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3 Things to Watch in the Stock Market This Week

Stocks ended their losing streak in a big way last week, as both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) gained 6%. The rally was sparked by some well-received earnings reports suggesting continued economic growth and robust consumer spending. Investors will be getting more updates in the week ahead, including from Okta (NASDAQ: OKTA), Ambarella (NASDAQ: AMBA), and Chewy (NYSE: CHWY). Let's look at these upcoming reports, and how they might move the stocks over the next few days. 1. Okta's profitability There are high expectations around Okta's sales growth trends when the company reports earnings results on Thursday. Management back in early March projected that the digital identity management specialist's sales are likely to rise 55%. That outlook hasn't dimmed much despite slowing economic growth, especially given that peer Palo Alto Networks just raised its short-term sales outlook while citing robust demand for cybersecurity services. Investors are demanding more than just growth these days, though. Okta reported an expanding operating loss last year, after all, and projected another loss for the current year as it works to integrate the new Auth0 business into the portfolio. Okta's stock might not get back into Wall Street's good graces until management can show that it is steadily moving toward profitability, perhaps starting later this year. 2. Ambarella's order backlog Investors have big questions heading into Ambarella's Q1 earnings report on Tuesday afternoon. The semiconductor specialist announced strong growth in the previous quarter as clients in the autonomous driving and security camera niches spent heavily on its low-power video processing platforms. However, supply chain issues had started causing delays in its order pipeline, CEO Fermi Wang said back in late February. The main concern is that these supply issues worsened over the next several months. Ambarella is targeting a much larger sales base over time, thanks to its push into the expanding computer vision space. This shift also could lift profit margins, since it involves more complex semiconductor design. Sure, Ambarella faces big, cash-rich rivals in this area. But if the company can continue delivering valuable tech to its manufacturing partners, it could build an impressive earnings stream over the next several years. 3. Chewy's renewal rate Investors have abandoned Chewy's stock in 2022 as part of a bigger move away from companies that had seen huge growth in earlier phases of the pandemic. Chewy also gave shareholders specific reasons to worry when it reported surprisingly weak sales growth last quarter from elevated churn, meaning fewer customers remained committed to its auto-ship subscriptions. Executives explained at the time that the slowdown was probably due to a temporary quirk associated with the pandemic, and not to market share losses. This week's report will be the first big test of that optimistic forecast. Chewy might scale back its 2022 outlook for the same reason other e-commerce retailers have reduced expectations in recent weeks. But its long-term future will remain bright so long as pet owners stay engaged in its service. Signs of that strength will show up in metrics like gross profit margin, average order spending, and Chewy's renewal rate. 10 stocks we like better than Okta When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* They just revealed what they believe are the ten best stocks for investors to buy right now... and Okta wasn't one of them! That's right -- they think these 10 stocks are even better buys. *Stock Advisor returns as of April 27, 2022 Demitri Kalogeropoulos has positions in Okta. The Motley Fool has positions in and recommends Chewy, Okta, and Palo Alto Networks. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

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