Earnings season is a crucial time for investors and analysts, as it provides insights into how well companies have performed over the past quarter and gives indications of their future earnings. In 2023, expectations for US Q1 earnings were low due to economic challenges and rising interest rates. Surprisingly, many companies beat these low expectations, with 75% of S&P 500 companies surpassing forecasts.
Three Earnings Reports to Move Markets This Week
2023-07-24 • Updated
Microsoft (MICROSOFT) will post its financial results for the second quarter of 2023 after the market close on Tuesday, July 25, 2023. The company has a strong earnings history, consistently beating EPS estimates 11 times and revenue estimates ten times. Analysts expect an EPS of $2.55 on revenue of $55.42 billion, representing EPS growth of 14.34% and revenue growth of 6.86%.
Despite the positive outlook, the FBS analysts are cautious about buying the stock heading into earnings. The stock has already experienced a significant run-up, and its current price-earnings ratio is higher than the 5-year average, making it potentially overvalued.
While FBS analysts expect Microsoft to beat EPS and revenue estimates, we emphasize that guidance and the company's tone regarding AI and Azure growth and future earnings prediction will significantly impact the stock's direction after earnings.
Estimated EPS: 2.55
Estimated Revenue: $55.41B
The best option is to trade the stock on July 26, the next day after the report as it looks like the release will define the future trend.
- If the stock makes a downward impulse, traders can join the trend and sell it with a target of 290.00.
- Otherwise, the price will move to 420.00.
Alphabet (GOOGLE) will post its financial results for the second quarter of 2023 after the market close on July 25, 2023. The upcoming Q2 results for Alphabet are highly anticipated, focusing on the impact of continuing macroeconomic uncertainty on advertisers. Analysts are looking for signs of a potential turnaround in the second half of 2023. The release of ChatGPT last year and Microsoft's integration of the technology on Bing earlier this year could play a significant role in shaping the future of their search business. Additionally, YouTube's revenue growth is expected to be driven by direct response ads.
Investors are also eager to learn more about the monetization plans for Bard, Alphabet's generative AI-powered search/chatbot, and whether the search business faces pressure from Microsoft's Bing or other AI-powered search offerings.
Furthermore, the firm's traffic acquisition costs and the impact of potential renegotiations with Apple are of interest, as well as reports suggesting Samsung's consideration of switching from Google to Bing as the default search engine on its devices. These developments could affect Alphabet's financials significantly.
Considering Alphabet's stock price, analysts believe it is undervalued compared to its long-term fair value estimate. However, uncertainty remains due to its dependency on online advertising growth.
Estimated EPS: 2.55
Estimated Revenue: $55.41B
Google stock is stuck between the 118.00 support and 127.00 resistance level. The breakout will most likely happen after the upcoming report.
- If the price breaks above 127.00, it will move to 145.00.
- Otherwise, a decline to 107.00 is the most likely outcome.
Meta (ex. Facebook)
Alphabet (FACEBOOK) will post its financial results for the second quarter of 2023 after the market close on July 26, 2023.
In anticipation of Meta's earnings report, investors are keen to observe:
- The impact of cost cuts and more efficient operations during the quarter;
- company's approach to artificial intelligence (AI) and whether management will prioritize cost control or increase spending due to the emergence of generative AI;
- updates on Threads, including user count and engagement and potential monetization plans;
- The firm's long-term AI strategy and alignment with the metaverse strategy;
- how generative AI is helping monetize WhatsApp;
- and whether Meta is progressing towards diversifying its revenue away from advertising;
- any indications of the progress of Reels monetization on Facebook and Instagram and its impact on average revenue per user
- user growth;
Despite its dominance, Meta faces risks from potential disruptive technologies luring users away, regulatory limitations on data usage, and a high dependence on online advertising growth.
Estimated EPS: 2.89
Estimated Revenue: $31.01B
Facebook stock is extremely locally overbought and needs a correction. FBS analysts believe that this earnings report is a great trigger for this. Even despite Treads exploded on the market, attracting millions of users during the first day, the overall hype fell as users didn’t find anything unique on the platform. If the report confirms it, investors might get disappointed. The major targets for this decline are 270 and 237, 61.8 and 50.0 Fibonacci levels, respectively.
However, if the report strongly overperforms the expectations and the price breaks above 320.00, an uptrend may continue to 383.00.
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