The Magnificent Seven—well, six of them, at least—are poised to kick off a new rise in tech stocks, thanks to copious earnings reported or expected for 2023’s third quarter.
According to an analysis by investment firm Wedbush Securities Inc., Big Tech’s projected profits bonanza “will create a massive tech rally heading into year-end in which we expect tech stocks to be up another 12%-15% in 4Q.” Since August, after a run-up, the major tech stocks, along with the S&P 500, have been flat to slightly down.
Software kingpin Microsoft Corp. and search-dominator Google’s parent, Alphabet Inc., indeed delivered strong earnings when they reported after Tuesday’s market close. The duo bested even sanguine analysts’ estimates: $2.99 earnings per share for Microsoft, versus a $2.65 estimate; for Alphabet, $1.55, compared with an estimated $1.45.
Investor reactions were mixed. Microsoft’s shares leapt 5% in after-market trading, while Alphabet’s dipped 7% as profit growth of its cloud business failed to meet expectations.
Forecasts are healthy for fellow Big Tech-ers. Social media giant Meta Platforms Inc. is due to report Wednesday, with e-commerce megalith Amazon.com Inc. expected on Thursday. Then come iPhone producer Apple Inc., slated for November 2, and chipmaker Nvidia Corp. on November 21. Projections of EPS increases, comparing Q3 to the year-prior quarter, range from 8% for Apple to 48% for Nvidia, which has won acclaim for its cutting-edge products serving accelerated growth in artificial intelligence.
Of course, all this good news about the Magnificent Seven has a major exception: Tesla Inc., which could be viewed as more of an auto manufacturing company than a tech one. The tech mantle gets placed on Elon Musk’s baby because of its self-driving software, solar panel production and development of advanced batteries (to store all that upcoming renewable energy).
Unfortunately, the electric vehicle maker stumbled badly with the October 18 announcement of its third-quarter earnings, which came in at 66 cents per share, 10% below the analysts’ consensus. The market punished its stock, which has lost 15% since. CEO Musk, touted as the world’s richest person, put part of the blame on problems with the company’s Cybertruck.
Still, Tesla shares are up sixfold since their recent low point in early 2020 and carry a stratospheric P/E of 70. It, like the others in the Magnificent Seven, is in its own lofty world. Five of them have market caps in excess of $1 trillion, with Apple ($2.7 trillion) at the top.
Tags: Alphabet, Amazon, Apple, Earnings, estimates, Magnificent Seven, Meta, Microsoft, Nvidia, Tesla