We’ve heard from Amazon, Alphabet, Facebook, Microsoft, and Apple. The earnings from the BIG GUYS are IN. But this week brings a bushel of earnings reports from the next generation in technology. And on recent performance these stocks have been out gaining most of the big tech stocks. Like what stocks, you ask?
Following on from the 82% year over year growth in earnings (projected but 91% of the 500 S&P companies have reported) in the second quarter is a huge challenge. And earnings projections for the third quarter are extremely uncertain.
I hope it’s no surprise to you–I’ve been yammering away on this topic for the last two weeks after all–but next week is a big week for earnings from bellwether tech companies. The market reaction to those earnings will determine whether the current earnings based rally goes on for a while or if, instead, we get a sell on the news retreat. Tuesday, April 27, is the first big day with Apple (AAPL), Advanced Micro Devices (AMD), Alphabet (GOOG) and Microsoft (MSFT) all reporting.
After picking up; 1.3% yesterday, shares of Microsoft added 1.23% today, Friday, July 23, as Wall Street analysts raised earnings estimates ahead of the company’s July 27 earnings report. It’s a tried and true earnings season game: No analyst wants to be on the wrong side of a strong earnings report so the days before a company is due to report earnings brings a raft of new, higher target prices.
The Standard & Poor’s 500 closed up 0.20% today, July 22. The Dow Jones Industrial Average squeezed out a 0.07% gain. But if you were looking for bigger upside moves, turn your eyes to the technology sector.
About 87% of Standard & Poor’s 500 companies tracked by Bloomberg have mentioned inflation in June quarter earnings conference calls so far in July
Ater the close on Tuesday, July 19, Netflix reported second quarter results that showed a stunning slowdown in the growth of new subscribers. In the quarter Netflix added just 1.54 million new customers. All of the growth came from the Latin American and Asia-Pacific regions. Netflix los 430,000 customers in the U.S. and Canada market. Adding to the bad news the company projected that in the third quarter it would add just 3.5 million subscribers. That’s well below the Wall Street consensus projection of 5.86 million. In this context revenue and earnings are an afterthought.
Before the market open today, July 13, JPMorgan Chase (JPM) reported earnings of $3.78 a share on revenue of $30.5 billion. But as expected trading revenue fell with fixed-income trading revenue down 44% year over year. Community banking revenue climbed just 3%; investment banking revenue rose just 1%; and commercial banking revenue grew just 3%. Average loans in the consumer banking unit fell 3%; across the company average loans were flat. A release of $3 billion from reserves against loan losses saved the quarter and produced a huge surprise above the $3.05 a share expected by Wall Street analysts.
Investors and traders will be looking to the first batch of earnings from big banks on Tuesday and Wednesday to answer two big questions: 1. Will earnings show the huge 65% year over year growth now expected by Wall Street analysts? 2. Will investors and traders sell on the news or push stocks higher on hoped for more economic (and earnings growth) to come? But I think w’ll have to wait until the week of July 27 to get answers to those queries.
Here’s my take n market sentiment over the next three months. First, in the very short-run, for the next four weeks of earnings season, it’s hard for me to imagine that investors and traders will sell ahead of one of the biggest surges in year over year earnings growth–ever. As of June 21 Yardeni Research was projecting year over year earning growth of 64.45 for the second quarter, FactSet report that Wall Street analysts have raised their earnings by 7.3% for the second quarter during the run of the quarter–that’s the highest increase in estimates for a quarter in FactSet records. I think the odds are very high that investors will stick around for second quarter earnings reports–and on the chance of substantial earnings surprises–for the earnings season that begins with JPMorgan Chase (JPM) before the market open on July 13 and that runs, roughly, lwrt’s say until Nvidia (NVDA) reports its earnings on August 18.
Friday’s market action argues that investors and traders are looking to buy shares of Apple, Amazon, Microsoft–you know the usual suspects–ahead of what looks like a blowout earnings season that will start on July 13 when JPMorgan Chase (JPM) reports before the market open.
Yesterday in my video “3 Picks for an Earnings Blowout” I argued the case that even the 61% second quarter year to year jump in earnings in the Wall Street analyst consensus was understated.. There’s a very high likelihood that we’ll see lots of positive earnings surprise in the second quarter earnings season the begins on July 13 when JPMorgan Chase reports earnings before the market opens. In that video I suggested three stocks JPMorgan Chase (JPM), Taiwan Semiconductor (TSM) and Advanced Micro Devices (AMD) as picks to play that second quarter earnings surprise. Today I’m adding one of these Advanced Micro Devices to my online portfolio with shares in my 12-18 month Jubak Picks Portfolio and Call Options in my Volatility Portfolio.
