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3 Things to Watch in the Stock Market This Week

Indexes pushed deeper into record territory last week as earnings season hit its peak. Strong third-quarter profits from the tech sector helped the Dow Jones Industrial Average and the S&P 500 (SNPINDEX: ^GSPC) add to an impressive rally that's so far produced double-digit gains for the stock market.

^SPX data by YCharts

The flood of earnings reports continues over the next few trading days. Here's a look at what to expect from a few of the most anticipated, from Under Armour (NYSE: UA) (NYSE: UAA), Fitbit (NYSE: FIT) and Activision Blizzard (NASDAQ: ATVI).  

Under Armour's holiday outlook

The sports apparel business is becoming more of a marathon than a sprint for Under Armour. It had been one of the S&P 500's fastest-growing stocks until last year, when its growth pace started its brutal decline. Revenue ticked higher by just 9% last quarter, compared with the 20%-plus rates investors had enjoyed for years .

UA Revenue (Quarterly YoY Growth) data by YCharts

CEO Kevin Plank and his team say they're revamping the entire business in response to demand shifts. Under Armour is changing from a men's apparel and mostly U.S.-based retailer to a broader, global product portfolio that includes footwear and collections for women and kids.

Investors aren't expecting to see robust revenue growth in Tuesday's report even as profitability continues to decline. But Wall Street will be focused on Under Armour's outlook for the holiday quarter, given that its current struggles really began in the year-ago period. Another surprisingly weak fourth quarter would mean the company hasn't yet adapted to the new realities in the industry.

Fitbit's profit margin

Wearable-electronics specialist Fitbit will post its results on Wednesday afternoon. Shares are up modestly in the three months since its last quarterly report showed encouraging signs of stabilization in the business. Sure, sales contracted by a painful 38%. However, the company introduced several new products that helped pull average selling prices higher. Fitbit's 3.4 million device sales beat management's expectations, too.

Image source: Getty Images.

The company predicted back in August that revenue in the third quarter would be about $390 million on the way to a full-year sales result of between $1.55 billion and $1.7 billion. Gross profit margin should range between 42.5% and 44%. Those top- and bottom-line figures imply a second straight year of net losses and a shrinking sales base. Whether 2018 changes that dynamic will depend mainly on Fitbit's execution around the holiday shopping season crush.

Activision Blizzard's gamer base

Activision Blizzard has a habit of under-promising and over-delivering. The video-game developer beat management's earnings forecast in each of the past five quarters, in fact, and shareholders are hoping that the streak stays alive through Thursday's report.

Results this week are likely to be heavily influenced by Activision's launch of Destiny 2, which we know set sales and engagement records during its early September release. The company is also sure to benefit from soaring demand for digitally delivered content. Its digital sales channel is up 30% so far this year and accounts for 80% of the business today, up from 68% a year ago.

Three months ago, Activision announced a decrease in its casual gamer base that management said wasn't a big deal, given that the remaining players were more engaged and generated more earnings for the company. This week we should find out whether the developer is still finding success at monetizing the massive, but fickle, casual audience it acquired with its King Digital purchase.

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Demitrios Kalogeropoulos owns shares of Activision Blizzard, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool owns shares of and recommends Activision Blizzard, Fitbit, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool has a disclosure policy.