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Earnings watch: Apple, Amazon, and Meta reports to set market tone

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In the current market landscape, the earnings reports of five major companies, known as the Magnificent Seven, are once again raising concerns about their significant impact on the S&P 500 index. Despite their collective strength driving U.S. equities to new highs, investors are closely monitoring whether these companies can meet the lofty expectations set for them during this earnings season. However, the initial reports have not been promising. Following disappointing results from Microsoft and Alphabet late on Tuesday, all of the Magnificent Seven stocks were trading lower on Wednesday morning. This downturn weighed on the S&P 500 and could potentially lead to increased volatility in the market as the week progresses, especially with the imminent earnings announcements from Apple, Amazon, and Meta. 

Apple: China iPhone Sales in Spotlight 

On Thursday, Apple is poised to disclose its first-quarter earnings, offering investors valuable insights into its iPhone sales performance, especially in China. Projections indicate a moderate uptick in sales and a slight increase in earnings per share. The company’s Services business, encompassing the App Store, iCloud, and Apple Music, is anticipated to be a significant driver of growth. Concerns surrounding the performance of the iPhone 15 in China prompted downgrades by Barclays, Piper Sandler, and Redburn Atlantic in early January. According to consensus estimates from Investing.com, Apple’s earnings per share for the holiday quarter are expected to reach $2.10, representing an 11.7% improvement from the previous year. Revenue is forecasted to increase by 0.9% year-over-year to $118.3 billion, despite slowing demand for high-end smartphones and computers. 

“Apple has the world’s most valuable technology platform with over 1.2 billion users. While Apple is exposed to a weaker consumer and competitive risks in China, these factors are well understood, and we believe Apple’s long-term outlook remains attractive given its technology leadership, sticky user base, and long runway to spend per user upside,” noted Erik Woodring, Equity Analyst at Morgan Stanley. 

“Catalysts to drive outperformance include 1) an underappreciated ‘Edge AI’ iPhone 16 cycle, 2) re-accelerating Services growth, 3) GM resilience, 4) new product launches (Vision Pro), and 5) a potential future hardware subscription/bundle offering, with longer-term investments in AI, payments, cloud, health, and home tools that can help sustain growth.” 

Amazon: Eyes on AWS and Prime Ad Revenue for Potential Beat 

Amazon is primed to experience a notable surge in both earnings per share and revenue, propelled by the triumphs of its cloud computing and advertising endeavors. Analysts project earnings per share of $0.79, showcasing a remarkable leap from the previous quarter, attributed to cost-saving measures implemented in recent months. Revenue is anticipated to increase by 11.3% year-over-year to $166.1 billion, underscoring the enduring prowess of its cloud computing and advertising segments. 

“Amazon is benefiting from its Prime program, delivery and logistic system in thee-commerce space. Further, its dominant position in cloud market is a positive,” said equity analysts at ZACKs Equity Research on reason to buy.  

Meta Platforms: Focus on Ad Revenue Trends 

Meta Platforms, previously known as Facebook, is anticipated to unveil one of its most lucrative quarters to date. Significant boosts in both earnings per share and revenue are expected, mirroring a revitalized digital advertising market. Analysts project a profit of $4.96 per share, reflecting an impressive 180% surge from the same period last year. Revenue is also forecasted to escalate by 21.3% year-over-year to $39.0 billion, signaling positive momentum in the digital advertising realm under the stewardship of Mark Zuckerberg. Should these projections materialize, it would mark Meta’s most profitable quarter in its two-decade history.

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