US Earnings Season: Tesla, Alphabet, Meta Platforms and Microsoft

The price information and economic data in this article are sourced from Bloomberg.

The first lot of Wall Street’s mega-cap tech companies report in the coming week. We preview what to expect from Tesla, Alphabet, Meta, and Microsoft’s quarterly results.

Tesla (TSLA)

Tesla enters the reporting season out of favour amongst investors as several headwinds build for the company. As Bloomberg data reveals (below), analysts estimate revenue declined by 3.4% in Q1, with EPS estimated to drop by 26.4% to $0.54 per share.

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Tesla's sales have slowed, while profit margins are eroding as the business deals with higher costs and the impacts of a more aggressive pricing strategy. Tesla has lowered prices to defend market share from legacy automakers and challenger brands in China. However, the cuts have failed to boost sales volumes and defend market share.

Recent delivery data underwhelmed expectations and revealed the first year-over-year decline since 2020. Deliveries in Q1 declined to around 387,000, with the impacts of supply disruptions – including snarled supply chains – as well as weaker demand for Tesla’s cars causing the fall.

Following the delivery data, Tesla announced that it would be laying off 10% of its staff, with CEO Elon Musk explaining the decision was made to lower costs, boost productivity, and prepare the automaker for its next growth phase. Despite the announcement, Tesla’s share price closed lower on the day it was made.

Analysts are as bearish on Tesla stock as at any point in the last two years: the company boasts a consensus “sell” rating. However, the consensus price target remains a premium to current prices, at $187.36 per share. Tesla reports after the closing bell on Tuesday, April 23, 2024.

Alphabet (GOOGL)

Alphabet is expected to deliver strong growth in the first quarter, supported by the performance of the company’s cloud services business. According to analyst consensus data compiled by Bloomberg (below), Alphabet is tipped to report EPS of $1.52 in Q1, a 30.1% increase, underpinned by revenue of $US79.1 billion.

Advertising revenue remains Alphabet’s biggest segment, with a resilient US consumer supporting ongoing strength in sales for the quarter. However, the company’s cloud services are the major growth driver, with analysts expecting a more than 25% increase in revenues for Q1 as the tech giant executes its artificial intelligence strategy.

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Investors will be keenly watching Alphabet’s guidance and whether it is and can continue to execute on advances in AI strategy, particularly whether the company can generate increased revenues while keeping operating expenses and capital expenditures at moderate levels.

Analysts remain very bullish on the outlook for Alphabet stock, boasting a consensus buy rating. Out of 65 brokers, 55 recommend buying the stock, while the remaining suggest holding. The consensus price target of $168.77 is at a premium to current valuations.

Alphabet reports after the closing bell on Tuesday, April 23, 2024.

Meta Platforms (META)

Based on Bloomberg data (below), analysts expect Meta to continue its trend of resurgent earnings growth. The consensus estimate among brokers implies Meta’s earnings will grow 95% to $4.29, with revenues projected to rise by more than 26%, primarily due to the platform’s app business.

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The strong performance is expected to come from an increase in average revenue per user, with solid, but historically modest, active user growth between three and four percent enhanced by generating higher advertising sales on a user-by-user basis. Much of this improvement is expected to come from the efficiencies delivered by artificial intelligence integration.

Meta’s earnings are also expected to be bolstered by a more disciplined approach to capital expenditure and cost management, with operating margins significantly higher than a year ago, albeit down from the previous quarter.

Analysts project resilient growth moving forward, although improvements in the top line and bottom line are forecast to moderate. The outlook for Meta will be determined by its ability to capitalise on AI technology and grow revenue per user while keeping capital expenditure under control.

Overall, analysts are bullish on Meta’s stock. 62 brokers give it a buy rating, and seven give it a hold. Two, however, suggest selling the stock at current prices. The consensus price target is at a lofty premium of $545.29 per share.

Meta Platforms report after the closing bell on Wednesday, April 24, 2024.

Microsoft (MSFT)

Microsoft’s fiscal Q3 is expected to reveal ongoing strong growth driven by artificial intelligence and the cloud services business. Bloomberg data (below) implies analysts expect adjusted EPS to rise 15% to $2.83 from a comparable rate of topline growth.

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Cloud revenues are expected to drive earnings growth. Intelligent cloud revenues are expected to top $26.25 billion – a growth rate of nearly 19% – with artificial intelligence integration, powered by Microsoft’s acquisition of open AI, driving the solid performance.

Revenue growth in Microsoft’s other business segments, especially personal computing, is forecast to be positive, although likely to continue to reveal consolidation.

According to Bloomberg surveys, analysts remain very bullish on Microsoft shares. The stock boasts a consensus “buy” rating, with 92.5% of analysts making that recommendation and the remaining giving a “hold rating”. The consensus price target is a significant premium at $472.57.

Microsoft reports its Q3 earnings on Thursday, April 25, in post-market trade.

Technical analysis: US Tech 100

Tech stocks have pulled back going into earnings, with a mixture of weaker sentiment stemming from geopolitical risks and the pricing out of US rate cuts this year weakening valuations. The NASDAQ—which Capital.com’s clients can trade via the US Tech 100—has seen its primary uptrend breakdown as momentum turns to the downside. Having broken support (now potential resistance) at approximately 17,400, the index has bounced off technical support just below 17,000. If that level were to break, a confluence of support levels, including the 200-day moving average, exists around 16,250.

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(Source: Trading View)
(Past performance is not a reliable indicator of future results)

The price information and economic data in this article are sourced from Bloomberg