Market Faces Key Test As ‘FAAMG’ Earnings Loom Amid Tech Selloff

Wall Street’s fourth-quarter earnings season kicks into high gear this week, with investors bracing for a rocky reporting period amid worries over the Federal Reserve’s tightening plans.

With the NASDAQ Composite trading near its lowest level in months, the result of the recent broad-based selloff in the tech space, most of the focus will once again be on the so-called ‘FAAMG’ group of mega-cap companies. NASDAQ Composite Daily Chart Under these circumstances, there will be a lot on the line when the market’s five biggest tech companies comprising the ‘FAAMG’ group, namely, Meta Platforms (formerly Facebook), Apple, Amazon, Microsoft, and Google, report their respective results in the days ahead.

Here’s a closer look at what to expect this earnings season from the FAAMG Five (in random order). 1. Microsoft

Earnings Date: Tuesday, Jan. 25, after market close

EPS Growth Estimate: +13.8% YoY

Revenue Growth Estimate: +17.5% YoY

Year-To-Date Performance: -10%

Market Cap: $2.28 Trillion

Microsoft (NASDAQ: MSFT )—which has topped Wall Street’s expectations for earnings and revenue for 18 consecutive quarters dating back to Q1 2017—has consensus estimates calling for the software and hardware giant to post earnings of $2.31 per share for its fiscal second quarter, improving roughly 14% from EPS of $2.03 in the year-ago period.

Revenue is expected to cross the $50 billion mark for the first time in history to an all-time high of $50.6 billion, up 17.5% from the same period a year earlier thanks to strong demand for its cloud computing products.

As such, investors will focus on growth in Microsoft’s booming Intelligent Cloud segment, which includes Azure, GitHub, SQL Server, Windows Server, and other enterprise services. Microsoft’s commercial cloud revenue rose 31% YoY to $16.96 billion in its most recent quarter , while revenue from its Azure cloud services grew 50%.

Market players will also be eager to hear fresh details on the company’s acquisition of video game giant Activision Blizzard (NASDAQ: ATVI ) for $68.7 billion—its largest acquisition in history—as it steps up efforts to become a major player in the emerging metaverse, which is viewed as the next-generation version of the internet. MSFT Daily Chart MSFT, which is down 10% so far this year, ended Tuesday’s session at $302.65. With a market cap of $2.28 trillion, Microsoft is the world’s second-most valuable company.

Despite recent volatility, the Redmond, Washington-based tech giant’s stock still looks like a good bet going forward, given the robust demand for its cloud-based offerings and plans to enter the emerging metaverse space.

Not surprisingly, 42 out of 45 analysts surveyed by Investing.com rate the stock as “outperform,” implying almost 22% upside from current levels to $368.52/share. MSFT Consensus Estimates Source: Investing.com 2. Apple

Earnings Date: Thursday, Jan. 27, after market close

EPS Growth Estimate: +12.5% YoY

Revenue Growth Estimate: +6.3% YoY

Year-To-Date Performance: -4.4%

Market Cap: $2.77 Trillion Apple (NASDAQ: AAPL ) reported mixed earnings and revenue in the previous quarter largely due to supply chain woes. In its next scheduled posting next week, financial results covering its all-important holiday period will be closely eyed.Analysts are calling for earnings per share of $1.89 for its fiscal first quarter, climbing 12.5% from EPS of $1.68 in the year-ago period. Revenue is forecast to increase 6.3% from the same period a year earlier to $118.49 billion.If confirmed, it would mark Apple’s largest quarterly revenue total in the company’s history, benefitting from strong demand for its lineup of 5G-enabled iPhone models.As such, Wall Street will pay close attention to growth in Apple’s iPhone revenue, which jumped 47% YoY to $38.87 billion in the previous quarter. Any updates on growth in the tech giant’s iPad and Mac business, which posted YoY revenue growth rates of 21.4% and 1.6%, respectively, in the last quarter, will also be centered upon, as it copes with supply constraints linked to the global chip shortage.In addition, Apple’s booming services business, which includes sales from the App Store, music and video subscription services, extended warranties, licensing, and advertising, will be in focus following posting of 25.6% YoY revenue growth in fiscal Q4. AAPL Daily Chart AAPL—which has fallen 4.4% so far in January—ended Tuesday’s session at $169.80. At current levels, the Cupertino, California-based consumer electronics conglomerate has a market cap of $2.77 trillion, making it the most valuable company trading on the U.S. stock exchange.We anticipate the positive trend in Apple to continue in the months ahead amid enthusiasm surrounding the company’s plans to develop its own electric vehicle as well […]

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