Companies that account for 45% of the market value of the S&P 500 will release their financial reports this week, including five of the Mag 7. Goldman Sachs believes that investors have not yet seen satisfactory financial reports from the Mag 7, and every tech giant is facing challenges. Meta is the most favored, while Intel is the least favored. It is expected that AI infrastructure construction will be the best theme in the market next year
This week, the peak of the US stock earnings season has arrived, with companies that make up 45% of the market value of the S&P 500 index set to announce their latest performance.
Among them, five of the seven tech giants in the US stock market will release their earnings one after another: Google on Wednesday (after the US market closes on Tuesday), Microsoft and Meta on Thursday, and Amazon and Apple on Friday. At the same time, companies like PayPal, AMD, eBay, Intel, and Uber will also be presenting their earnings reports this week.
Goldman Sachs analyst Peter Callahan has provided predictive ratings for these upcoming earnings reports in the latest report. Goldman Sachs is most bullish on Meta, giving it the highest score of 9.5, followed by Amazon with 8.5, Apple with 8, Microsoft with 7, and Google with 6. Companies like Intel received the lowest score of 2.
The earnings reports of these large tech stocks are being released intensively before the US election and the Federal Reserve decision, which may lead to market fluctuations. Goldman Sachs has outlined ten key focus points and industry trends for this "super earnings week".
1. Strong Performance of TMT (Technology, Media, Telecommunications) Earnings Reports
So far, TMT stocks have shown strong performance in the third-quarter earnings reports. Among the first batch of information technology companies to report earnings, about 78% exceeded earnings per share (EPS) expectations, while the communication services industry saw about 67%.
2. US Stock Seven Giants
Goldman Sachs points out that the challenges facing the US stock seven giants include the difficulty in finding investors' perceived "good" earnings reports - Meta faces pressure to raise sales expectations and capital expenditures by 2025, Amazon's fourth-quarter profit guidance is controversial, YouTube under Google is experiencing slowing growth and regulatory pressure, Microsoft has once again lowered EPS expectations, Azure's transparency is also contentious, and Apple's fourth-quarter guidance is uncertain.
3. Investor Sentiment
Goldman Sachs notes that the most popular earnings reports among investors include Meta, AAPL (Apple), AMZN (Amazon), RDDT, MA, BKNG, DASH;
The most controversial ones are ON, FFIV, EA, Visa, EBAY, MSFT (Microsoft), RBLX, UBER, TEAM;
The least popular ones are AMD, GOOGL (Google), SNAP, GPN, CFLT, ETSY, PCOR, STMicro, INTC (Intel).
4. Industry Observations
Goldman Sachs believes that confidence in the software industry remains low, while the hardware industry may perform strongly in 2025 due to the PC cycle, iPhone cycle, and the recovery of non-AI data centers. The situation in the internet industry is uncertain, investors in the payment industry are relatively relaxed, and profitability issues are not a concern for now.
5. Focus on AI Infrastructure Development Goldman Sachs believes that the market's interest in the expansion of AI at the "infrastructure" level by 2025 is an important or optimal theme, involving components from GPUs to switches, optical fibers, CPUs, etc. Stocks related to AI infrastructure have shown strong performance, such as GLW, BDC, FLEX, ETN.
VI. Semiconductor Industry Cycle
As a pioneer in the semiconductor industry, Texas Instruments (TXN) was the first to announce its financial report last week, with the company's fourth-quarter revenue guidance not lower than expected. Goldman Sachs believes that the stocks in this sector still need to be observed.
VII. Storage Industry
Goldman Sachs is puzzled about the outlook for storage and semiconductor equipment in 2025, such as ASML's performance disappointment, BE Semiconductor's fourth-quarter guidance below market expectations, but companies like LRCX remain optimistic about growth in 2025. This week, attention needs to be paid to the financial reports of companies like Samsung and their views on the prospects of HBM/storage and foundry industries.
VIII. Advertising Industry
While discussions about third-quarter advertising trends are limited, there is an increase in discussions about fourth-quarter guidance (elections+holidays) and the clues investors seek from the financial reports of companies like GOOGL Search, RDDT, META, etc.
IX. Software Industry
Goldman Sachs believes that the software industry is currently off to a good start, but this week will face a greater test. Several small and medium-sized companies (such as CFLT, TWLO, GEN, PCOR, PAYC, PCTY, TEAM) will release their financial reports, and investors are looking for stable signs in the fourth-quarter guidance to boost confidence in the outlook for 2025.
X. Some "defensive" or low-volatility stocks are stagnating
Goldman Sachs points out that this phenomenon is partly due to the rise in U.S. bond yields (the 10-year U.S. bond yield briefly exceeded 4.2%) and the "tension" regarding cyclical risks. Several "value"/"defensive" TMT stocks will release their financial reports this week: FFIV, CHKP, MSCI, ZBRA, ADP, EBAY, GDDY