Weekly Preview: Earnings To Watch this Week (AMD, AMZN, FB, GOOGL)
Has the market finally bottomed? Stocks staged a strong rebound on Friday as dip-buyers swooped in at the last hour of trading to acquire some cheap shares. Could this be a sign of things to come in the weeks ahead? The major averages closed out the week booking gains, which helped to reverse massive declines to start the week.
While the volatility seems like it’s here to stay, there is emerging evidence that the worst of the declines are in the rearview mirror, at least for now. On Friday the Dow Jones Industrial Average rose 1.7%, adding 565.69 points, to close at 34,725.47. The Blue Chip index was driven by increases in Microsoft (MSFT), Intel (INTC), Qualcomm (QCOM) and IBM (IBM). Apple (AAPL) was a key contributor on Friday, rising 7% after the tech giant not only breezed past Wall Street’s earnings expectations with profits of $30 billion, the company also issued strong guidance for the current quarter.
Apple’s dominant quarter could revive what has been so far a mixed bag of earnings results. Some analyst believe Apple’s blowout numbers could be a near-term catalyst for the tech sector. Meanwhile, the S&P 500 index rose 2.4% to close at 4,431.85. Notably, the S&P 500 reached an intraday low at 4,292.46, putting the index in correction territory as it is down at least 10% below its Jan. 3 closing peak. The Nasdaq Composite ended strongly, posting a gain of 417.79 points, or 3.1%, to end at 13,770.57. Aside from the aforementioned Apple and Microsoft, Nasdaq’s rally was driven by gains in, among others, Tesla (TSLA), Alphabet (GOOG , GOOGL) and Amazon (AMZN).
For the week, the S&P 500 index was the biggest gainer, rising 1.3%. The Dow just missed a full point gain, booking 0.8% for the week, while the Nasdaq Composite finished up 0.01% higher. The tech-heavy index just narrowly avoided its fifth consecutive weekly decline. Investors want to know whether this rally can continue. Between balancing concerns about rising inflation, interest rates and weak consumer spending, that’s not an easy question to answer, especially when factoring rising COVID cases and geopolitical worries.
However, stock valuations are now seemingly more attractive given the rash of dip-buying that occurred last week. A “flight to quality” is now part of the approach. This means the “easy money” has already been made. Investors must now pick their spots. To survive the volatility, not only do you need time, but the companies have to feature fundamental qualities such as sustainable revenue and earnings growth, solid cash flows and strong balance sheets.
On the earnings front, here are the stocks to keep an eye on this week.
Advanced Micro Devices (AMD) - Reports after the close, Tuesday, Feb. 1
Wall Street expects AMD to earn 76 cents per share on revenue of $4.52 billion. This compares to the year-ago quarter when earning were 52 cents per share on $3.24 billion in revenue.
What to watch: Having surpassed both revenue and profit estimates in ten straight quarters, it appears AMD is finally getting the respect it deserves. But not everyone believes AMD’s success can last. AMD stock was under pressure last week, falling some 7% amid the selloff in tech. And analysts at Piper Sandler fanned more bear flames by downgrading the stock and slashing the price target. Citing several areas of concerns, including a decline in PC market, analyst Harsh Kumar rated AMD down from Overweight to Neutral. Kumar also reduced his 12-month price target to $130. The analysts also expects a potential headwinds with earnings and revenue growth from the AMD’s recent deal for Xilinx (XLNX). In the meantime, investors are wondering is the decline the beginning of a trend or a buying opportunity. Assuming the company’s growth metrics have not drastically decelerated, it would be a mistake to part with AMD stock.
Alphabet (GOOG , GOOGL) - Reports after the close, Tuesday, Feb. 1
Wall Street expects Alphabet to earn $27.40 per share on revenue of $72.09 billion. This compares to the year-ago quarter when earnings came to $22.30 per share on revenue of $56.90 billion.
What to watch: Can Google’s cloud business finally make a big dent in quarterly revenues? Amid the recent tech decline, which has punished GOOG stock 10% year to date, the company’s cloud arm could be a strong catalyst for a rebound. When factoring the recent momentum of Google Cloud Platform and Google Workspace, the company has shown considerably more growth than it has received credit for. In the most recent quarter, the company posted segment revenues of $5 billion, rising 45% year over year and accounting for about 8% of total revenues. If Google can show continued acceleration in that segment, the market will begin to take it more seriously. Estimates call for Google Cloud to deliver Q4 segment revenues of $5.5 billion, implying year-over-year growth of almost 45%. Will that be enough? In the meantime, the company will continue to rely on its search dominance, where it has 90% market share, and digital advertising, which has seen some cyclicality of late. The company’s recent uptrend in several verticals in digital advertising, particularly in areas such as retail, financial services and travel remain compelling reasons to bet on higher prices on Tuesday.
Meta Platforms (FB) - Reports after the close, Wednesday, Feb. 2
Wall Street expects Meta to earn $3.84 per share on revenue of $33.38 billion. This compares to the year-ago quarter when earnings came to $3.88 per share on revenue of $28.07 billion.
What to watch: Amid the recent tech selloff, Meta shares have been under pressure over the past several weeks, falling some 15% in thirty days, trailing the S&P 500 index. But is now a good time to buy on the dip? Aiming to be known for more than just social media (Facebook, Messenger, Instagram and WhatsApp), the company recently rebranded from Facebook to Meta Platforms. Some estimates suggest that the metaverse can grow as much as $2 trillion annually. Meta’s advances in virtual reality with its Oculus VR headset gives it a leg up on the competition. The market will get more details about the company’s plans. In the near term, the company announced it will split out revenue and profits for two business segments. Aside from Family of Apps, which includes Facebook, Instagram, Messenger, WhatsApp, investors will get a breakdown for Reality Labs, which included augmented reality/virtual reality hardware as well as software and content.
Amazon (AMZN) - Reports after the close, Thursday, Feb. 3
Wall Street expects Amazon to earn $3.71 per share on revenue of $137.66 billion. This compares to the year-ago quarter when earnings came to $14.09 per share on revenue of $125.56 billion.
What to watch: What’s wrong with Amazon? That has been the main question over the past several months as the stock has gotten punished, falling more than 25% in six months, compared to the 1% decline for the S&P 500 index. Shares of the e-commerce giant are already down more than 16% year to date, including 20% just in the past thirty days alone. The market is re-assessing tech valuations, and Amazon has seemingly gotten caught in the middle. The company has also suffered from slowing revenue growth. But with the stock now trading some 26% below its 52-week high, it’s hard to ignore the value. Whether it’s with Prime Video, AWS, or its various retail segments such as its contactless store concept, the company still has many growth levers to pull. What’s more, the Prime membership base has continued to grow despite the pandemic. The Prime services segment has shown strong growth in the past few quarters and should continue to drive revenue help the in an economic downturn. The question is whether these trends can show enough strength to revive the stock.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.