An earnings miss might halt the impressive runs of Apple and Microsoft. An encouraging earnings call might catalyze a breakout for Amazon.
Investors are turning pessimistic as fear of the coronavirus continues to grow.
The Dow Jones Industrial Average finished the week down by 1.2%. The index printed its first red weekly candle for the year. Concerns about the lethal disease infecting more people did not help the index’s cause. It’s the same story for the S&P 500. The index was also in the red to finish the week, down by 1%.
This week, investors have a lot to consider on top of the novel virus. A number of big companies are scheduled to release their earnings reports for the quarter ending December 2019. The performance of Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and Microsoft (NASDAQ:MSFT) will likely dictate market sentiment this week.
The tech giant will release its fiscal first-quarter earnings after the market closes on Tuesday. Apple’s stock has been on a massive tear since 2019, growing by over 124% in a year. Barron’s reported that the company’s valuation has grown by about $4 billion per day since its last earnings report. Expectations are quite high for the tech titan.
With an impressive run over the last 12 months, Apple needs to crush expert consensus or risk losing its bullish steam. Analysts polled by FactSet believe Apple is set to report revenue of $88.41 billion and GAAP EPS of $4.54 for its fiscal first quarter. An earnings miss might trigger a selloff that can pull down the S&P 500.
The good news for Apple investors is that the wearables business continues to impress. In the quarter ending in September 2019, the segment surged 54%. Analysts also expect another strong quarter for Apple Watch and AirPods.
iPhone sales is another key factor that would dictate the performance of the tech company in the December quarter. The Street reported that demand for Apple’s flagship product has been “stronger than expected.” Analysts predict that iPhone revenue would stand at over $51 billion.
Microsoft has been in a parabolic run ever since it breached resistance of $60 in January 2017. Last year, the software maker’s shares climbed nearly 60% to make it the second most valuable company in the world at $1.26 trillion.
In the earnings call after the close on Wednesday, analysts expect an EPS of $1.32 on revenue of $35.69 billion.
Investors will closely monitor Microsoft’s cloud-computing segment for signs of weakness. Investopedia reports that the intelligent cloud business grew from 27% of the company’s total revenue in Q2 2018 to an expected 32% in the fiscal second quarter of 2020. This segment appears to be Microsoft’s primary growth driver. Its performance might make or break MSFT’s three-year parabolic run.
The e-commerce giant is scheduled to report its fourth-quarter earnings after trading closes on Thursday. CNBC reveals that analysts expect Amazon to print close to $86 billion in sales and earnings per share of $4.05 for the period ending December 2019.
Fool reported that Amazon expects its operating income to drop between 24% and 68% on a year-over-year basis. Amazon’s huge investment to deliver better services to Prime members is the reason for the decline. The one-day free delivery perk negatively impacted the tech giant’s income.
Should CFO Brian Olsavsky say in the earnings call that the days of heavy spending are almost over, expect investors to start picking up shares. Amazon has been consolidating in a narrow range for about a year. A range breakout catalyzed by an encouraging earnings call might take the S&P 500 to greater heights.
Disclaimer: The above should not be considered trading advice from CCN.com. The writer does not own shares of Apple, Microsoft or Amazon.
This article was edited by Sam Bourgi.