Weekly Preview: Earnings To Watch this Week (AAPL, AMD, FB, MSFT, TSLA)

Men looking at stock quotes at Nasdaq MarketSite
Credit: Reuters / Gary Hershorn - stock.adobe.com

After reaching record highs earlier in the week, stocks closed mostly lower Friday which, to some, suggests a level of fatigue has crept in. Notably, this is despite the number of positive fourth quarter earnings reports from S&P 500 companies that have been released so far. Although Wall Street analysts broadly expect the trend to continue, including upbeat results for Q1, investors are nonetheless taking a cautious approach, it would seem.

The Dow Jones Industrial Average declined 179.03 points Friday to close at 30,996.98, losing 0.6%. The Blue Chip index was pressured by a 9% decline in IBM (IBM) which reported Q4 revenue results that missed the Street’s estimates. Intel (INTC), which lost 7% during the session, also dragged the Dow lower despite releasing better-than-expected Q4 earnings. The S&P 500 index closed 11.60 points lower to 3,841.47, while the Nasdaq Composite Index added 12.15 points to close at a record high of 13,543.06.

Nasdaq’s rally was driven by, among others, Apple (AAPL), Microsoft (MSFT) and Facebook (FB), which are due to report earnings this coming week. But as noted, some fatigue is starting to creep into the market. Part of the reason has been due to a combination of factors. Aside from reports of various lockdown measures being considered to combat the COVID-19 pandemic, particularly in Europe, Dr. Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases, said during White House briefing on Thursday that the vaccines currently on the market may be less effective to battling new variants of the virus.

What’s more, the U.S. Senate has shown an opposition to President Joe Biden’s $1.9 trillion new round of fiscal stimulus which includes not only $1,400 cash payments to households, but also supplemental unemployment payments as well as money for distributing COVID-19 vaccines. A number of Republicans don’t support the bill and have criticized the price tag. But there are also some Democrats, including Sen. Joe Manchin, who has criticized the size of the proposed stimulus checks.

As it stands, with political opposition seemingly on both sides, the market is now unsure of whether the President’s stimulus goals will become law. And this is likely to pressure cyclical stocks (energy, financials, materials, etc.) — those that stand to benefit from additional stimulus.

Meantime, this week, earnings from mega tech companies come into focus. These reports, as well as their outlook for 2021 will be closely-watched as their revenue and earnings growth are less dependent on fiscal stimulus. Here are the names to keep an eye on.

Advanced Micro Devices (AMD) - Reports after the close, Tuesday, Jan. 26

Wall Street expects AMD to earn 47 cents per share on revenue of $3.02 billion. This compares to the year-ago quarter when earning were 32 cents per share on $2.13 billion in revenue.

What to watch: Expectations are high for AMD, given strong Q4 results and upside guidance issued last week from rival Intel (INTC) that showed a rebound not only in the datacenter business, but also PC sales. These trends bode well for AMD, which has steadily gained market share from Intel in both categories. The market assumes minimal disruption to AMD’s business despite the pandemic. AMD shares have been been on the rise, climbing about 5% over the past week, and is now up 1.2% year to date. The stock’s popularity has been driven by several factors, namely AMD's execution, which includes topping the Street’s revenue estimates in five of its last six quarters. The company is well-positioned to do so again. Aside from the top and bottom line numbers, investors will focus on metrics such as shipment growth and any commentary from management about expectation for Q1 and all of 2021.

Microsoft (MSFT) - Reports after the close, Tuesday, Jan. 26

Wall Street expects Microsoft to earn $1.64 per share on revenue of $40.18 billion. This compares to the year-ago quarter when earning were $1.51 per share on $36.91 billion in revenue.

What to watch: Work and learn-from-home trends continue to power increased demands for Microsoft services, evidenced by the strong Q4 demands in its Productivity and Business and Intelligent Cloud segments. But the strength of Microsoft’s Commercial Cloud business has been and will continue to be the catalyst for the stock’s strong performance over the past year. Last quarter, Azure revenue was up 48% year over year — a slight deceleration from the 50% growth in Q4. Wall Street remains broadly positive about the company’s prospects to achieve double-digit revenue growth in fiscal 2021, driven by Azure's momentum. On Wednesday, investors will want some evidence that Azure and Microsoft’s Teams (a Zoom (ZM) competitor) can continue to propel the company higher.

Apple (AAPL) - Reports after the close, Wednesday, Jan. 27

Wall Street expects Apple to earn $1.40 per share on revenue of $102.76 billion. This compares to the year-ago quarter when earnings came to $1.25 per share on revenue of $88.5 billion.

What to watch: This quarter will be all about revenue and unit sales for the iPhone 12, in all its variants. Analysts have lauded the device, describing it as the most significant upgrade super-cycle of the iPhone since the iPhone 6 was launched with a larger screen. The iPhone 12, however, is deemed more important not only for its 5G capabilities, but also for features such as its world-facing LIDAR sensor which comes on the Pro models. All told, unlike prior models, there are few mere “incremental” upgrades not the device. It’s more revolutionary. The question is, will its holiday quarter sales meet such high expectations? But Apple is more than just a phones shop. The company’s Services business, which now accounts for almost 22% of total revenue, surged last quarter to a record $14.5 billion, topping consensus of $14.12 billion.

Facebook (FB) - Reports after the close, Wednesday, Jan. 27

Wall Street expects Facebook to earn $3.19 per share on revenue of $26.34 billion. This compares to the year-ago quarter when earnings came to $2.56 per share on revenue of $21.08 billion.

What to watch: Facebook shares have gone on an impressive run over the past week, posting some 12% gains suggesting that the concerns the market has had about softness in the digital advertising market, particularly amid the pandemic, have now vanished. The company has been a model of consistency, topping consensus earnings expectations in each of the past eleven quarters. All told, the company has missed earnings estimates just once over the past five years. Yet, over the past year FB shares have bee a relative under-performer on fears of political risks brought on by its dominance. But if the company can deliver show a strong surge in daily active users and monthly active users, while providing upbeat revenue guidance the stock should continue to perform as it has over the past few sessions.

Tesla (TSLA) - Reports after the close, Wednesday, Jan. 27

Wall Street expects Tesla to earn $1.00 per share on revenue of $10.32 billion. This compares to the year-ago quarter when earnings came to 41 cents per share on revenue of $7.38 billion.

What to watch: Already up 20% year to date, shares of Tesla are erasing doubt that the company in 2021 can deliver the rate of return produced in 2020. While skeptics continue to scoff at the stock’s high valuation, Tesla’s focus has been on executing it strategy. With four double beats (top and bottom line) in row few companies have executed better over the past year, including its reported Q4 deliveries of 180,570 for and delivered 499,550 vehicles for 2020. And there are no signs of slowing down, evidenced by the company’s vehicle registrations in California which jump nearly 63% year over year in Q4. The electric vehicle pioneer will have to keep its foot on the gas pedal next week as its delivery guidance for 2021 will likely determine where the stock heads in the near term.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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