The busiest week of first-quarter earnings season is upon us. Wall Street will be privy to results from some of the biggest names in technology, with Apple (AAPL, $163.99), Alphabet (GOOGL, $2,401.49), Microsoft (MSFT, $276.60), Meta Platforms (FB, $184.76), Amazon.com (AMZN, $2,893.96) and Twitter (TWTR, $48.62) among those on this week’s earnings calendar.
While energy and materials are going to be the clear winner this earnings season, Jeff Buchbinder, equity strategist for independent broker-dealer LPL Financial, says don’t fall asleep on tech stocks.
“Our view of the sector is still just neutral but double-digit earnings growth in the first quarter looks likely, while estimates have held up well over the past month despite the global economic slowdown,” Buchbinder says.
Apple Earnings Expected to Beat on Strong iPhone, Mac Demand
Apple will report its fiscal second-quarter earnings report after the April 28 close. Analysts, on average, are anticipating earnings of $1.43 per share for the iPhone maker, up 2.1% year-over-year (YoY). AAPL’s revenue, meanwhile, is expected to rise 4.9% to $94.0 billion.
Morgan Stanley analysts Katy Huberty and Erik Woodring believe Apple will beat the top-line consensus estimate for the quarter on solid demand for the iPhone 13 and Mac.
However, COVID-19-related shutdowns across China in early 2022 will likely prompt management to take a more cautious approach to June quarter commentary, they say. The pair has an Overweight rating on the Dow Jones stock, which is the equivalent of a Buy.
Alphabet Projected to Post Double-Digit Q1 Revenue Growth
Earnings from Google parent Alphabet will be released after Tuesday’s close. “Like all advertising-dependent companies, Alphabet could be severely hurt by a slowdown in ad spending,” says Argus Research analyst Joseph Bonner (Buy). “However, 4Q21’s performance [where the company reported a 33% YoY surge in Google ad revenue] demonstrated that online advertising continues to ramp higher.”
And Bonner isn’t alone in his outlook. “Google has, and will likely continue to benefit from the Apple privacy changes as digital advertisers shift their budgets away from Facebook to other more effective platforms, which in Google’s case is primarily Search,” Wedbush analysts write in a note. GOOGL is their favorite stock among the digital advertisers they cover.
Consensus estimates for Alphabet’s first quarter are for earnings of $26.11 per share (-0.7% YoY) and revenue of $68.1 billion (+23% YoY).
Microsoft Stock Struggles Ahead of Earnings
Like so many other tech stocks, Microsoft has had a rough go of it in 2022 – down more than 16% for the year-to-date. But despite the decline in share price for this mega-cap stock, the company’s fundamentals remain solid.
“Consistent with recent quarters, we expect Microsoft’s fiscal third-quarter print to exceed expectations,” says Stifel analyst Brad Reback (Buy). “Growth should be driven by sustained strength within the company’s commercial-business as Microsoft remains a clear and direct beneficiary of the increased pace of cloud migrations.”
Reback expects MSFT to post total revenue of $48.6 billion when it reports its fiscal third-quarter results after the April 26 close, fueled by a 32% year-over-year spike in Microsoft Cloud revenue. Analysts’ consensus top-line estimate is slightly higher at $49.0 billion (+17.5% YoY). On the bottom line, the average outlook is for $2.18 per share (+7.4% YoY).
Is Meta Platforms Stock a Buy at Current Levels?
Earnings from Meta Platforms will be released after the April 27 close. Analysts expect the Facebook parent to report earnings of $2.56 per share (-22.4% YoY) and revenue of $28.2 billion (+19.3% YoY).
FB stock could certainly use an earnings-related boost, considering shares are down more than 45% for the year-to-date. But BMO Research analyst Daniel Salmon says the sell-off feels a little overdone.
“We think near-term visibility remains low and [we] stay Market Perform, but we wouldn’t push back overly hard on a buy thesis at these levels,” Salmon writes in a note. “Our downgrade last quarter was of the tactical variety, not the ‘terminal value in question’ type, and we think FB remains a vital online advertising destination.”
Analyst: Amazon.com is Doing All the Right Things
Did Amazon.com return to double-digit revenue growth in the first quarter of 2022? Wall Street will find out when the e-commerce giant reports earnings after Thursday’s close.
Analysts, on average, are targeting revenue of $116.3 billion for the first three months of 2022, up 11.3% over the year-ago period. Earnings of $8.13 per share (-48.5% YoY) are also expected.
“Amazon is taking the right steps to operate amid a challenging macro environment that includes rampant inflation and a supply-chain crisis, among other headwinds,” says Wedbush analyst Michael Pachter (Outperform). The analyst expects AMZN to report Q1 revenue and operating income near the high end of the company’s guidance after raising prices on products to counter inflation.
AMZN’s “business fundamentals remain unchanged and we expect the supply-chain crisis to continue easing as we approach 2023,” Pachter adds. And “strong momentum across the company’s cloud, third-party, advertising businesses should drive a steady margin expansion” over the long term.
Twitter Earnings Due Amid Musk Buyout Buzz
It’s been a wild ride for Twitter in recent weeks. TWTR stock is up roughly 27% for the month-to-date after Tesla (TSLA) CEO Elon Musk followed up news of his taking a major stake in the social media platform with an unsolicited bid to buy it outright.
While Twitter’s board of directors rejected Musk’s $54-per-share buyout offer, the latest headlines suggest he may be teaming up with private-equity firm Thoma Bravo to finance a potential tender offer to buy shares directly from TWTR shareholders.
This drama could draw extra attention to Twitter’s first-quarter earnings report, due out ahead of the April 28 open.
“We believe that Twitter, with or without Musk, is poised for strong advertising revenue growth going forward thanks to the relevancy of its platform and key major global events (the FIFA World Cup, the U.S. midterm elections, etc.) slated for later in 2022,” says Argus Research analyst Jim Kelleher (Buy).
The analyst adds that while TWTR has been pressured by Apple’s privacy changes and broad-market headwinds, its “long-term trend in user monetization at Twitter is positive, with ad revenues growing faster than revenue growth.”
When Twitter reports its Q1 results Thursday morning, Wall Street pros are calling for revenue of $1.2 billion (+19.2% YoY) and earnings of 3 cents per share, down from the 16 cents per-share-profit it recorded in the year-ago period.