SA Asks: Which Magnificent 7 stocks could react negatively to earnings?
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The Magnificent 7 are gearing up for another earnings season, with Tesla (NASDAQ:TSLA) slated to be the first to take the field when it releases its Q3 earnings report after market close on Wednesday.
Alphabet (NASDAQ:GOOGL) will be next on deck, with its report scheduled for Tuesday, Oct. 29, followed by Microsoft (NASDAQ:MSFT) and Meta (NASDAQ:META) on Wednesday, Oct. 30, and then Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) on Thursday, Oct. 31.
Fan favorite Nvidia (NASDAQ:NVDA) will be the last to report, with its earnings release scheduled for Wednesday, Nov. 27.
Most of the Mag 7 have seen their stocks rack up double-digit percentage gains this year, ranging from 11% for Microsoft (MSFT) to 63% for Meta (META), while Nvidia has seen its shares soar an impressive 179%. Tesla (TSLA) has been the lone decliner, with shares sliding 11%, year-to-date.
Yesterday, we asked which Mag 7 stocks were likely to react positively to earnings. Today, we ask: Which Mag 7 stocks are likely to react negatively to earnings?
Seeking Alpha analysts Jonathan Weber, Danil Sereda, Ahan Vashi and Victor Dergunov weigh in on the topic.
Jonathan Weber: I believe that Tesla (TSLA) is at risk of performing badly following its earnings release. The 10/10 event was not well-received by investors, and Q3 profits will likely be down compared to the previous year’s quarter. Shares crashed lower after the previous earnings miss, and with shares still trading at almost 100x forward earnings, there is significant downside potential.
Danil Sereda: I just sent out an article about Tesla (TSLA) (not published as of the time of this writing) discussing the Robotaxi catalyst. As you may know, bulls were expecting the Robotaxi event to boost market sentiment, but it was not strong enough to significantly change the negative perception resulting from Tesla’s (TSLA) performance in the automotive segment.
While the share of revenue from services and energy – essentially everything not related to cars – is growing, which is beneficial in the long term due to higher margins there, I do not think the stock should stay as high as it is today in the short to medium term. The growth prospects seem too distant. I think the fair price is much lower than the current market price.
To some extent, the market seems to be underestimating the potential for multiple contractions over the next few years, in my view. Therefore, the stock should react with a correction first – in this context, the upcoming quarterly report, which I expect to reveal fundamental issues in the automotive business, could serve as a negative catalyst.
Ahan Vashi: Despite being incredible technology businesses, Apple (AAPL) and Microsoft (MSFT) are priced for more than perfection. With their growth rates failing to justify premium multiples of 35x+ P/E, both Apple (AAPL) and Microsoft (MSFT) stocks could come under pressure at the slightest hint of fundamental weakness.
For Apple (AAPL), iPhone16 demand has seemingly fallen short of big Apple Intelligence-driven expectations – as per widely reported production cuts. And while Microsoft (MSFT) is supposed to be leading the way when it comes to the AI revolution, Microsoft (MSFT) stock has been underperforming major equity indices in recent weeks, with technicals signaling buyer exhaustion.
Victor Dergunov: Alphabet (GOOGL) is plagued by regulatory issues that could negatively impact earnings. Moreover, Microsoft (MSFT) may report in line, and Apple (AAPL) could miss its expected guidance. However, Tesla (TSLA) is the actual wild card, and the stock could get slammed if the sales or EPS miss the mark.