap & Intel (Oct. 21), Facebook (Oct. 25), Alphabet, Microsoft & Twitter (Oct. 26), Amazon (Oct. 27), Apple & Atlassian (Oct. 28)

4. Are the big pandemic plays over?

Tech stocks may have been a major beneficiary of the pandemic, but they were hardly alone. 

From online dating and trading to crypto and exercise tech, the pandemic accelerated a number of trends that have been emerging for years.

Big pharmaceutical companies, on the other hand, surged as the race to produce a COVID-19 vaccine began.

While none of the beneficiaries below are likely to disappear any time soon, it will be interesting to see which companies will be able to sustain the momentum this earnings season and which will simply fall off the pace. 

Stocks to watch: Johnson & Johnson (Oct 19), Nasdaq (Oct 20), Robinhood (Oct 26), Teladoc Health Inc. (Oct. 27), Activision Blizzard & Pfizer (Nov 2), Match Group (Nov. 3), Peloton (Nov. 4),  Fiverr (Nov. 10), Coinbase (expected in November).