After a full year of declines in 2022, U.S. stocks are likely to start 2023 in January: as of January 30, the S&P 500 index rose 4.64% in January, and the NASDAQ rose 8.86%.
Among them, the Nasdaq has risen for four consecutive weeks, which is the longest weekly gain for the index since August last year. And the main question this week is, will this rally continue? Especially as the US earnings season enters a core stage, big tech companies such as Apple, Amazon, Meta and Google will all disclose results.
Given that big tech companies have recently announced layoffs that have cut more than 52,000 jobs, their growth prospects will be of particular concern. Guidance for this quarter and beyond will reveal their level of confidence and ability to navigate inflation headwinds.
Meta: After-hours earnings report on February 1, Eastern time
According to Bloomberg, $Meta Platforms (META. US) $4 revenue of $31.562 billion, down 6% year-over-year; Adjusted net profit is expected to record US$6.443 billion, down 37.36% year-on-year.
In 2022, after Meta released a third-quarter earnings report that was considered "catastrophic", almost all Wall Street analysts sharply lowered their expectations for the company's Q4 results. Subsequently, Meta's share price fell to its lowest level in nearly 7 years, with a cumulative decline of 64% throughout the year.
The reason for this is mainly due to the company's "embattled" situation, which is more hostile than other giants:
In addition to slowing user growth and a long period of weakness in the digital advertising businesses of its core products Facebook and Instagram, the company is also facing stiff competition from Tik Tok and challenges from Apple's new privacy rules, which have led to a violent impact on the online advertising business on which it depends.
In addition, the meta-universe, which was "pinned on high hopes" by Meta, has not only not improved, but has become a "gold-swallowing beast". To investors' fear, while the company's operating losses are expected to "grow significantly year-on-year" in 2023, it doesn't stop the company from making a desperate bet and continuing to accelerate the pace of investment in the business.
It is said that confidence is more important than gold, and investors who have lost confidence in Meta can only vote with their feet in the end.
But unlike the hazy 2022, 2023 seems to be getting better. In just one month year-to-date, Meta's share price has risen 22%, leading a number of large technology stocks; Since its November low, Meta has rebounded nearly 70%.
Nowadays, Meta has also ushered in a lot of optimistic voices.
Competition in the social space, especially with platforms like TikTok, and a slowdown in the expansion of the digital advertising market, have weighed on Meta's prospects. However, some analysts believe that the current situation in which Meta is located is not as severe as people expect. Cavenagh Research said recently that given the negative sentiment in the market, Meta does not need many positives to deliver better-than-expected results.
Cavenagh Research believes that the recovery of digital advertising may be a potential source of performance growth. Investors should take into account that the macro environment, or at least sentiment and macroeconomic expectations, improved materially in the fourth quarter of 2022 compared to the third quarter of 2022.
Debra Williamson, an analyst at research firm Insider Intelligence, also said there were some signs that Meta's advertising business could be taking a turnaround. Since Apple ATT (App Tracking Transparency) went into effect in April 2021, Meta has been working to improve its ad tracking technology and has begun targeting users using other data sources. For example, Meta's porting customer data from Shopify has helped improve its ability to deliver targeted ads to users.
Williamson said that while Meta faces a lot of challenges in developing tools and metrics to improve the effectiveness of its ads, this is getting better, and Meta's results may see some rebound compared to past quarters.
Cavenagh Research also stressed that investors should also consider that foreign exchange headwinds in the fourth quarter will not be as strong as in the third quarter, as the dollar index has already depreciated significantly; Meta also has the potential for a larger-than-expected slowdown in cost spending, as the company has announced important cost-cutting plans, including a 13% layoff, which is expected to increase the value of Meta's equity by about $30 billion.
Investment bank Jefferies also expects the short video feature on Meta's Instagram to be the backbone of its stock price rally. Driven by fee cuts and new monetization drivers, Meta will be the best-performing large company.
Apple: After-hours earnings report on February 2, Eastern time
A number of agencies predict that due to the limited supply of iPhones and the bilateral impact of weak demand, Apple (AAPL. US) revenue for the first quarter of fiscal 2023 is likely to decline for the first time since 2019.
Among them, Bloomberg expects Apple's revenue in the quarter to be $122.564 billion, down 1.11% year-on-year; Adjusted net profit is expected to record US$31.524 billion, down 8.97% year-on-year.
In Apple's revenue composition for the full fiscal year, Q1 revenue is usually the highest. In Q1 of fiscal 2022, Apple achieved revenue of 123.95 billion yuan, a year-on-year increase of 11%, and set the highest quarterly revenue in the company's history. But in the past three months, Apple's performance forecast has been lowered 22 times; A number of institutions believe that Apple will not be able to deliver a single-quarter revenue record this week.
In the last fiscal quarter (that is, Q4 of fiscal year 2022), Apple achieved revenue of $90.146 billion, a year-on-year increase of 8.14%, higher than market expectations. But on the earnings call, CEO Tim Cook also said that revenue growth will slow down in the next fiscal quarter and that Apple has slowed the pace of hiring.
Analysts generally expect that since last October, the decline in mobile phone shipments due to insufficient production capacity will be partially reflected in this quarter's earnings report.
Previously, TrendForce estimated that iPhone shipments in the fourth quarter of 2022 would decrease by 22% year-on-year; Tianfeng Securities analyst Guo Mingxi has also previously revised iPhone shipments in the fourth quarter of 2022 by about 20% to 70 million ~ 75 million units. He expects that iPhone revenue may decline significantly from market expectations during the period.
Bank of America analyst Wamsi Mohan said that given the severely constrained supply of high-end iPhone Pro models (in the December quarter), the tone of the earnings call is crucial to understanding the potential demand trajectory.
In addition, demand for smartphones and PCs began to weaken due to rising interest rates, high inflation and weak growth. According to Canalys data, the smartphone market performed in the fourth quarter of last year as the worst in 10 years. However, it is worth noting that unlike previous quarters, the demand for the high-end market of smartphones began to surge.
Impacted by the launch of its latest iPhone, Apple earned its highest quarterly market share ever in the fourth quarter of 25 percent, up 8.7 percent year-over-year.
In addition to smartphones, the PC market is also sluggish. But Apple was the only major manufacturer that did not record a double-digit decline, with shipments down just 2.1% to 7.5 million units during the period. IDC reported that in the third quarter ended September last year, Mac quarterly revenue reached a record $11.5 billion, exceeding expectations by $2 billion, making up for the lack of iPhone sales.
Analysts expect that in the earnings report released this time, the Mac business will also record a good performance, boosting Apple's overall performance.
Google: After-hours earnings report on February 2, Eastern time
According to Bloomberg, $Google-A (GOOGL. US) $4 revenue was $64.035 billion, down 14.99% year-over-year; Adjusted net profit is expected to record US$17.177 billion, down 16.79% year-on-year.
In terms of financial data, most of Google's revenue comes from its advertising services. Amid macroeconomic headwinds amid weak digital ad spending, Jefferies analysts said Google's advertising business is expected to experience some weakness.
But investors are beginning to return to the online advertising industry after a brutal 2022, analysts expect financial results to rebound in 2023, and some signs of recovery can be seen this week, and the company's results are expected to reveal the latest information such as whether brands have started to increase related spending after suspending advertising campaigns.
In addition to advertising revenue, investors need to keep an eye out for the cloud business, which is seen as Google's second growth curve in the future. Compared with the weak advertising business, Google Cloud achieved growth beyond expectations in the third quarter. According to the Wall Street Journal, Google ranks third in terms of cloud sales, behind rivals Amazon Inc. and Microsoft. As the growth rate of cloud revenue recognized every quarter remains high (especially in the current environment), it can be seen that Google Cloud's product competitiveness is not weak.
So far, cloud accounts for less than 10% of Google's total revenue. Assuming the slowdown in digital advertising continues, investors may be watching to see if Google's cloud business can be a strong offsetting factor.
Amazon: After-hours earnings report on February 2, Eastern time
According to Bloomberg, $Amazon (AMZN. US) $4 revenue was $145.697 billion, up 6.03% year-over-year; Adjusted net profit is expected to record US$6.132 billion, down 57.19% year-on-year.
In 2022, Amazon's share price is close to halving, and its slowing profit growth is one of the main reasons why the stock has underperformed over the past year. The company's investment, labor costs, and R&D costs eroded a significant portion of profits.
Since the start of the year, the market has also lowered its revenue and earnings forecasts for the company, indicating growing concerns about the company's ability to weather this challenging inflationary environment that has weighed on consumer spending.
In the third quarter of 2022, dragged down by the strong US dollar, Amazon International, AWS and other businesses performed less than expected, and the company's revenue was lower than market expectations. In addition, Amazon's fourth-quarter guidance, which the market valued, also fell short of market expectations.
According to Amazon's estimates, the fourth quarter of net sales growth will be the slowest in recent years. Generally speaking, the fourth quarter includes the two major consumption seasons of Thanksgiving and Christmas in the United States, and it is also a great opportunity for retailers to make profits. However, as macroeconomic uncertainty increases in the United States, more and more consumers are looking to cut back during the holiday season.
But on the optimistic side, Amazon's cloud computing business, AWS, is still on track to achieve nearly 30% revenue growth. Driven by the increasing adoption of the company's cloud computing products by large enterprise customers, the business is expected to have Q4 revenue in the range of $22.4 billion to $23.1 billion, along with strong profitability.
In addition, Amazon's advertising business has made significant progress, and now e-tailers prefer to promote their brands on the company's website and various services. According to Insider Intelligence, Amazon's share of the U.S. digital advertising market last year was 13 percent, and its advertising revenue grew 25 percent in the third quarter.
According to FactSet, analysts expect Amazon's advertising division to grow 17 percent in the fourth quarter, far ahead of its peers and maintain revenue growth in the teens throughout 2023.
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