In the coming days, Wall Street’s fourth quarter earnings season will kick into high gear. Investors are bracing for another uncertain reporting season amid the impact of the ongoing coronavirus crisis on several sectors and industries.
With the NASDAQ Composite trading near its highest level on record, most of the focus will once again be on the five, big-name, mega-cap tech companies, which are all due to release their respective results next week.
All five are set to report another quarter of blockbuster earnings and are well worth considering given their growing dominance in the tech space.
1. Microsoft
- Reports January 26 After Markets Close
- EPS Growth Estimate: +8.6% YoY
- Revenue Growth Estimate: +9% YoY
Microsoft (NASDAQ:MSFT) has been flying high. The software and infrastructure titan is enjoying a bump in demand for its cloud-based services amid the shift to work-from-home during the coronavirus outbreak.
The Redmond, Washington-based company has seen its stock gain roughly 29.5% over the last 12 months, outperforming the S&P 500’s 14% increase over the same time period.
MSFT shares, which hit a record high of $232.86 on Sept. 2, ended at $216.44 on Tuesday. With a market cap of $1.63 trillion, Microsoft is the world’s second-most valuable company.
Microsoft, which reported a massive beat on earnings and revenue in the last quarter, is scheduled to next report financial results on Tuesday, Jan. 26 after the closing bell.
Consensus estimates call for the tech behemoth to post earnings of $1.64 per share for its fiscal second quarter, improving from EPS of $1.51 in the year-ago period. Revenue is expected to reach an all-time high of $40.2 billion, up 9% from sales of $36.9 billion in 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 booming Intelligent Cloud business, which includes Azure, GitHub, SQL Server, Windows Server and other enterprise services. Microsoft’s commercial cloud revenue rose 31% year-over-year to $15.2 billion in its most recent quarter, while revenue from its Azure services grew 48%.
Another key metric in focus will be how well Microsoft’s Productivity and Business Processes segment performed. This critical unit includes the Office 365 cloud productivity suite, its Teams communications app, LinkedIn, as well as Dynamics products and cloud services.
Despite lofty valuations—the tech giant's stock is trading at 34 times trailing 12-month earnings—Microsoft still looks like a good bet going forward, considering the strong demand for its cloud-based offerings, which has made it one of the true leaders in its field.
2. Apple
- Reports January 27 After Markets Close
- EPS Growth Estimate: +12% YoY
- Revenue Growth Estimate: +11.4% YoY
Apple (NASDAQ:AAPL) shares have been on a tear throughout the last 12 months, as the COVID-19 pandemic led to soaring demand for its subscription services, such as iTunes Music, Apple TV+ and Apple Arcade.
AAPL shares, which have surged by around 60% in the past year, closed at $127.83 yesterday, not far from their all-time high of $138.78 reached on Dec. 29.
The Cupertino, California-based tech and consumer electronics conglomerate has a market cap of $2.18 trillion, making it the most valuable company trading on the U.S. stock exchange.
Apple—whose earnings and revenue easily topped expectations in the previous quarter—next reports financial results after the market closes on Wednesday, Jan. 27.
Consensus calls for earnings per share of $1.40 for its all-important fiscal 2021 first quarter, which includes the holiday shopping season, climbing 12% from the year-ago period. Revenue is forecast to increase more than 11% from the same period a year earlier, to $102.3 billion, reflecting surging demand for its recently released lineup of new 5G-enabled iPhone 12 models.
In addition to earnings and revenue, Wall Street will pay close attention to growth in Apple’s wearables segment—which includes AirPods and the Apple Watch—as well as in its subscription services business.
Any updates on growth in its iPad and Mac business will also be in focus, as both have performed well amid the stay-at-home environment, posting year-over-year revenue growth rates of 46% and 29%, respectively, in the last quarter.
More importantly, investors are hoping Apple will provide guidance regarding its outlook for the current quarter, after the iPhone giant failed to previously offer a forecast, citing uncertainty surrounding the impact of the pandemic on its business.
3. Facebook
- Reports January 27 After Markets Close
- EPS Growth Estimate: +23% YoY
- Revenue Growth Estimate: +24.4% YoY
Facebook (NASDAQ:FB) has seen its stock lag those of the other 'Big Five' tech companies, climbing “just” 17.5% in the last 12 months, as worries over the negative impact regarding its handling of hate speech and misinformation on its social media platform have kept a lid on gains.
In spite of that, the social media giant has still managed to grow its audience across its family of apps, which also include Instagram, Messenger and WhatsApp. The social network now has 3.2 billion users across its platforms.
FB shares settled at $261.10 yesterday, well below their record high of $304.67 touched on Aug. 26. At current levels, the Menlo Park, California-based company is valued at $726.7 billion, making it the smallest of the mega-cap tech firms and the only one with a valuation below $1 trillion.
Facebook, whose earnings and revenue smashed expectations in the third quarter, is projected to report fourth quarter results on Wednesday, Jan. 27 after the U.S. market closes.
Consensus calls for earnings per share of $3.15 for the period, up 23% from EPS of $2.56 in the same quarter a year earlier. Revenue meanwhile is forecast to increase over 24% year-over-year to $26.2 billion, driven by strong advertiser demand during the holiday season.
As such, Facebook’s ad revenue—which grew 22% year-over-year in the third quarter despite an ongoing global boycott from more than 1,000 advertisers —will be closely watched by investors.
In addition, details regarding the social media company’s user growth will be in focus. Facebook said daily active users rose 12% to 1.82 billion in the last quarter, while monthly active users also increased 12% to 2.74 billion.
Despite growing regulatory concerns after a Congressional committee recently accused Facebook of having an effective monopoly in social media, FB stock still looks like a good bet, considering its track record of strong growth.
4. Amazon
- Reports February 2 After Markets Close
- EPS Growth Estimate: +10.3% YoY
- Revenue Growth Estimate: +36.7% YoY
Widely viewed as one of the biggest beneficiaries of the COVID-19 health crisis, Amazon (NASDAQ:AMZN) has significantly outperformed the broader market over the last 12 months, surging nearly 68%, as Americans accelerated their shift to online shopping during the pandemic.
AMZN shares, which hit a record high of $3,552.25 in early September, ended at $3,120.76 yesterday. With a valuation of $1.57 trillion, the Seattle, Washington-based e-commerce and cloud giant is the third most valuable company listed on the U.S. stock exchange.
Amazon, which reported blowout third quarter results at the end of October, next releases earnings for its key fourth quarter after the closing bell on Tuesday, Feb. 2.
Consensus calls for earnings per share of $7.14, which would indicate a year-over-year growth rate of around 10% from EPS of $6.47. Revenue, meanwhile, is expected to climb almost 37% from the year-ago period to $119.6 billion, reflecting continued strength in both e-commerce and cloud-computing.
Investors will focus on the company’s booming cloud-computing business to see if its torrid pace of growth can be maintained. Amazon Web Services’ revenue jumped 29% to $11.6 billion in the third quarter.
Growth in its Subscription Services unit, which mainly constitutes Amazon Prime and its 150 million paying members, will also be in focus. Numbers from this segment have increased by 53% in each of the last two quarters.
Despite worries over antitrust reform amid allegations the company monopolizes its services to suppress competition, the tech giant remains one of the best names to own in the year ahead.
5. Google
- Reports February 2 After Markets Close
- EPS Growth Estimate: +1.3% YoY
- Revenue Growth Estimate: +14.4% YoY
Google-parent Alphabet (NASDAQ:GOOGL) has seen its shares rise almost 21% in the last year, as its core search and advertising revenue business rebounded amid the coronavirus pandemic.
The stock, which hit a record high of $1,843.13 at the start of December, closed yesterday at $1,784.47. It has a market cap of $1.21 trillion, making the Mountain View, California-based tech behemoth the fourth most valuable company listed on the U.S. stock exchange.
Alphabet, which beat expectations for its third quarter earnings and revenue in late October, next reports financial results after the U.S. market closes on Tuesday, Feb. 2.
Consensus calls for fourth quarter earnings of $15.55 per share, improving from EPS of $15.35 in the year-ago period. Revenue is forecast to clock in at $52.7 billion, increasing 14% from sales of $46.1 billion in the same quarter a year earlier.
Investors will stay laser-focused on growth rates at Google’s Properties unit, which includes internet search, YouTube advertising and the Play store. Revenue from this segment rose 10% to $31.4 billion in the last quarter.
In addition, one segment that should be primed for another quarter of blockbuster growth is Alphabet's lucrative Google Cloud Platform, which saw sales surge 45% to $3.44 billion in Q3.
Beyond the top- and bottom-line numbers, investors will be keen to hear further details on recent news that the U.S. Department of Justice will file an antitrust suit against Google. Part of the suit will look at allegations the company monopolizes its internet search function to suppress competition.