Earnings reports from tech giants have been in the spotlight this week. This is especially true given that Alphabet (GOOGL), Meta Platform (META), Microsoft (MSFT), Apple (AAPL) and Amazon (AMZN) are set to report this week and will offer insights about their future strategies.
These stocks are hovering around their record highs ahead of the earnings announcements. The third-quarter earnings for the “Mag 7” companies are expected to be up 16.9% from the year-ago quarter on 13.3% higher revenues. This would follow the 35.2% earnings growth on 14.7% higher revenues in the second quarter (read: Can Q3 Earnings Fuel a New Rally in "Mag 7" ETFs?).
The five biggest companies in the S&P 500 Index by market capitalization — Apple, Nvidia (NVDA), Microsoft, Alphabet and Amazon.com — are projected to post average third-quarter earnings growth of 19%, according to data compiled by Bloomberg Intelligence.
Artificial intelligence (AI) will be a big focus for investors as to how much the companies are spending on the infrastructure. Microsoft, Alphabet, Amazon and Meta Platforms are projected to have poured $56 billion into capital expenditures in the third quarter, up 52% from a year ago.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Alphabet
Google parent Alphabet will report third-quarter 2024 earnings on Oct. 29 after market close. Alphabet has an Earnings ESP of -0.16% and Zacks Rank #2 (Buy), indicating lower chances of a beat. It saw no earnings estimate revision over the past 30 days for the to-be-reported quarter. The company’s earnings surprise track record over the past four quarters is good, with the average being 9.60%. Earnings are expected to increase 18.1%, while revenues are likely to grow 13.7% from the year-ago quarter. The Internet behemoth has lost 2.5% in the last three months.
Google is facing headwinds from antitrust lawsuits and intensifying competition in the AI space. Analysts are concerned about the impact of generative AI on Google's core search business. However, Alphabet’s Waymo seems to be winning the global self-driving cars race.
T-Rex 2X Long Alphabet Daily Target ETF GOOX seeks to magnify 200% of the daily performance of the publicly-traded common stock of Alphabet. It charges 1.05% in annual fees from investors. Direxion Daily GOOGL Bull 2X Shares GGLL tracks two times the performance of the Class A shares of Alphabet, charging 95 bps in annual fees.
Meta Platforms
Meta Platforms has an Earnings ESP of +2.83% and Zacks Rank #2, indicating a huge chance of a beat. The social media giant saw a positive earnings estimate revision of 2 cents for the to-be-reported quarter over the past 30 days. Analysts increasing estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The Zacks Consensus Estimate for the to-be-reported quarter indicates year-over-year earnings growth of 17.7%. Revenues are expected to increase 17.6% year over year. Meta Platforms delivered an earnings surprise of 12.61%, on average, in the last four quarters. Shares of META have gained about 24.4% over the past three months.
Several analysts raised the target price for META ahead of its earnings, showing strong confidence in the company’s prospects. UBS raised the price target to $690 from $635, maintaining a Buy rating, while Guggenheim raised the price target to $665 from $600 with a Buy rating. Jefferies and TD Cowen lifted the price target on Meta Platforms to $675 from $600 each and kept a Buy rating. KeyBanc increased the price target to $655 from the previous $560 while maintaining an Overweight rating on the stock.
Analysts cited enhanced user engagement and better monetization of video content, including the Reels feature on the platform. An increased ad load and overall usage rate for its Reels (short-form video) offering would "continue to drive growth" for Instagram.
META is scheduled to report on Oct. 30 after the market close. As such, single-stock ETFs targeting META have been in focus. GraniteShares 2x Long META Daily ETF FBL and Direxion Daily META Bull 2X Shares METU are the two available options. Both funds track two times the performance of Meta Platforms stock. META is slight cheap, charging 95 bps in annual fees while FBL has 1.15% expense ratio.
Microsoft
Microsoft will also report on Oct. 30 after market close. It has an Earnings ESP of +0.35% and a Zacks Rank #3 (Hold), indicating a reasonable chance of a beat. Microsoft saw no earnings estimate revision over the past 30 days for the to-be-reported quarter. Its earnings track record is impressive, with the four-quarter earnings surprise being 6.34%, on average. The Zacks Consensus Estimate indicates earnings growth of 3% and revenue growth of 14% from the year-ago quarter. Microsoft has gained about 0.3% over the past three months.
The world's largest software company is spending billions to construct new data centers to meet demand for cloud computing and power-hungry AI services. While Azure growth will continue to slow in the current quarter, chief financial officer Amy Hood said that investments in data centers and servers will let the company capitalize on demand and accelerate Azure growth in the second half of fiscal 2025. Microsoft expects revenues of $63.8-$64.8 billion for the first quarter of fiscal 2025, implying 13.8% growth at the middle of the range.
T-Rex 2X Long Microsoft Daily Target ETF MSFX and Direxion Daily MSFT Bull 2X Shares MSFU seek to track the two times the performance of the stock of Microsoft. MSFU is slightly cheap, charging 95 bps in annual fees while MSFX has 1.05% expense ratio.
Apple
Apple has an Earnings ESP of -17.71% and a Zacks Rank #3, indicating less chance of beating estimates. Apple saw a negative earnings estimate revision of 6 cents over the past 30 days for the fiscal fourth quarter. The iPhone maker has a strong track record of positive earnings surprises. It delivered an average earnings surprise of 3.79% in the trailing four quarters. The Zacks Consensus Estimate indicates a modest year-over-year increase of 5.5% for earnings and 5.6% for revenues. The stock is up 6% over the past three months (read: Should You Buy Apple ETFs as the Stock Hovers Around a Record High?).
The iPhone manufacturer returned to revenue growth in the third quarter of fiscal 2024 and introduced four versions of iPhone 16 based on AI last month. The new AI-based iPhones will likely kickstart the next big upgrade cycle, enhancing the company's performance and restoring investor confidence in Apple. The stock touched a new high this week on improving demand for its latest iPhone 16. The preliminary iPhone shipment data from International Data Corporation showed strong demand for Apple's previous smartphone models. Sales were also helped by Apple's rollout of iPhone 16.
Apple is scheduled to report on Oct. 31 after market close. Investors seeking for Apple exposure ahead of its earnings could consider T-Rex 2X Long Apple Daily Target ETF AAPX, GraniteShares 2x Long AAPL Daily ETF AAPB and Direxion Daily AAPL Bull 2X ETF AAPU. The trio tracks 200% of the daily percentage change of the common stock of Apple. AAPB is costlier, charging a high expense ratio of 5.09% while AAPX has an expense ratio of 1.05%. AAPU charges 95 bps in annual fees from investors.
Amazon
Amazon will also release its results on Oct. 31 after the market close. The stock has an Earnings ESP of 0.00% and a Zacks Rank #3. The stock saw no earnings estimate revision over the past 30 days for the third quarter. The Zacks Consensus Estimate indicates a year-over-year earnings increase of 34.1% and revenue growth of 9.8% for the to-be-reported quarter. Additionally, Amazon’s earnings surprise history is impressive, with the four-quarter average surprise being 31.1%. The stock has gained about 2.5% in the past three months.
Amazon remains the king of e-commerce, and its advertising unit is booming. The growth in Amazon’s cloud computing business — Amazon Web Services (“AWS”) — is also accelerating, driven by its AI capabilities. Like other tech companies, Amazon has been ramping up investments in data centers, chips and the power needed for AI workloads. The world's largest online retailer expects revenues in the range of $154-$158.5 billion for the third quarter of 2024.
Direxion Daily AMZN Bull 2X Shares ETF AMZU tracks two times the performance of Amazon shares, charging 95 bps in annual fees.
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