Wall Street's fourth-quarter earnings season kicks into high gear this week, with investors bracing for a rocky reporting period amid concerns over the Federal Reserve's tightening plans.
With trading nearing its lowest level in months, the result of the recent large-scale sell-off in the tech space, most attention will once again be focused on the so-called "FAAMG" group of mega-cap companies.
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Under these circumstances, much will be at stake when the five largest tech companies of the market, including the "FAAMG" group, namely Meta Platforms (formerly Facebook), Apple, Amazon, Microsoft and Google, their respective results in the coming days.
Here's a closer look at what to expect from the FAAMG Five this winning season (in no particular order).
1. Microsoft
Revenue date: Tuesday, January 25, after market close
EPS growth estimate: +13.8% yoy
Estimated Revenue Growth: +17.5% YoY
Performance to date: -10%
Market Cap: $2.28 Trillion
Microsoft (NASDAQ:) — which has beaten Wall Street's earnings and earnings expectations for 18 straight quarters from the first quarter of 2017 — has released consensus estimates calling for the software and hardware giant to make a profit of $ 2.31 per share for its fiscal second quarter, improving about 14% from earnings per share of $2.03 in the same period a year ago.
Revenues are expected to cross the $50 billion mark for the first time in history to a record high of $50.6 billion, up 17.5% from the same period a year earlier, thanks to strong demand for its cloud computing products. ]
As such, investors will focus on growth in Microsoft's thriving Intelligent Cloud segment, which includes Azure, GitHub, SQL Server, Windows Server and other enterprise services. Microsoft's commercial cloud revenue grew 31% year-over-year to $16.96 billion in its revenue, while revenue from its Azure cloud services grew 50%.
Market players will also be eager to hear new details about the company's acquisition of video game giant Activision Blizzard (NASDAQ:) for $68.7 billion – the largest acquisition in history – as it ramps up its efforts to become a major player. are in the emerging metaverse, which is seen as the next-generation version of the Internet.
MSFT, which is down 10% so far this year, ended Tuesday's session at $302.65. With a market cap of $2.28 trillion, Microsoft is the second most valuable company in the world.
Despite recent volatility, the Redmond, Washington-based tech giant's stock still looks like a good bet for the future, given strong demand for its cloud-based offerings and plans to enter the emerging metaverse space.
Not surprisingly, 42 of the 45 analysts surveyed by Investing.com rate the stock as "outperforming," representing a nearly 22% increase from its current level to $368.52/share.
Source: Investing.com
2. Apple
Revenue date: Thursday, January 27, after market close
EPS growth estimate: +12.5% ??yoy
Estimated Revenue Growth: +6.3% YoY
Performance to date: -4.4%
Market Cap: $2.77 Trillion
Apple (NASDAQ:) reported mixed revenue and earnings largely due to supply chain problems. In the next scheduled release next week, financial results over the all-important holiday season will be closely monitored.
Analysts call for earnings per share of $1.89 for the fiscal first quarter, up 12.5% ??from earnings per share of $1.68 in the same period a year ago. Sales are expected to grow 6.3% from the same period a year earlier to $118.49 billion.
If confirmed, this would be Apple's largest quarterly revenue in the company's history, benefiting from strong demand for its lineup of 5G-enabled iPhone models.
As such, Wall Street will be paying close attention to the growth of Apple's iPhone revenue, which increased 47% yoy to $38.87 billion in the previous quarter. Any updates on growth in the tech giant's iPad and Mac business, which delivered revenue growth of 21.4% and 1.6% year-over-year respectively in the last quarter, will also take center stage as it deals with supply constraints that related to the global chip shortage.
In addition, Apple's thriving services, including App Store sales, music and video subscription services, extended warranties, licenses, and advertising, will be in the spotlight after posting revenue growth of 25, 6% YoY in fiscal fourth quarter.
AAPL – which is down 4.4% so far in January – ended Tuesday's session at $169.80. At its current level, the Cupertino, California-based consumer electronics conglomerate has a market cap of $2.77 trillion, making it the most valuable company trading on the U.S. exchange.
We expect the positive trend at Apple to continue in the coming months, amid excitement around the company's plans to develop its own electric car, as well as augmented reality and virtual reality (AR/VR) products that are tuned to the metaverse.
Indeed, 35 out of 41 analysts surveyed by Investing.com are optimistic about AAPL stock, forecasting an increase of about 3% from current prices to $175.17/share.
Source: Investing.com
3. Google
Income date: Tuesday, February 1, after market close
EPS growth estimate: +23.5% yoy
Estimated Revenue Growth: +26.6% YoY
Performance to date: -6.1%
Market Cap: $1.81 trillion
Alfabet, the parent company of Google (NASDAQ:), which easily exceeded expectations for earnings and revenue despite broad strength in the online advertising market, has analysts forecast fourth-quarter earnings of $27.54 a share, a improvement of 23.5% from earnings per share of $22.30 in the same quarter a year earlier.
Revenues are expected to come in at an all-time high of $72.0 billion, up about 27% from the same period a year ago, thanks to a continued increase in digital advertising spend.
As such, investors will continue to focus on the growth rates of Google's core ad revenue business, which grew 43 percent in the previous quarter to $53.1 billion. YouTube ad revenue growth, which grew 43% to $7.21 billion in the last quarter, will also be examined.
In addition, a segment to be primed for another quarter of blockbuster growth is Alphabet's Google Cloud Platform, whose third-quarter revenue grew 45% to $4.99 billion. The tech giant has invested heavily in its cloud business while catching up with Amazon Web Service and Microsoft Azure.
The best performing "FAAMG" stock last year, with annual gains of nearly 65%, GOOGL closed out Tuesday's session at $2,719.96. At its current level, the Mountain View, California-based tech giant has a market cap of $1.81 trillion, making it the third most valuable company trading on the US stock exchange.
We expect GOOGL stocks to continue their strong upward trend in the coming year on the back of strong demand for its innovative products and services. Indeed, the quantitative models in InvestingPro indicate an approximately 19% increase in GOOGL shares to a fair value of $3,234.38/share.
Source: InvestingPro
4. Amazon
Income date: Tuesday, February 1, after market close
EPS growth estimate: -73.5% yoy
Estimated revenue growth: +9.7% yoy
Performance to date: -4.7%
Market Cap: $1.61 trillion
Amazon.com (NASDAQ:), which reported for the second consecutive quarter and provided weak guidance, is expected to report EPS of $3.73, down 73.5% from versus earnings per share of $14.09 in Q4 2020, reflecting a difficult year-to-year comparisons, higher labor costs and higher shipping costs related to global supply chain constraints.
Revenues are expected to grow less than 10% from the same period last year to $137.8 billion as e-commerce growth slows amid fading pandemic-era lockdown restrictions and consumers are returning to physical stores in greater numbers.
Beyond the top-and-bottom numbers, investors will focus on Amazon's booming cloud unit to see if it can sustain its scorching pace of growth. Amazon Web Services (AWS) revenue grew 39% in the third quarter to a record $16.1 billion, cementing its position as a leader in the cloud computing space ahead of Microsoft Azure and Google Cloud.
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Ad revenue, which has increasingly become a major growth engine for Amazon, will also be closely watched. While Amazon doesn't disclose its ad sales figures, they are included in the fast-growing 'Other' category of the company, where third quarter sales grew by about 50%.
AMZN closed 2021 with a meager gain of 2.4%, significantly underperforming the four other so-called FAAMG stocks. It closed last night at $3,178.35. With a valuation of $1.61 trillion, the Seattle, Washington-based e-commerce and cloud giant is the fourth most valuable company listed on the U.S. stock exchange.
While the company's recent earnings and revenue growth failed to impress investors, we think Amazon is well positioned to march higher in the coming months, given its leadership position in the e-commerce and cloud computing spaces. ]
According to the InvestingPro model, AMZN stock could rise more than 23%, bringing it closer to fair value of $3,921.56 per share. Analysts also remain bullish on the stock, citing expectations for an upturn in e-commerce activity.
Source: InvestingPro
5. Meta Platforms
Revenue date: Wednesday 2 February, after market close
EPS growth estimate: -0.7% yoy
Estimated revenue growth: +18.7% yoy
Performance to date: -5.4%
Market Capitalization: $885 Billion
Consensus estimates see Meta Platforms (NASDAQ:), formerly known as Facebook, which reported, but added $50 billion to its share buyback program, with earnings per share of $3.85, a slight drop from the earnings per share of $3.88 in the year-ago period
Facebook previously warned that higher costs and investments related to the hardware and VR segment will reduce operating profit for the full year 2021 by approximately $10 billion.
Revenues are expected to grow approximately 19% year-over-year to an all-time high of $33.3 billion, fueled by strong advertiser demand and higher ad prices.
Perhaps of greater importance, investors will focus on the company's plans to build and develop the metaverse, a virtual world simulation in which multiple people can interact within a 3D environment.
Emphasizing the changing digital landscape, Meta recently broke out its Reality Labs unit, which focuses on consumer hardware, such as Oculus virtual reality headsets, into its own reporting segment starting in the fourth quarter. Meta will also release growth stats for its family of apps for the first time in the company's history, including Facebook, Instagram, Messenger and WhatsApp.
Comments from CEO Mark Zuckerberg on the post-profit call will also be in the spotlight as the social media platform moves away from its ad-based business and positions itself for an increasingly digital future.
FB, which is down more than 5% so far, ended Tuesday at $318.15. At current levels, the Menlo Park, California-based tech giant is valued at $885 billion, making it the sixth most valuable company traded in the US stock market.
Despite the recent downturn, we expect Meta to outperform the broader market in the coming months. While analysts are a bit more conservative, the quantitative models in InvestingPro point to a 31% increase from current levels to $417.46/share.
Source: InvestingPro
