Mag 7 Earnings: Meta & Apple in Focus

The earnings season has gained momentum recently, showcasing a diverse range of companies releasing their quarterly results. The outlook for Q3 appears promising, primarily driven by robust performance in the technology sector.

Next week, several key members of the Magnificent 7 will report their earnings, prominently featuring Apple and Meta Platforms.

Keep informed on all quarterly releases by referring to the earnings calendar.

As a group, the Mag 7 is anticipated to achieve an impressive 16.2% increase in earnings, coupled with a 13.6% rise in sales. This forecast demonstrates the overall strength of these leading technology companies.

META's Continued Success

In 2024, META shares have exhibited remarkable strength, positioning the company as one of the standout performers within the Mag 7. While other stocks have largely stagnated, excitement around META has consistently remained high leading up to its quarterly announcement.

Since the start of August, earnings expectations for the upcoming quarter have remained upbeat, with the Zacks Consensus EPS estimate rising by 2% to $5.17, signifying an 18% increase compared to last year. Positive revisions to earnings estimates have helped boost META’s Zacks Rank to #2 (Buy).

Similarly, sales expectations have shown promising growth, with a projected 17% increase year-over-year. A major area of focus will be on the company’s advertising performance, which has significantly benefited from recent advancements in AI technology.

Historically, the advertising results have consistently outperformed consensus expectations, maintaining an impressive streak of six consecutive positive surprises.

Investors should also pay attention to META’s insights on its AI roadmap, especially concerning capital expenditures. Valuation metrics ahead of the earnings release appear reasonable, with a forward earnings multiple of 23.7X, which is close to its five-year median of 22.1X and comfortably below its five-year peak of 31.5X. Furthermore, the PEG ratio currently stands at 1.2X, aligning with historical averages.

Focus on Apple’s AI Strategies

As for Apple, expectations for its upcoming earnings report show some unease, reflected in recent downward revisions pushed through in early October. The current Zacks Consensus EPS estimate is $1.54, which indicates a modest 5% growth year-over-year.

A crucial point of interest will be the performance of the iPhone segment, which typically takes center stage. Investors should anticipate detailed discussions regarding the new iPhone 16 and the anticipated AI advancements that the company has been promoting in recent months.

In the last three quarters, iPhone results have exceeded consensus forecasts in two of the three reports, reinforcing their importance.

The valuation indicators for Apple appear somewhat stretched, with a forward earnings multiple of 30.3X, exceeding the five-year median of 26.3X while still being lower than the five-year peak of 36.1X. The current PEG ratio is 2.4X, which is also above the five-year median of 2.2X. Despite some concerns over valuation, investors remain confident in Apple's sterling fundamentals, often willing to pay a premium for its shares.

Conclusion

Looking ahead to next week, key companies such as Apple and Meta Platforms will be taking center stage, helping to initiate the earnings reporting season for the wider Magnificent 7 group.

Investors should closely monitor META's commentary on capital expenditures, with a strong emphasis on advertising outcomes likely to shape expectations. Meanwhile, Apple's key focus will be on iPhone performance and the integration of advanced AI capabilities.

earnings, stocks, technology