by The ‘Magnificent Seven’ accounted for around two-thirds of the S&P 500’s (^GSPC) gains last year but can they repeat those extraordinary results in 2024?
This group of mega-cap tech giants — Alphabet ( GOOGL ), Amazon ( AMZN ), Apple ( AAPL ), Meta Platforms ( META ), Microsoft ( MSFT ), Nvidia ( NVDA ) and Tesla ( TSLA ) — is benefiting from the growth of technological trends such as artificial intelligence (AI) and cloud computing.
In 2023, The Magnificent Seven stocks have risen between 48% and 239%, accounting for 60% of last year’s 24% total return for the S&P 500.
Here’s what to expect as Tesla kicks off mega-cap reporting season on January 24.
Tesla (TSLA) – reporting on January 24th
Shares in EV maker Elon Musk doubled in value over 2023, gaining 102%, as the company is expected to report revenue of $25.5bn (£20.1bn).
Tesla reported 485,000 deliveries for Q4 2023, which represents an increase of about 20% compared to last year.
“Tesla has already provided insight into its performance through the quarterly vehicle production and delivery data released before the financial results. In the fourth quarter it produced 494,989 vehicles and delivered 484,507 vehicles, the majority of which were Model 3 or Y,” said Dan Coatsworth, investment analyst at AJ Bell.
“It managed to hit an annual delivery target of 1.8 million, giving it breathing room amid market concerns that competition was getting worse, particularly China’s BYD which has overtaken Tesla as the largest electric vehicle maker in world in the last quarter,” he said.
There are concerns about a stall in their car sales without the launch of any new model and a delay in the promotion of Cybertruck.
Analyst forecasts for the next set of quarterly results are earnings of $0.72 per share.
Microsoft (MSFT) – reporting on 30 January
Microsoft has managed to steal the title of the world’s most valuable company from Apple in 2024, with the software giant’s bet on AI paying off.
CEO Satya Nadella has pushed for Microsoft to take a global leadership role in AI. The company is heavily involved with the maker of AI startup ChatGPT, OpenAI, and has reportedly invested up to $13bn in the startup.
This alliance has been considered one of the most profitable connections in the technology industry.
On Wednesday, Microsoft’s market capitalization stood at $2.895tn, a new record high for the company, and above Apple’s market cap of $2.825tn.
The last time the software giant earned the title of the world’s most valuable company was in 2021.
The consensus analyst forecast for the next set of quarterly results is earnings per share at $2.29 and revenue at $52.94bn.
Read more: The most trending FTSE tickets in 2023
“The big issues are whether Microsoft can sustain strong growth in cloud computing and how it can take AI to the next level,” Coatsworth said.
“Seen by most as the leading AI software activity, its apps are already critical to millions of businesses, so folding functionality into Windows, Microsoft 365, Azure and more through its Copilot tools offers huge potential.
“It’s not all champagne and caviar for Microsoft. Its success has naturally attracted the attention of various regulators and competition authorities and like its mega-cap counterparts, there are growing concerns that the company has become too dominant. Antitrust probes are likely to be a key focus for investors in 2024.”
Alphabet (GOOG, GOOGL) – reporting on 30 January
The search engine giant appears to be catching up in the AI race and has announced hundreds of job cuts in an effort to cut costs. But the stock remains a buy with most analysts because of its powerful free cash flow.
Most analysts expect Alphabet to report a 12% increase in fourth-quarter revenue, to $85.26bn, which should translate into a 51% increase in earnings per share to $1.60, up from $1.05 in the same period a year ago .
“Alphabet has beaten market expectations for earnings per share and revenue with three consecutive quarterly results. Investors will be hoping he can make it four in a row on January 30,” Coatsworth said.
“Cloud computing is the biggest unknown – one minute Alphabet is thriving in this field, the next it can’t sustain growth momentum. Competition is fierce and it is difficult to get ahead of the results.
“YouTube continues to go from strength to strength, with millions of people treating the platform as a preferred place to consume content.
Apple (AAPL) – reporting on 30 January
Samsung has been overtaken by Apple (005930.KS) as the world’s largest phone maker but that may not be enough to convince investors amid declining iPhone sales in China.
Apple added $1tn to the market cap in 2023 even as it reported revenue declines from the previous year in four consecutive quarters.
Analysts predicted Apple will report earnings of $2.09 per share and revenue of $118bn amid weakness in China and reduced global demand for Mac computers and iPads.
“The company was known for bringing out truly innovative products and shaking up the market. In recent years that reputation has faded away as there have only been new iterations of the same products,” said Coatsworth.
“The big change could be the Vision Pro headset that goes on sale in February 2024. While the $3,500 price point seems high, people pay that for high-end laptops and it could be This would be another ‘must have’ product for Apple fans.
“The key issue to monitor is whether Apple’s output can meet demand as there were reports last year that it had to significantly reduce production forecasts for the Vision Pro due to design complexity.”
Meta Platforms (META) – reporting on 1 February
The year of efficiency, which saw the company push away from the pressure of the metaverse, enabled Meta to achieve an impressive return of 194% in 2023.
However, what can investors expect when Mark Zuckerberg, the chief executive of the owner of Facebook, sold almost half a billion dollars worth of the company’s shares at the end of last year. It was the first time he had sold shares in nearly two years.
Analysts forecast fourth-quarter earnings of $4.96 per share for Meta for 2023 compared to a loss of $1.76 per share in the same period a year earlier. Revenue is expected to be $39bn compared to $34.15bn in the previous quarter.
“The repeat results are likely to include an increase in expenses in 2024, driven by higher costs related to infrastructure and investment in AI. The hype around the metaverse has died down but the concept continues to gain traction and any success from Apple’s Vision Pro headset could reignite public interest in virtual worlds,” said Coatsworth.
Read more: ChatGPT’s portfolio exceeds the 10 most popular funds in the UK
“Meta has a large portfolio of AI ideas such as language translation and Instagram users reimagining their photos, but these seem unlikely to generate meaningful revenue, so advertising will remain key in terms of revenue in the near future,” a he said.
Amazon (AMZN) – reporting on February 21st
Amazon stock rose 81% in 2023 and AI generation is promised to bring tens of thousands of revenue to Amazon Web Services in the next few years.
Amazon aims to be a dominant player in the market despite being slow to invest in this technology.
The company also has a strong position in TV, film and music streaming and although the stock is not cheap, the shares are the cheapest they have been in over 10 years.
Amazon has guided for net sales of between $160bn and $167bn, representing growth of 7% to 12% compared to the fourth quarter of 2022. The analyst consensus forecast is earnings of $0.78 per share and $165.86 income bn.
“The uncertain economic outlook raises the prospect that companies are continuing to find new ways to save money including cutting back on IT costs which could be a problem for Amazon’s cloud computing division . Greater corporate interest in AI could offset that, which could benefit the group,” Coatsworth said.
“Amazon is rolling out new versions of AI chips it says offer improved performance and has announced plans to invest up to $4bn in Anthropic, a US company that generates AI systems and large language models. AI may be the ‘hot topic’ in technology but it can be expensive to keep up with competitors, let alone overtake them,” he said.
Nvidia (NVDA) – reporting on February 21
The AI boom on these tech mega-caps wouldn’t be possible without the chips from Nvidia, and the chipmaker saw shares rise 239% last year.
With demand far outstripping supply for its graphics processing units, investors will be looking to see if Nvidia can continue to drive the AI-related rally the market has enjoyed over the past year.
The analyst consensus forecast for its next quarterly results is earnings of $4.49 per share and revenue of $20.06bn.
Read more: How the AI boom will benefit these nine chip makers in 2024
“Nvidia is going full AI, believing that the world is about to change radically in the use of technology. Companies in every industry are exploring ways to deploy AI to improve productivity and that creates a huge runway for Nvidia to grow its earnings,” Coatsworth said.
“His main challenge is keeping up with demand and continuing to innovate, rolling out new products that can help companies while ensuring they remain at the forefront of the AI industry. Nvidia is the dominant force in the market and can’t be complacent, or the competition will get worse,” he said.
See: Why technology will still be one of the leaders in 2024
Download the Yahoo Finance app, available for Apple and Android.
