Market Alert: Earnings Super Thursday

Big Tech companies were drivers of this year's recovery rally on Wall Street. Facebook, Amazon, Apple and Alphabet account for around 20% of the S&P 500 and all four companies will report earnings on Thursday after the US session closes! Solid releases may help US stock market end a losing streak. On the other hand, lacklustre results may add more fuel to the ongoing sell-off.

Apple

Apple (AAPL.US) reported record results in the second quarter of 2020. However, earnings are expected to be lower in Q3 2020 while revenue growth is expected to stall on the back of weaker hardware sales. On the other hand, revenue from services is expected to post another quarter of growth as the company continues to diversify its business and put more emphasis on recurring revenue. Unexpected slowdown in this metric could hurt sentiment. Apple stock is trading nearly 60% year-to-date higher and 120% above low from March 2020.

Apple (AAPL.US) pulled back to the upward trendline after painting a higher high. Bulls may try to halt ongoing short-term correction and solid earnings report could see stock surge towards recent peak at $124. Source: xStation5

Amazon

Amazon (AMZN.US) benefited from strong e-commerce sales during the pandemic as well as higher demand for services of its cloud unit. Strong growth in both sales and earnings is expected this quarter so focus will be on the pace. Growth has been slowing in the AWS cloud segment since 2018. While this is a smaller business segment than e-commerce, it has higher profit margins. Companies hired thousands of additional workers to keep up with increased e-commerce demand therefore markets do not worry much about the performance of this unit. Amazon stock is trading around 80% higher year-to-date and over 100% above low from March 2020.

Amazon (AMZN.US) recovers after bears were unable to break below 100-session moving average (green line) and 50% retracement of the recent upward impulse. Upcoming report is likely to confirm strong e-commerce growth that remains key business for Amazon. However, cloud performance will also be on watch. Source: xStation5

Alphabet

Google, subsidiary of Alphabet (GOOGL.US and GOOGC.US), reported the first ad revenue drop in its two decade long existence in Q2 2020. However, analysts expect that Alphabet will report higher year-over-year revenue in Q3 2020 on the back of recovering ad spending and strong cloud revenue. Performance of the cloud segment will be on watch as Google is facing another antitrust case over its monopolistic position in the main business field and investors want to see revenue stream diversified further. Stock is trading almost 20% year-to-date and nearly 60% above low from March 2020.

Alphabet (GOOGC.US) trades in a steep upward channel. Stock pulled back along with the broad market recently but managed to regain ground. Resistance area at $1,630 is now in focus. Breaking above would pave the way for a test of the all-time highs above $1,700. Source: xStaiton5

Facebook

Facebook (FB.US) managed to avoid a drop in sales in Q2 2020. However, 10.7% YoY revenue growth was the slowest in over 3 years and the company said it expects Q3 revenue to be in-line with it. Market expects that company will report slightly lower earnings in the July-September period than a year ago. Focus as always will be on the number of active users, consensus estimate expects a 12.5% YoY increase, to 2.7 billion monthly active users. User growth accelerated in the first and second quarter of 2020. Facebook stock is trading around 40% year-to-date and over 100% above low from March 2020.

Facebook (FB.US) continues to climb following a test of the 100-session moving average in late-September (green line). Renewed antitrust scrutiny did not hurt sentiment and stock is looking towards all-time highs in the $300 area. However, unexpected slowdown in user growth would be an obstacle. Source: xStation5