We have entered the heart of the 2024 Q1 earnings cycle with a notably stacked earnings schedule on deck for this week. The period has primarily been positive so far, with the big banks’ results not causing any spooks.
And concerning this week’s busy docket, two ‘Mag 7’ members – Alphabet GOOGL and Meta Platforms META – are scheduled to unveil quarterly results.
Alphabet will report after the market close on April 25th, whereas Meta will report on April 24th after the market close. Shares of each have been considerably strong in 2024, outperforming the S&P 500 handily.
Image Source: Zacks Investment Research
Advertising revenue is a significant chunk of each company’s business and will undoubtedly be a focal point in the releases. But how does everything stack up heading into their quarterly releases? Let’s take a closer look at what’s expected.
Meta Platforms
The outlook for Meta’s upcoming release has turned visibly bright, with the $4.32 Zacks Consensus EPS estimate up 20% since the end of January and suggesting 63% year-over-year growth. Favorable cost-cutting measures have aided the company’s profitability picture in a big way.
Image Source: Zacks Investment Research
Concerning Advertising revenue, the Zacks Consensus Estimate presently stands at $35.6 billion, suggesting a sizable 27% growth rate from the year-ago period. The tech titan has regularly exceeded our expectations for this metric as of late, with the most recent beat totaling $827 million.
Image Source: Zacks Investment Research
Despite their strong run, shares aren’t valuation stretched, with the current forward 12-month earnings multiple of 22.8X nearly in line with the 21.6X five-year median and well beneath highs of 31.5X in 2020. In addition, the current PEG ratio of 1.2X reflects that investors aren’t overpaying for the forecasted growth.
Shares have had a tough showing over the last month, losing roughly 5% alongside the S&P 500’s 4% decline. Further weakness post-earnings could be a great purchase point for investors if the company’s guidance is solid, which will keep analysts’ revisions positive.
The stock is currently a Zacks Rank #2 (Buy).
Alphabet
Analysts haven’t shown as much positivity for Alphabet’s upcoming release compared to META, with the $1.49 Zacks Consensus EPS estimate up a modest 2% since the end of January. The company’s forecasted growth remains strong, expected to post 28% earnings growth on nearly 14% higher sales.
Image Source: Zacks Investment Research
The Zacks Consensus estimate for Advertising revenue stands at $60.1 billion, 10% higher than the year-ago mark of $54.5 billion. The company fell short of the consensus estimate in its latest release by $105 million, snapping a previous streak of positive surprises on the metric.
Image Source: Zacks Investment Research
Like META, shares aren’t overly stretched concerning valuation, with the current 21.8X forward 12-month earnings multiple nearly in line with the five-year median and well beneath highs of 32.6X in 2021. The PEG ratio works out to 1.4X, again in line with the five-year median and beneath five-year highs of 1.9X.
Shares have displayed relative strength over the last month, gaining 4% in value compared to the S&P 500’s 4% decline. Favorable commentary from the release concerning AI developments and advertising trends can help keep the stock’s momentum positive, though it is critical to follow analysts’ revisions post-earnings.
Bottom Line
Earnings season kicks into a much higher gear this week, with a wide variety of companies scheduled to report quarterly results.
Among the bunch are two ‘Mag 7’ members – Alphabet GOOGL and Meta Platforms META.
Both stocks have continued their momentum in 2024, outperforming handily. Analysts have been positive for both companies’ quarterly releases, though positive revisions are much more pronounced within META.
Post-earnings weakness could be prevalent given the recently strong runs, though both companies’ fundamentals continue to make them an attractive long-term play.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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