Are “the Seven” still magnificent?
Back in January, I wrote about the so-called “Magnificent Seven”: megacap technology companies with share prices that have soared in recent years.
These are chipmaker Nvidia (Nasdaq: NVDA), software giant Microsoft (Nasdaq: MSFT), online retailer Amazon (Nasdaq: AMZN), Google parent company Alphabet (Nasdaq: GOOG), laptop and mobile phone behemoth Apple (Nasdaq: AAPL), Facebook parent company Meta Platforms (Nasdaq: META) and carmaker Tesla (Nasdaq: TSLA).
Individually. these seven companies are important because each of them offers new technologies and innovations that have the power to alter our society and raise our standards of living. They are putting the newest technologies – ranging from artificial intelligence (AI) to cloud computing to the Internet of Things and driverless automation – to work in the products and services they offer.
Collectively, they’re also important because they have powered this bull market to many new all-time highs over the past year and a half.
That makes it very worthwhile to periodically check in on how these companies and their stocks are faring in thisvolatile market. Because if they falter, it’s a pretty good indication that this bull market will also stumble.
Here’s how the stocks have fared year-to-date versus the S&P 500…
Earnings Season
We’re about halfway through the first quarter earnings season, and several of the companies I listed above have reported results. A few are yet to come, but more on that in a moment.
Quarterly results are particularly important for these companies because investors have bid their stock prices higher… to the heavens, in the case of Nvidia, which is up nearly 600% since this bull market began in October 2022.
And now – similar to an NFL team that expects its handsomely-paid stars to perform – those investors are demanding strong performances from these companies. Likely in the form of robust sales and profit growth to justify the enormous premiums they paid.
So far, the results have been mixed.
Microsoft and Alphabet both reported results last week and both beat earnings expectations. And the two stocks got an initial boost, but then settled back a bit. Given the prices paid, it seems that investors want to see more from each.
Meta Platforms also reported results last week and it also beat Wall Street’s estimates for earnings. But its guidance (what it expects for the rest of the year in terms of revenue) was not as high as expected. That sent the stock down about 13% in recent days.
Tesla posted terrible first quarter earnings (its worst performance in several years), and the shares are down more than 25% this year. Yet the stock soared on comments made by CEO Elon Musk that the carmaker will accelerate its rollout of cheaper models. It seems Musk has a unique ability to charm his stock upward despite poor results…
And this week, Amazon reported that first quarter revenue rose 13% to reach $143 billion – an all-time high. Earnings for the quarter were triple from a year ago and 18% higher than expectations. Shares rallied on the news.
That leaves two to report. Apple will announce its quarterly results tomorrow (May 2) after market close. The average earnings estimate from analysts is for $1.50 a share, just about what it earned in the same quarter a year ago.
The company will need a strong report – including good forward guidance – to get the stock out of negative territory for the year. It continues to suffer from weak sales of its iPhone 15 and problems it is having in the Chinese market.
Lastly, Nvidia…
The Most Magnificent
Potentially the most important of these seven stocks is Nvidia. It will report first quarter earnings on May 22 and investors have very high hopes. The company is expected to report revenue of $24 billion and earnings of $5.54 a share, with some analysts expecting more than $6 a share. Anything near that higher estimate should send the stock much higher.
Because of the firm’s sheer size (a market cap of $2.2 trillion), epic share price rise in recent years, and centrality to the AI mania that has enthralled the market, the release Nvidia’s results later this month will be massive… and will likely move the entire market.
Buckle up.