What You Need to Know Ahead of Big Tech Earnings

Moomoo News Global joined discussion · Jan 16 15:21

Next Monday (January 20, 2025), with the official return of Trump, the U.S. stock market officially enters the "Trump 2.0 era." Following closely, on January 21, Netflix will be the first to release its earnings report, officially kicking off a new round of earnings season for U.S. tech stocks.

Looking ahead to this earnings season, global investors are once again focusing on the U.S. stock market's tech giants— $Apple (AAPL.US)$ , $Microsoft (MSFT.US)$ , $Alphabet-A (GOOGL.US)$ , $Amazon (AMZN.US)$ , $NVIDIA (NVDA.US)$ , $Meta Platforms (META.US)$ , and $Tesla (TSLA.US)$. The market is looking for clues as to when the massive investments made by these companies might start to pay off.

Here are Q4 earning forecasts for large tech stocks based on analysts' consensus estimates.

What You Need to Know Ahead of Big Tech Earnings

According to FactSet data, the S&P 500 index's EPS is projected to grow by 11.9% year-over-year in the fourth quarter of 2024. If the actual figure reaches 11.9%, it will be the highest year-over-year earnings growth since the fourth quarter of 2021 and the sixth consecutive quarter of year-over-year earnings growth for the index.

Barclays researchers state that the market consensus indicates that despite a challenging start to the year, tech stocks remain the core of EPS growth for the S&P 500 index, with large tech stocks expected to see a 24% increase in EPS in Q4 2024. Additionally, non-tech stocks have seen pre-earnings release downgrades greater than the average by 300 basis points, suggesting an intensification of bearish sentiment in the market.

It is expected that other tech stocks will contribute approximately $7 per share in earnings in Q4 2024 (a 20% year-over-year increase), while the rest of the S&P 500 constituents will contribute about $39 per share (a 1% year-over-year increase).

UBS's strategy report further indicates that tech stocks will perform exceptionally well in terms of earnings growth in the fourth quarter, particularly companies related to "Tech+"; however, investors should be aware that tech stock valuations may already be at a high level. Therefore, despite strong earnings potential in the fourth quarter, market expectations for their stock prices will likely be conservative, which is also why their recent market performance has been somewhat weak.

Meanwhile, as we enter 2025, Wall Street has also made projections for the full-year earnings of large tech stocks.

Morgan Stanley's Chief Investment Officer, Lisa Shalett, recently made a bearish statement about the earnings of large tech stocks in 2025. She said that, according to data compiled by Bloomberg, the combined earnings growth rate of the "Big Seven" U.S. stocks is projected to be 18% in 2025, lower than the projected 34% in 2024. This suggests that the earnings growth of these tech giants will slow down, and it will likely be challenging for them to continue dominating the market.

Interestingly, Lisa is not the only Wall Street professional who believes that the dominance of the "Big Seven" will eventually end. Bank of America researcher Savita Subramanian also warned that growth expectations for these giants are nearing historical highs, which is precisely when their earnings are expected to slow down. Furthermore, firms from Goldman Sachs to Citigroup are also urging clients to diversify their investments beyond the tech giants.

In contrast, Capital Economics believes that U.S. stocks will complete a 20% "hat trick" rise in 2025.

The report notes that the two main drivers that will continue to push the bull market this year are similar to last year: enthusiasm for AI and the exceptionalism of the U.S. economy. The fervor for AI investments will further boost the prices of U.S. large tech stocks, especially through higher valuations. Compared to the internet bubble period, the current P/E ratios of U.S. stocks are still far below their peaks, suggesting further upside potential for U.S. stocks.

Another reason for the solid performance of the U.S. stock market is the robust foundation of the U.S. economy, which is expected to continue outperforming major developed economies in 2025, contributing to higher corporate earnings expectations.

In summary, facing a complex investment environment in 2025, the majority advice from Wall Street currently is: don't put all your eggs in one basket. Diversified investment has become a consensus among major institutions.

Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more

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