Big technology companies take center stage next week for earnings, with most of the major players reporting third quarter results. It will be interesting to see how markets react to the latest numbers.
If the results are strong and the big tech names rally, it could lift the broader market, especially given the huge market capitalizations and outsized weightings of the largest U.S. technology companies.
Here are seven technology companies reporting earnings the week of October 25:
- Facebook (NASDAQ:FB)
- Microsoft (NASDAQ:MSFT)
- Alphabet (NASDAQ:GOOG,GOOGL)
- Apple (NASDAQ:AAPL)
- Amazon (NASDAQ:AMZN)
- Twitter (NYSE:TWTR)
- Advanced Micro Devices (NASDAQ:AMD)
So far this year, the market has been a mixed bag for technology stocks. While some of the more popular names have rallied, others have sputtered. And many technology concerns continue to be hurt by the global shortage of semiconductors that has hurt the production of everything from laptop computers to smartphones and video game consoles.
Technology Companies Reporting Earnings The Week Of October 25: Facebook (FB)
The latest news concerning the social network is that the company has planned a major rebrand, including an entirely new name for the company. The name change is expected to be announced next week and could happen during the company’s earnings release on October 25. Media reports say Facebook aims to position its flagship social media app as one of many products under a parent company that oversees brands that also include Instagram, WhatsApp and Oculus. Essentially, Facebook is looking to adopt the same approach Google did back in 2015, when it reorganized into a holding company and rebranded as “Alphabet.”
The name change comes at a time when Facebook is under scrutiny from global lawmakers and regulators over its content moderation practices and harms linked to its platforms, with internal documents leaked by a whistleblower forming the basis for a U.S. Senate hearing earlier in October.
At the same time, Facebook Chief Executive Officer (CEO) Mark Zuckerberg is talking up the so called “metaverse,” a digital world where people can move between different devices and communicate in a virtual environment. The new name is expected to reflect Facebook’s increasing focus on the metaverse.
Unsurprisingly, all the negative attention has harmed FB stock, which is now down 5% in the past month to $340 a share. For its earnings next week, Wall Street analysts are calling for Facebook to report revenues of $29.57 billion and earnings per share (EPS) of $3.19.
Microsoft stock got a bump in September after the company announced that it is buying back up to $60 billion of its own stock and raising its quarterly dividend by 11% to $0.62 per share – six cents higher than the previous quarter. Investors applauded the moves. The Seattle-based technology giant said the buyback program has no expiration date. The share buyback announcement was more good news in what has been a very good year for MSFT stock. So far in 2021, the Seattle-based tech giant’s share price is up 42% to $310. The stock rose more than 3% in September when the broader market was grappling with seasonal turmoil.
MSFT stock has also gotten a push higher in recent weeks after several analysts raised their price targets on the shares. Investment banks Jeffries and Wedbush each boosted their price targets on Microsoft stock to $375 on the same day. The $375 mark would represent a further 21% gain from the current share price.
Microsoft could reach that lofty mark though, propelled higher by its cloud computing and video game segments that have each been growing at a fast clip this year. Heading into Q3 results, analysts forecast that Microsoft will report revenues of $43.97 billion and EPS of $2.07.
The parent company of online search engine Google reports earnings on October 26, and investors will be hoping that the latest financial results will keep the momentum going in the company’s stock, which is up 63% year-to-date at $2,821.03.
Today, nearly three billion people worldwide regularly use Google products and services ranging from Gmail to Google Docs. And just as many people use Google’s search engine on a daily basis to find what they want online. Add in video streaming site YouTube, and it should come as no surprise that the Google parent remains an online advertising powerhouse. More than 80% of Alphabet’s revenue comes from Google ads, which amounted to $147 billion in revenue last year.
Additionally, Google Cloud is emerging as another growth engine for Alphabet. While still contributing a relatively small slice to Alphabet’s overall business and profitability, Google Cloud is currently the company’s fastest growing segment. In 2020, Google Cloud’s revenues rose 46% to $13.1 billion as the usage of its cloud services ramped up during the pandemic. And, the Cloud segment’s revenue rose a further 50% on an annual basis to $8.7 billion in this year’s first half.
By every measure, Google is outperforming and analysts anticipate that the company’s Q3 data will show that outperformance continuing. Analysts are calling for third-quarter revenues of $63.32 billion and EPS of $23.48.
As is the case every year at this time, Apple is busy unveiling its new slate of consumer electronic products, which range from the latest iPhones to MacBooks. However, amidst the hype and pageantry of the new releases, Apple announced that it is scaling back production of its signature iPhones due to the ongoing shortage of semiconductors.
Apple announced earlier in October that it is likely to slash its projected iPhone 13 production targets for 2021 by as many as 10 million units. For months, Apple had managed to avoid the supply chain shocks that rocked the electronics and automotive industries. But as supply chain woes continue to drag on, even the world’s biggest company by market capitalization could not escape the crunch.
News of the scaled back production did nothing to help AAPL stock, which has been moving in fits and starts this year. While Applestock is up 15% YTD, much of that growth came in this year’s first quarter before money started rotating in and out of technology stocks.
However, Apple appears to be doing everything it can to shore up its business and continue returning value to shareholders, even announcing recently that it is removing Intel (NASDAQ:INTC) chips from its computers, replacing them with its own inhouse made processors for use in its MacBook Pro laptops.
For the third quarter, Apple is expected to report revenues of $72.93 billion and EPS of $1.01.
The stock of online colossus Amazon needs some good news. Shares of the world’s largest e-commerce company have been trading largely sideways since the spring, up an anemic 2% over the past six months to $3,432.40.
Ironically, the poor stock performance has not been due to the Seattle-based company’s financial results. On the contrary, Amazon has produced stellar quarterly earnings throughout this year, having announced three consecutive quarters of revenues in excess of $100 billion.
Rather the poor share price performance is due to a number of issues, including labor shortages, wage inflation, supply chain bottlenecks, shipping delays and a lack of availability of popular consumer products ranging from smartphones to video game consoles.
These challenges, along with tough year-over-year comparisons from the height of the pandemic, caused Amazon to see a sharp drop in growth. For the second quarter, Amazon saw revenue increase by 27% year over year. A year ago, sales were up 41% in the second quarter. And management has warned that growth is likely to slow to 10% to 16% in the third quarter.
Additionally, Amazon is adjusting to its new chief executive officer, Andy Jassy, who took over in July when longtime Amazon leader Jeff Bezos stepped down to focus on his other business ventures. The transition marked the first CEO change in the company’s 27-year history.
Hopefully a strong earnings performance can give AMZN stock a lift. The consensus call is for Amazon to report revenues of $111.62 billion and EPS of $8.93.
Shares of social media company Twitter appear to have stalled out right around $65. In the last six months, TWTR stock has risen by just 1% and even that paltry gain only occurred during the current month of October, as the stock market as a whole recovers from a difficult September.
That Twitter’s stock is currently undervalued has not gone unnoticed. In the past month, ARK Investment Management, run by well-known technology bull Cathie Wood, has bought $55 million worth of Twitter stock across the company’s various actively managed funds. Ark Invest was apparently inspired to buy the Twitter shares after the company introduced a new feature that allows people to tip using Bitcoin (CCC:BTC-USD).
The ability to tip using Bitcoin is one of many new features Twitter has rolled out this year. The company has also launched a “super follows” feature on its social media platform that allows creators to generate monthly revenue by sharing subscriber-only content with their followers, as well as the ability for creators to set-up subscription plans for their followers. Creators can set a monthly subscription rate of $2.99 U.S., $4.99 U.S. or $9.99 U.S. to monetize behind-the-scenes content for their most engaged followers. And Twitter has implemented a safety feature that allows users to temporarily block accounts for seven days if they use harmful language or send uninvited comments.
The goal of all the new features is to help Twitter generate $7.5 billion in new annual revenues and grow to 315 million daily active users by the end of 2023.
For the most recent third quarter, Twitter is expected to announce revenues of $1.29 billion and EPS of $0.15.
Advanced Micro Devices (AMD)
Advanced Micro Devices enters earnings season with its stock on a tear. AMD’s share price is up 15% over the past month and is now trading at $118 per share. The recovery since the end of September has helped push AMD’s gains for the last six months to 45%.
The latest rally has analysts speculating that new all-time highs could be in store for the stock in coming months. AMD’s latest breakout comes as demand is rising for the semiconductors and graphics cards that AMD designs, which are used in everything from laptop computers to video game consoles. That demand is being fueled by a global shortage of semiconductors and microchips.
At the same time, AMD has emerged as one of the most advanced chip makers today, producing 7 nanometer chips and developing new 5 nanometer ones while rivals such as Intel are still producing older 10 nanometer microchips. Bank of America recently named AMD one of its top stock picks and placed a price target on the company’s shares of $135.
While Bank of America’s prediction is among the highest on Wall Street, analysts and institutional investors remain bullish on AMD stock. For its third-quarter earnings being reported on October 26, the Street is calling for AMD to report revenues of $4.11 billion and EPS of $0.67.
Disclosure: On the date of publication, Joel Baglole held long positions in MSFT and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.