It wouldn't be an overexaggeration to say that, for markets, this coming week could be make or break. Some of the U.S.'s most powerful megacap companies report quarterly earnings.
On Friday, the Dow Jones Industrial Average delivered its fifth straight week of gains. Fueling the price action: strong earnings momentum, hopes that the longest government shutdown in U.S. history was about to end and an expectation that the U.S.-China trade dispute may be getting closer to a resolution.
But in the week ahead—when Apple, Facebook, Amazon, Microsoft (NASDAQ:MSFT), Tesla (NASDAQ:TSLA), Caterpillar (NYSE:CAT) and Boeing (BA) are all expected to report—which is the busiest in terms of earnings and future outlooks, there's an equal chance of this rally gaining additional momentum, or abruptly ending.
Here are the three most important earning reports to be released in the coming week. Stock investors simply can’t afford to ignore them.
1. Apple
After giving investors a shock ahead the company's earnings release early this month, in which the iPhone maker cut the sales outlook on its iconic smartphone, Apple (NASDAQ:AAPL) may not have much more to add when it reports quarterly earnings on Tuesday, January 29 after the market close.
On average, analysts are expecting $4.17 a share profit, up from $3.89 a year ago. Sales are expected to decline $84.04 billion, down 5% from the same period a year ago. According to the company, that deceleration in sales is the result of weaker demand from China.
While trimming its revenue outlook for the first time in almost two decades, Apple indicated that sales will be about $84 billion in the quarter ended December 29, down from earlier estimates of $89 billion to $93 billion. This news has pressured Apple shares (NASDAQ:AAPL) which have tumbled 32% since reaching a record high of $233.47 in early October. The stock closed at $157.76 on Friday.
In our view, the two most important things investors would like to know from Apple's CEO Tim Cook during the company's earnings call are: how will he revive sales growth when customers aren’t willing to buy more expensive iPhones, and what else is in his bag of tricks to make up for the declining share of his flagship product on the company's total sales.
2. Facebook
The world’s largest social media company, Facebook (NASDAQ:FB) will report Q4 2018 earnings on Wednesday, January 30 after the market close. Analysts on average expect EPS of $2.19, up from $1.44 a share a year ago. Sales are expected to gain 26% for the same period, to $16.4 billion.
Facebook's founder and CEO Mark Zuckerberg has spent the past year dealing with the severe damage caused by the company’s failure to protect user privacy and stop the political manipulation of its platform by adversaries of the U.S. These two fiascos were such debacles, that the the social media giant had to completely change its policies relating to the merchandising of user data while also imposing strict controls over the spread of fake news on its platform.
The company's upcoming earnings call will be important for investors since they might get some insight from Zuckerberg on how this crisis is affecting Facebook's return on investment. Markets are also eager to find out what plans he has to reinvigorate Facebook's sales growth to previous levels which strongly boosted shareholder value.
Facebook shares have lost about a third of their value since late July when the stock was trading at $218. Shares closed at $149 on Friday.
3. Amazon
Amazon (NASDAQ:AMZN), the world’s biggest e-commerce retailer, is scheduled to report fourth quarter 2018 earnings on Thursday, January 31 after the market close. Analysts are expecting $5.65 a share profit on average, more than double what the company delivered during the same period a year ago. Sales are expected to surge to $71.85 billion, about 19% higher than the same period a year ago.
One of the few tech sector companies still showing robust growth momentum, Amazon has been helped by strong U.S. consumer sentiment and a cyclical shift to online commerce. Amazon's advertising, retail and web services businesses are all performing remarkably, helping its shares outperform other tech stocks.
Trading at $1,670.57 as of Friday's close, Amazon shares surged 24% during the past month, suggesting that investor anticipation may be overhyped ahead of the company’s earnings report. Though Amazon is a great long-term investment, a slight miss versus expectations might generate a pullback at this point. We recommend proceeding with caution till after the report.