Photo = Getty Image Bank The ‘Magnificent 7’ (Apple, Alphabet, Tesla, Meta, Microsoft, Nvidia, Amazon) leading the U.S. stock market will announce their third quarter earnings starting next week. With TSMC, the leader in the artificial intelligence (AI) craze, announcing better-than-expected earnings first, there are expectations that companies closely related to AI will also perform well. On the other hand, Tesla, which has fallen into the electric vehicle ‘chasm’ (temporary stagnation in demand before reaching the popularization stage), is expected to perform poorly.
Tesla predicts a step back in 3rd quarter EPS
According to the financial investment industry on the 19th, the earnings announcements of the Magnificent 7 stocks will begin on the 23rd, starting with Tesla. Following Tesla, Amazon (24th), Microsoft (30th), Alphabet (29th), Meta (30th), and Apple (31st) will announce their earnings one after another until the end of this month. Nvidia, the last runner, will release its performance on November 14th, about two weeks later.
The performance outlook for Tesla, the first runner, is bleak. According to Yahoo Finance, Tesla’s third quarter sales consensus (average forecast) predicted by Wall Street analysts is expected to be $25.33 billion, a 14.7% increase compared to the same period last year. However, earnings per share (EPS), which shows profitability, is expected to be only $0.58, down from last year’s third quarter ($0.66). It is lower than the previous quarter’s EPS of $0.62.
Analysis suggests that Tesla’s profitability has decreased as a result of its massive discounts to overcome slowing electric vehicle sales. Previously, Tesla held an event in the Chinese market in August to provide interest-free or low-interest loans for up to 5 years for Model 3 and Model Y products. In April of this year, the prices of Model Y, Model X, and Model S were reduced by about $2,000 in the United States.
Wells Fargo analyst Colin Langan said, “Tesla’s promotions such as low-interest loans have the effect of lowering vehicle prices by about 8%,” adding, “This means that net profit is reduced accordingly.”
Amazon’s third quarter EPS was expected to be $1.14, up 32.55% from the same quarter last year, and sales were expected to hit $157.16 billion, up 11.1% from the same quarter last year. However, it was lower compared to the second quarter EPS ($1.26).
Wall Street’s opinions on Amazon investment are mixed. Although rapid growth continues in the cloud business, Amazon Web Services (AWS), retail sales are expected to be sluggish due to the economic slowdown in North America. On the 11th, JP Morgan presented Amazon’s target stock price at $230 and gave it a buy rating. On the other hand, Wells Fargo issued a neutral investment opinion on Amazon on the 10th.
Meta and NVIDIA are raising their performance expectations
Recently, Meta and NVIDIA’s stock prices have risen the most among the Magnificent 7. Meta’s stock price rose 7.25% and Nvidia’s stock price rose 20.78% in the past month (September 18 to October 17). On the other hand, Tesla (-2.78%) and Microsoft (-3.27%) fell, while Amazon (0.59%) and Alphabet (2.3%) were flat. Apple rose 5.19% in one month.
According to Yahoo Finance, Meta and Nvidia’s EPS for the third quarter were expected to be $5.23 and $0.74, respectively. Meta’s EPS forecast rose 7.61% from $4.86 90 days ago, and Nvidia’s EPS forecast rose 5.71% from $0.7 during the same period. In particular, NVIDIA’s sales in the third quarter are expected to reach $32.9 billion, a surge of 81.56% compared to the same period last year, due to a surge in demand for AI chipsets.
As TSMC announced earnings that exceeded Wall Street expectations, investor interest is also focused on Nvidia’s performance. Global investment banks are raising their target stock prices for Nvidia one after another. Recently, Goldman Sachs raised Nvidia’s target stock price from $135 to $150, and Bank of America raised its target stock price from $165 to $190.
Alphabet, Google’s parent company, is expected to show decent performance due to the growth of Google Cloud, the AI field. Alphabet’s third quarter EPS was expected to be $1.84 and sales were expected to be $86.3 billion. EPS increased by 30.49% compared to the same period last year, but was slightly lower than the second quarter ($1.89).
Although good performance is expected, Alphabet’s stock price is not rising. Last August, Alphabet lost a lawsuit against it for violating anti-monopoly laws in the search market, and plans to disband the company are being discussed. Alphabet’s stock price rose only 2.41% from August 6, when the court ruling was issued, until the 17th of this month. During the same period, the S&P 500 index jumped 12.63%.
Apple’s third quarter EPS was expected to be $1.55, a 13.97% increase compared to the same period last year. It also increased compared to the second quarter ($1.45). Although concerns have grown about a slowdown in consumer sentiment, sales of Apple’s flagship product, the iPhone 16, are expected to show decent performance as sales are in line with expectations.
Evercore ISI analyst Amit Daryanani said, “Investment sentiment toward Apple has been weak in recent weeks, so the stock price could rise further if the company delivers performance that meets estimates.”
Investor interest is also focused on other stocks that announce their third quarter earnings around the same time as the Magnificent 7. AMD will announce its third quarter earnings on the 29th and Qualcomm will announce its third quarter earnings on November 6th. AMD’s third quarter EPS was expected to be $0.92, up 31.42% from the same period last year, and Qualcomm’s was expected to be $2.56, up 26.73%. In addition, the performance of major U.S. companies such as Verizon (22nd), Coca-Cola Company (23rd), and Lam Research (23rd) are announced around the same time.
Reporter Taewoong Bae
