The busiest week of the earnings season is about to start, with companies Tesla and Big Tech expected to grab headlines.
The six largest companies in the S&P 500 SPX index,
will release results in the coming week, as about a third of the index reveals first quarter numbers. The strong performance of tech giants helped offset the weaker performance of many other industries earlier in the COVID-19 pandemic, and investors will have a sense of how much momentum continues as the world begins to reopen.
One of the new members of the S&P 500, Tesla Inc. TSLA,
starts the week Monday afternoon. The company has already announced first-quarter deliveries that have largely exceeded expectations, so investors will be looking for clues to Tesla’s earnings on how the rest of the year might unfold. The consensus forecast currently calls for around 800,000 deliveries during 2021.
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Microsoft Corp. MSFT,
and Alphabet Inc. GOOG,
follow Tuesday afternoon with two portraits of the cloud computing landscape.
Microsoft’s Azure cloud business “could slow slightly” in the March quarter results, wrote J. Derrick Wood of Cowen & Co. in a note to customers, but expects overall growth driven to accelerate. by improving demand for products such as the Office suite. amid economic recovery as well as heavy shipments of personal computers that could help the Windows business.
Alphabet appears to be showing “sustained strength in the cloud,” wrote Jefferies analyst Brent Thill, who expects this part of the business to benefit from “pent-up demand” as the year progresses. He also anticipates an acceleration of the dynamics.
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Another vision of the advertising landscape will come from Facebook Inc. FB,
Wednesday afternoon, following SNAP from Snap Inc.,
report that showed healthy ad spending. The main growth drivers for Facebook could be increased revenue from Instagram Stories and growth in impressions on major Facebook and Instagram mobile feeds, wrote Cowen’s John Blackledge.
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Apple Inc. AAPL,
has been a big beneficiary of the pandemic, as its iPad and Mac categories have experienced robust growth thanks to the remote working boom, and Morgan Stanley’s Katy Huberty argues that the strength in these categories may have indeed accelerated. during the March quarter. Its forecast calls for growth of 53% in Mac business and 52% in iPad business when Apple releases its results Wednesday afternoon.
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To complete the week of Thursday afternoon, Amazon.com Inc. AMZN,
This was another big winner from the pandemic amid an online shopping boom, and admittedly “no easy catalyst in sight” for Amazon these days, wrote Bernstein analyst Mark Shmulik. . He nevertheless underlines “a positive commercial dynamic and an attractive secular growth everywhere we look”.
Thinking back to the first quarter, he expects the company to benefit from the continued strength in e-commerce and the arrival of stimulus controls. Shmulik ultimately expects an “acceleration in workload migration” for Amazon’s cloud business as workers return to office life, but he admits it may take a few quarters.
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Tesla and the Tech Titans are among 177 members of the S&P 500 expected to report in the coming week. The slate also includes 10 Dow Jones Industrial Average DJIA,
components, one-third of the first-order index components.
Corporate profits have generally exceeded estimates so far, with a 73% beat rate for the S&P 500, according to JPMorgan analyst Mislav Matejka. About a quarter of the index has already delivered results, and analysts polled by FactSet expect earnings to have risen a total of 33.7% for the first quarter. This is up from the 15.7% expected at the end of December.
Here are some of the other highlights for the week ahead.
Big week for the Dow
Among the 10 Dow components on the register are Boeing Co. BA,
and Chevron Corp. CLC,
two companies looking to bounce back from poor results on recent earnings.
Analysts tracked by FactSet expect Chevron’s profits to fall 31% in the March quarter, although that decline is not as steep as what Chevron has posted in previous quarters. Mizuho analyst Daniel Boyd predicts that the past period has been a “difficult” quarter for Chevron as winter storms “have negatively impacted Permian production, chemicals and the Pasadena refinery on the coast of the Gulf of Mexico. ” The company reports Friday morning.
Even more technology
As the top five tech companies report this week, there are plenty of other tech pillars lined up to report it.
Advanced Micro Devices Inc. AMD,
is expected to release its results Tuesday afternoon after rival Intel Corp. INTC,
drove down data center sales that some analysts attributed to competition from AMD. Even before Intel’s earnings, Cowen’s Matthew Ramsay wrote that “AMD’s earnings (and product roadmaps) have become much less volatile than Intel’s, and we expect it to be. the same may be said this quarter. ”
Facebook won’t be the only social media name in the spotlight, like Pinterest Inc. PINS,
reports Tuesday afternoon and Twitter Inc. TWTR,
Thursday afternoon reports.
Some elements of Snap’s recent report bode well for Pinterest, according to Wedbush analyst Ygal Arounian, who cited strength in categories such as retail, e-commerce and packaged goods which are also categories. important to Pinterest. While the reopening appears to be helping Snap user engagement trends, it could hurt Pinterest, he warned.
Food for thought
A number of food-related stocks are on the menu this coming week. Mondelez International Inc. MDLZ,
and Starbucks Corp. SBUX,
report Tuesday, while Domino’s Pizza Inc. DPZ,
and McDonald’s Corp. MCD,
publish the results on Thursday.
One trend to watch at McDonald’s is early demand for the company’s new chicken sandwiches, which launched in February. Third-party data indicates that the company “has seen a widening gap from [quick-service] peers starting in late February and continuing through March mainly due, in our opinion, to its highly anticipated new crispy chicken sandwich, ”wrote Jefferies analyst Andy Barish, who said the checks on relaunch could also have given the company a boost.
Pay in advance
Several readings on consumer spending will come from Visa Inc. V,
(Tuesday afternoon), PayPal Holdings Inc. PYPL,
(Wednesday afternoon) and Mastercard Inc. MA,
(Thursday morning). Some improvements in travel trends could help Visa and Mastercard, while all three could benefit from sustained traction in e-commerce.
For PayPal, investors will be looking for updates on the company’s efforts to bring cryptocurrency into its ecosystem. PayPal began allowing US users to buy, sell, and hold bitcoin and other cryptocurrencies in their PayPal wallets late last year, which it says is sparking increased engagement with its application. More recently, the company has started allowing customers to shop online using these crypto funds, and management can share more about early trends.