The elite group known as the Magnificent Seven faces a decisive market test as four mega-cap tech giants report their latest quarterly earnings this week.
Microsoft Corp. (NASDAQ: MSFT) will kick things off on Tuesday, reporting its fiscal fourth-quarter 2024 earnings after market close.
Meta Platforms Inc. (NASDAQ: META) will take the spotlight after the market closes on Wednesday, potentially making for a volatile day as traders assess interest rate moves following the Federal Reserve policy meeting and Fed Chair Jerome Powell's press conference.
Amazon.com Inc. (NASDAQ: AMZN) and Apple Inc. (NASDAQ: AAPL) will both report their fiscal second-quarter and third-quarter earnings, respectively, on Thursday, after market close.
Collectively, these four giants have a market valuation of nearly $10 trillion, highlighting the significant impact these earnings are expected to have on the markets.
Last week, the Roundhill Magnificent Seven ETF (NYSE: MAGS) suffered its worst day since the fund's inception, tumbling over 6% on Wednesday. On the same day, both the S&P 500 and the Nasdaq 100 indices had their worst session since late 2022. Magnificent Seven also marked their third consecutive week of declines.
What Analysts Expect
"Much depends on investor sentiment," said David Morrison, senior market analyst at Trade Nation.
According to Morrison, the key questions to address are whether the tech sector has pulled back enough for investors to buy again, regardless of earnings. Additionally, if there are further disappointments, will it trigger another wave of selling, and will funds then shift towards smaller-cap stocks?
"There's a lot to consider, and that's before factoring in monetary policy meetings from the Federal Reserve, Bank of Japan, and Bank of England, along with the U.S. Non-Farm Payrolls on Friday. This may prove to be a decisive week ahead of the summer's main holiday month," he added.
Goldman Sachs Predicts Positive Amazon Performance Ahead of Earnings
Goldman Sachs equity analyst Eric Sheridan highlighted three key debates for investors ahead of Amazon's earnings this week.
First, he pointed to the health of the consumer, with Amazon's eCommerce business remaining strong in Q2 despite some weakness in the UK and Germany.
Second, Sheridan observed Amazon's potential to boost operating income margins, with expected outperformance driven by higher retail margins, increased advertising contributions, and robust AWS profitability.
Third, he addressed the growth trajectory of AWS revenue, anticipating a reacceleration in 2024 as optimization and workload migration challenges turn into tailwinds, alongside rising AI workloads.
Goldman Sachs raised Amazon's 12-month price target from $225 to $250, reiterating a Buy rating.