Weekly insights + SMS alerts
Earnings season is heating up, and after two weeks dominated by Dow Jones Industrial Average companies, this week the spotlight turns to the Magnificent Seven. Three of the seven, all of which also happen to be Dow components, report quarterly results in the coming days.
Here's a look at the earnings estimates, key items to watch and which ETFs could be in focus.
The following three Magnificent Seven stocks will report quarterly financial results this week:
Here are the current revenue and earnings per share estimates from market data for those three technology giants:
Microsoft: $4.72 EPS estimate versus $4.13 last year and has beaten analyst estimates more than 10 straight quarters; $90.68 billion revenue estimate versus $77.67 billion last year and has beaten analyst estimates more than 10 straight quarters.
Alphabet: $3.02 EPS estimate versus $2.87 last year and has beaten analyst estimates more than 10 straight quarters; $128.18 billion revenue estimate versus $102.35 billion last year and has beaten analyst estimates more than 10 straight quarters.
Amazon: $1.96 EPS estimate versus $1.95 last year and has beaten analyst estimates two straight quarters and in nine of the last 10 quarters overall; $202.24 billion revenue estimate versus $180.17 billion last year and has beaten analyst estimates eight straight quarters and in nine of the past 10 quarters overall.
With concerns about neocloud financing and capex by big technology companies, Yorkville Ives analyst Dan Ives sees pressure on the Magnificent Seven stocks ahead of earnings.
Ives estimates that 800 to 1,000 more data centers will be built in the U.S. over the next few years. The analyst sees hyperscalers such as Microsoft, Amazon and Alphabet as winners from this Fourth Industrial Revolution.
"This week will be an important one to gauge the demand trends/GPU building/enterprise capex-driven plans for the Big Tech stalwarts with all the markets watching," Ives said.
Ives highlights $850 billion of hyperscaler AI spend this year against a cloud backlog of more than $2 trillion, meaning capacity and not demand is the constraint.
"Microsoft is the cleanest expression of that setup. Azure moves the stock, but the read that matters is whether capacity is absorbed as fast as it lands, since backlog compounding ahead of revenue is the demand underwriting the capex."
Ives says for Amazon the key is the AWS backlog.
On Alphabet, Ives says Google Cloud will set the tone for the company's earnings.
"The Cloud question is how much of the $514 billion backlog converts as capacity arrives."
Here are Ives' ratings and price targets on the three stocks:
Freedom Capital Markets Chief Market Strategist Jay Woods highlights Alphabet and Microsoft as the two names to watch among the three Magnificent Seven stocks reporting.
"The question is will good results be able to take them higher or back to old highs," Woods said in a weekly newsletter. "We have seen pricing multiples tell us these are cheap stocks, but will investors buy it."
Woods highlights Alphabet stock peaking near $408 in May and then making lower highs since then, setting up some bearish technicals.
"The bears have the technical advantage, but a swift recovery of support could quickly change that narrative."
For Microsoft, Woods calls the $340 to $350 level a floor for the stock, with shares rejecting the $545 to $555 area previously, setting up the technical boundaries.
"For now, Microsoft remains in a longer-term trading range, and until buyers can convincingly clear that ceiling, history suggests chasing rallies near resistance may be a tough trade."
The three Magnificent Seven stocks will create large volatility for several of the largest stock market indexes and the ETFs that track them. All three companies belong to the Dow Jones Industrial Average and are key top 10 holdings in the S&P 500 and Nasdaq 100.
Here's a look at the current weighting in key ETFs.
SPDR Dow Jones Industrial Average ETF (NYSE:DIA)
SPDR S&P 500 ETF Trust (NYSE:SPY)
Invesco QQQ Trust (NASDAQ:QQQ)
Here are the current year-to-date stock performances of the three stocks and the major indexes:
Of the three Magnificent Seven stocks, Microsoft and Amazon have both outperformed the Dow Jones Industrial Average. All three stocks have underperformed against the S&P 500 and the Nasdaq 100.
Real-time alerts on price moves, news, and trading opportunities.
Join 20,000+ investors. No spam, ever.
