SA Asks: Which Magnificent 7 stocks could react positively to earnings?
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Earnings season is once again upon us, with the Magnificent 7 slated to begin rolling out their respective quarterly reports on Wednesday.
Telsa (NASDAQ:TSLA) will first out of the gate, with the EV icon expected to release its Q3 report after market close on Oct. 23. Next up will be Alphabet (NASDAQ:GOOGL) on 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.
Chip powerhouse Nvidia 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.
Which brings us to our latest SA Asks question: Which Magnificent 7 stocks are likely to react positively to earnings?
We asked Seeking Alpha analysts Jonathan Weber, Danil Sereda, Ahan Vashi and Victor Dergunov to weigh in on the topic.
Jonathan Weber: I believe that Alphabet (GOOGL) has a good chance of reacting positively to earnings. It has beaten estimates on both lines for six quarters in a row, has a lot of AI exposure, and its share price remains below recent highs, thus not a lot of enthusiasm is baked into its stock. At just 21x forward earnings, Alphabet (GOOGL) is pretty cheap compared to the Mag 7 average.
Danil Sereda: I see significant opportunities for Amazon (AMZN) and Microsoft (MSFT), as I recently discussed in my articles published on October 9 and October 15.
Specifically for Amazon (AMZN), I am impressed by the momentum the company has gained in its AWS segment, maintaining a large market share in this niche. Considering the consensus forecasts for the third quarter in terms of EPS and revenue, I believe Amazon (AMZN) has a strong chance of exceeding the newly reduced forecasts. My valuation model estimates the stock’s value to be 20.5% higher than current prices, which further strengthens my conviction.
Regarding Microsoft (MSFT), a similar positive outlook applies: in a nutshell, I think most of the negativity surrounding increased capital expenditures has already been factored into the stock. As the company reports its first fiscal quarter of 2025, I anticipate a shift in sentiment and rhetoric, likely driving the stock higher.
Ahan Vashi: Heading into the September quarter results, the “Magnificent 7” basket is still going strong – driving the bulk of equity market returns. While trading multiples for this basket are stretched from a historical perspective, Amazon (AMZN), Meta Platforms (META) and Alphabet (GOOGL) aren’t priced for perfection and, therefore, could react positively on earnings.
For Amazon (AMZN), continued re-acceleration within AWS Cloud and healthy growth in the Ads business can power a sustained breakout above multi-year resistance. Alphabet (GOOGL) and Meta (META) have showcased robust business momentum in recent quarters, and if that positive trend continues, Mr. Market will likely be forced to bid away their respective relative valuation discounts to the Mag 7 basket.
Victor Dergunov: I like the Mag 7 and other high-quality large caps here. However, not all Mags are created equal. We should see solid results and robust guidance from all the “Mags,” Meta (META), Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT), Apple (AAPL), Tesla (TSLA) and Nvidia (NASDAQ:NVDA). Meta (META), Nvidia (NVDA) and Amazon (AMZN) could also provide the best earnings and guidance.