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The 7 Magnificents kept their promises in Q2, beware of the danger for Q3?

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The year 2023 was the occasion of a rise in the markets which surprised many observers, not only because it took place in the context of a sharp rise in the rates of the Fed, but also because this rise is essentially based on the bullish outburst from some big tech names.

Earnings from Apple Inc (NASDAQ:), Microsoft Corporation (NASDAQ:), Alphabet Inc (NASDAQ:), Amazon.com Inc (NASDAQ:), NVIDIA Corporation (NASDAQ:), Tesla Inc (NASDAQ:) and Meta Platforms Inc (NASDAQ:) year-to-date have had a disproportionate influence in the index’s roughly 16% gain this year.

The influence of these companies on the general trend of the indices was such that investors took to calling them the « Magnificent 7 », although most of them were already part of another well-known group, the FAANG.

With the Q2 earnings season already well underway, all of the companies in this group have released their most recent financial updates except Nvidia, which will release its results on August 23.

In this article, therefore, we offer you an update on the recent Q2 results of the Magnificent 7 (and expectations in the case of Nvidia), as well as the objectives of analysts and InvestingPro models for each of these stocks.

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Apple

Apple’s quarterly results that were released on August 3 were generally disappointing, with AAPL stock falling 5.5% the day after the release, according to InvestingPro datawith revenues just in line with expectations having been penalized despite EPS which was 5.5% above the consensus.

Apple results

Apple results

For the next quarter, the data of which will be released on October 26, the consensus of analysts expects EPS of $1.39, or 10.3% more than in Q2, for revenues of $89.3 billion, up 9.1%. from one quarter to the next.

Apple Forecast

Apple Forecast

Finally, with regard to analysts’ forecasts, we note that the average target of the 42 analysts who follow Apple’s stock is at $199.97, or 12.2% more than the current price.

Apple Lenses

Apple Lenses

In contrast, AAPL’s InvestingPro Fair Value of just $162.08 assumes 9% downside risk.

Meta Platforms

Meta Platforms posted compelling quarterly results in Q2, with earnings per share beating expectations by 3.2%, while revenue beat consensus by 3.1%. As a result, META stock posted a 5.85% jump the day after the release, according to InvestingPro data.

Meta Results

Meta Results

For the current quarter, the financial results of which are due on November 1, analysts on average expect EPS of $3.59, which would represent an increase of more than 20.4% compared to the previous quarter. Meta’s revenues are for their part anticipated at 33.37 billion dollars, or 4.2% more than in Q2.

Meta Forecast

Meta Forecast

Speaking of analysts’ targets, note that the 50 professionals who track Meta Platforms stock have an average target of $362.25, or 22.9% above the current price.

Meta Goals

Meta Goals

Meta’s InvestingPro Fair Value, which synthesizes 13 recognized financial models, is displayed at $354.19, which translates into an upside potential of 16%.

Alphabet

Alphabet’s quarterly results also came in better than expected in Q2, pushing the stock up 6.37% in the session following the release. EPS came in at $1.44, or 7.3% above expectations, for revenue of $74.6 billion, beating forecasts by 2.5%.

Alphabet Results

Alphabet Results

For the next quarterly publication scheduled for October 24, analysts expect EPS to decline to $1.42, for sales up very slightly to $75.57 billion.

Alphabet Forecast

Alphabet Forecast

Regarding the outlook for Alphabet stock, analysts see a fairly limited upside potential, with an average target at $150, reflecting an upside potential of 15.7%.

Alphabet Goals

Alphabet Goals

InvestingPro Fair Value, which averages 13 recognized valuation models, is slightly more bullish at $151.61, or 16.9% above the current price.

Amazon

Online retail giant and global leader in cloud services, Amazon, was the Magnificent 7 stock that posted earnings that deviated the most from expectations. Indeed, EPS of $0.65 reported on August 3 was nearly 90% higher than analysts had expected. The turnover of 134.4 billion dollars exceeded forecasts by 2.3%, all causing an increase of 8.86% of the title the day after the revelation of the figures.

Amazon Results

Amazon Results

For the next quarter, although analysts expect further sales growth, profitability is expected to decline, with EPS expected at $0.56.

Amazon Forecast

Amazon Forecast

From an analyst’s point of view, Amazon stock has an upside potential of 23.3%.

Amazon Lenses

Amazon Lenses

On the other hand, the valuation models are more conservative, with the InvestingPro Fair Value of $153.97 implying a more limited upside potential of 11.7%.

Nvidia

Nvidia, the Magnificent 7 stock that has posted the biggest rise since the start of the year, thanks to its widely accepted status as the stock most exposed to the AI ​​revolution, has far exceeded expectations. of the consensus in its most recent quarterly results published on May 24. EPS exceeded expectations by 18.8%, for sales exceeding the consensus by more than 10%.

Nvidia results

Nvidia results

However, the trend should turn purple according to analysts’ forecasts, since the EPS for the second quarter, the results of which will not be published until August 23, is expected at $2.07, almost double the previous quarter, for revenues in quarter-on-quarter growth of 52.7%.

Nvidia Forecast

Nvidia Forecast

However, beyond these optimistic forecasts for the results, the analysts also show a relatively conservative objective for the action on a horizon of 12 months. Indeed, their average target of $490 for Nvidia reflects an upside potential limited to 15.1%.

Nvidia Lenses

Nvidia Lenses

But above all, Nvidia’s InvestingPro Fair Value, which is based on recognized financial models, is limited to $307.54, or 27.7% below the last closing price.

You’re here

Despite a profit that exceeded the consensus of 11.1% and a turnover generally confirming expectations, Tesla shares fell by more than 10% the day after the publication of its Q2 results, in particular due to vague forecasts.

Tesla results

Tesla results

In this regard, it should be noted that analysts are forecasting a decline in earnings for the next quarter, while EPS is expected at $0.81, against $0.91 in Q2. Revenues should remain stable.

Tesla Forecast

Tesla Forecast

From the perspective of the stock’s outlook, note that the average target of $272.5 of analysts who follow the stock assumes an upside potential of 12.5%.

Tesla Lenses

Tesla Lenses

For its part, the InvestingPro Fair Value of TSLA, which is limited to $253.12, reflects a smaller potential gain of 4.5%.

Microsoft

Although received coldly, with the stock falling 2.13% in response to the release, Microsoft’s Q2 quarterly results beat expectations on both EPS and revenue.

Microsoft Results

Microsoft Results

In addition, it should be noted that both revenues and earnings per share are expected to decline in the previous quarter.

Microsoft Forecast

Microsoft Forecast

Analysts remain fairly bullish on Microsoft’s stock price, however, with an average target of $400 assuming the stock will rise more than 24%.

Microsoft Goals

Microsoft Goals

The InvestingPro Fair Value, which summarizes the main most used financial models, is on the other hand much more cautious, at $332.65, representing an upside potential of only 3.2%.

Conclusion

Provided Nvidia doesn’t reveal a nasty surprise when it releases results later this month, it’s safe to say, despite some disappointments in the details, that the Magnificent 7 delivered on Q2.

However, as shown by InvestingPro’s valuation, which considers most of these stocks to be fairly valued (except Nvidia, which is already considered overvalued), and as shown by the mixed forecast for next quarter’s results, the continued rise from current prices becomes more uncertain.

While continuing to watch these Magnificent 7 closely for a correction that would allow for better buys, investors would therefore do well to also look at other stocks outside of these main headliners.

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Warning : This article is written for informational purposes only; it is not intended to encourage the purchase of assets in any way, and does not constitute a solicitation, offer, recommendation, advice, advice or investment recommendation. We remind you that all assets are considered from different angles and are extremely risky, so the investment decision and the associated risk are unique to the investor.

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