The Magnificent 7: A Closer Look at Third-Quarter Earnings Reports

The third-quarter earnings season is here, with the “Magnificent 7” companies once again in the spotlight. After a robust first half of 2024, these market favorites have seen a decline as the excitement over AI has cooled and investors shift their focus to sectors more likely to benefit from interest rate cuts.

The “Mag 7” includes Tesla TSLA, Alphabet GOOGL, Meta Platforms META, Microsoft MSFT, Apple AAPL, Amazon AMZN, and NVIDIA NVDA. Tesla will kick off the earnings reports today after market close. Alphabet is scheduled to report on October 29, followed by Microsoft and Meta Platforms on October 30, and finally, Apple and Amazon on October 31. NVIDIA is expected to report next month.

Overall, the earnings for the “Mag 7” are anticipated to rise by 16.2% from last year, supported by a 13.6% increase in revenues. In contrast, the second quarter showcased an even stronger performance with a 35.2% earnings growth alongside a 14.7% revenue increase.

For real-time updates on earnings reports: Check Zacks Earnings Calendar.

Tesla

Tesla has an Earnings ESP of -1.28% and holds a Zacks Rank of #2 (Buy). This ranking indicates potential for earnings growth, particularly when combined with a positive Earnings ESP. Over the last 30 days, there have been no changes to Tesla’s earnings estimates for Q3 2024. The current consensus anticipates a significant decline of 12.1% in earnings year-over-year, alongside 9.5% revenue growth. Historically, Tesla faces challenges, delivering a four-quarter average negative earnings surprise of 7.99%. The stock has also decreased by 5.7% in the last three months.

Tesla, Inc. Price, Consensus and EPS Surprise

Tesla returned to delivery growth in Q3 after two quarters of losses, achieving the third-highest quarterly total in its history. Investors are eagerly awaiting details about the company’s plans for an affordable EV priced under $30,000 and its long-term vision for Cybercab, following a recent Robotaxi event that disappointed some due to vague details regarding its ridesharing platform.

Alphabet

Alphabet enjoys an Earnings ESP of +1.57% along with a Zacks Rank of #2. In the past month, analysts did not adjust their earnings estimates for Q3 2024. The company’s earnings surprise track record is strong, averaging 9.60% over the past four quarters. Analysts expect Alphabet’s earnings to grow by 18.1% and revenues by 13.6% compared to the same quarter last year. However, shares have dipped by 9% in the last three months.

Alphabet Inc. Price, Consensus and EPS Surprise

Google faces challenges due to ongoing antitrust lawsuits and rising competition in the AI market. Analysts express concerns about how generative AI might impact Google’s primary search business.

Meta Platforms

Meta Platforms has an Earnings ESP of +2.83% and a Zacks Rank of #2. Analysts have raised earnings expectations by 2 cents in the last month for Q3 2024, suggesting confidence in the company’s performance. The current consensus reflects a robust year-over-year earnings growth estimate of 17.8% and a revenue increase of 17.6%. Meta has averaged a notable earnings surprise of 12.61% in the last four quarters. Over the past three months, shares of META have appreciated by about 23.5%.

Meta Platforms, Inc. Price, Consensus and EPS Surprise

Meta Platforms is trading close to its all-time high, with numerous analysts raising their price targets for META before earnings, demonstrating strong confidence in its growth trajectory. UBS increased its target from $635 to $690 while maintaining a Buy rating, while Guggenheim also lifted its target from $600 to $665. Multiple analysts, including Jefferies and TD Cowen, have set new targets of $675, up from $600, retaining Buy ratings. KeyBanc increased its forecast to $655 from $560, keeping an Overweight rating on the stock.

Analysts point to improved user engagement and enhanced ad monetization through video content, particularly the Reels feature. The increased usage and advertising load for Instagram’s Reels are expected to drive growth moving forward.

Microsoft

Microsoft has an Earnings ESP of -0.74% and a Zacks Rank of #3. In the past month, a minor earnings estimate adjustment of one cent occurred for Q3 2024. The company has a solid record, with an average earnings surprise of 6.34% over the past four quarters. The consensus estimate suggests earnings growth of 3% and revenue growth of 14% compared to last year. Recently, shares have declined by about 4%.

Microsoft Corporation Price, Consensus and EPS Surprise

Microsoft, the largest software company globally, is making substantial investments to build new data centers to accommodate the rising demand for cloud computing and AI services. Although growth in Azure is expected to slow this quarter, CFO Amy Hood stated that ongoing investments will enable the company to leverage demand and boost Azure growth in the latter half of fiscal 2025. For the upcoming fiscal year, Microsoft forecasts revenues between $63.8 billion and $64.8 billion, indicating a potential growth rate of 13.8% at the midpoint.

Apple

Apple has an Earnings ESP of -17.71% along with a Zacks Rank of #3. Over the past 30 days, its earnings estimate was revised downward by 6 cents for Q4 2024. Famous for its earnings surprises, Apple has experienced an average surprise of 3.79% in the last four quarters. The consensus predicts a slight year-over-year earnings growth of 5.5% and a revenue increase of 5.6%. In the last three months, the stock has climbed by 4.9%.

Apple Inc. Price, Consensus and EPS Surprise

The company’s upcoming earnings report is highly anticipated as Apple continues to navigate market challenges while maintaining a strong market presence. Observers will be closely monitoring how the company addresses shifts in consumer demand and competition.