Going into this earnings season, the hope was that strong, surprisingly strong perhaps, earnings from the big growth stocks would put a stop to the selling. Earnings would be strong enough to convince investors that the market wasn’t over-valued since at these growth rates stocks would be seen to be quick growing into current extended valuations.
That hasn’t exactly worked so far. Netflix (NFLX), for example, delivered a horrendous miss on subscriber growth (a 200,000 decline in subscribers to the quarter) that just added to fears that valuations were actually excessive since earnings and revenue growth rates were going to be disappointing. Tesla (TSLA) knocked Wall Street projections out of the park but that didn’t lead to a surge for growth stocks in general because 1) Tesla is seen as a “special case” and 2) there was enough worry the Tesla numbers from Pandemic slowdowns in China to support worries about similar growth slowdowns from Apple (AAPL) and other tech growth giants.
But this week the earnings story from growth stocks hits its stride. If the companies reporting this week can’t make the case for growth stock earnings, there probably isn’t a growth stock story to be made in the light of Federal Reserve interest rate increases, supply chain disruptions, and fears of a recession.
Here’s the calendar:
Tuesday (tomorrow), April 26. Alphabet (GOOG), Chipotle Mexican Grill (CMG), Visa (V) and Microsoft (MSFT) report. In terms of market leadership Alphabet and Microsoft are most important since the companies will give investors a read on Cloud revenue growth (the two companies are #3 and #2 to Amazon in Cloud services) and in growth of digital advertising. Microsoft looks particularly well set up to delivery a surprise since forecast calls for Just $2.18 in earnings for the quarter (against $1.95 in the same quarter in 2021) and the company delivered an 8.3% surprise in the December quarter.
Wednesday, April 27. Meta Platforms (FB) reports. Wall Street doesn’t have high expectations with analysts forecasting earnings of $2.54 a share versus $3.30 a year ago. Anything better than that will be a big boost to market sentiment along the lines of “See, even Facebook can beat estimates.”
Thursday, April 28 is the big day. Amazon (AMZN), Apple (AAPL), and PayPal (PYPL) weigh in. PayPal is in roughly the same boat as Meta Platforms–the stock has been beaten to a pulp this year (shares were don 54.38% year to date as of April 22) and analysts are looking for just 58 cents a share in earnings for the quarter against 91 cents a share a year ago. Anything that’s not significantly uglier than that will be good news. Apple is a key stock because of worries that China troubles have sapped sales in the quarter and post production challenges gong forward. The market would like to hear a Tim Cook version of “Don’t worry.” Amazon will move the market because, well, the stock is so important in some many indexes, and because Amazon’s revenue growth might as well be the economy. key issue here will be trends versus increased competition from Walmart (WMT) and whatever detail Amazon provides on ad revenue growth.
Friday, April 29, is “Throwback Friday” with earnings from Big Pharma (Bristol Myers Squibb (BMY) and AbbVie (ABBV)) plus Big Oil ExxonMobil (XOM) and Chevron (CVX)), but by that time the growth story will be told.