Earnings season continues with Apple and Amazon releasing results after market close on Thursday, August 3rd. Who will win the challenge between the two big techs?
Amazon and Apple will present quarterly results this week. The two technology giants, in different ways, approached the quarter with new strategies and targeted moves, to satisfy shareholders and keep up with the ever-growing competition in the sector. That’s why the financial markets are in turmoil, ready to evaluate the quarterly performance of the two Wall Street giants.
Let’s figure out who will win the earnings challenge in Q2 2023.
Apple predictions
On August 3rd, Apple (AAPL) will release its fiscal third quarter financial results. Attention will be focused on the iPhone, the iconic product that made the company’s fortune. Despite solid sales, the iPhone is increasingly becoming an essential rather than a discretionary purchase. Expectations are high regarding iPhone 15 news, which should bring little innovation compared to previous models. In addition, it is important to understand the growth in the Chinese and Indian markets.
In addition, market attention will be focused on the new $3,499 virtual reality (VR) headset.
As the stock hovers around all-time highs and the market capitalization exceeds $3 trillion, investors are wondering what the Cupertino-based company will hold this time around. According to some forecasts, revenues should have a similar trend compared to the previous quarter, while the gross margin will be between 44% and 44.5%. In the third quarter of 2022, Apple reported a 2% year-over-year increase in revenue, with iPhone revenue rising slightly to $40.6 billion. For this quarter, Wall Street estimates revenue of approximately $90.29 billion and earnings per share of approximately $1.36.
According to Morgan Stanley forecasts, Apple should post a quarter in line with expectations, with earnings per share of approximately $1.19 and revenue of $81.7 billion.
Goldman Sachs is equally enthusiastic about the quarter, forecasting EPS of $1.21 on positive performance from Mac PC sales ($9.4 billion) and the AppStore (21.8 billion).
Deutsche Bank increased its price target for Apple to $210, from the current $195, expecting results in line with or slightly better than Wall Street estimates, with hikes across iPhone, Mac and services. All three banks have a positive outlook for Apple given its high-quality earnings and strong balance sheet.
Amazon predictions
Here are Amazon’s quarterly forecasts:
- Net sales estimated in the range of 115-120 billion dollars, with significant growth compared to the same period of the previous year.
- Profit margin expected at around 46.53%, down from 46.77% in the first quarter, still demonstrating solid profitability in the e-commerce business.
- Amazon Web Services (AWS) business growth is expected to be slightly slower due to decreased corporate spend.
- Advertising business is growing strongly thanks to investments in machine learning and artificial intelligence.
- Compared to Google which reported a 3.3% increase in ad revenue to $58.1 billion, despite a larger advertising pullback.
- First quarter advertising net sales of $9.51 billion, expected to increase to $10.3 billion in the second quarter.
However, there are many questions surrounding the effect of cost cuts on e-commerce and the use of artificial intelligence to drive growth in the cloud industry. As noted by analyst Tom Forte, Amazon, along with other tech giants, has taken several actions to reduce costs, potentially improving margins. In particular, investors are interested in seeing how AWS differs from other cloud services and how Amazon’s AI-powered advertising business compares to Google’s. US retail sales growth has slowed. Investors want to know about Amazon’s plans to maintain e-commerce profitability, considering that the expected profit margin for Amazon is 46.53% .
According to analysts, Amazon is playing a sort of "gambling game" by betting that other e-commerce companies will not offer a superior service to its own, rather than following its historical customer-oriented approach.
Apple stock has strong support from analysts, with nearly 94% of "buy" recommendations from over 60 investment banks, only 4.5% of "holds" and a single "sell". The 12-month average price target is approximately $145, compared to approximately $132 currently, suggesting a potential double-digit return for the stock.
Conclusions
The comparison between Amazon and Apple promises to be compelling. Both giants are trying to adopt targeted strategies to stay competitive and please investors, but only this quarter’s results will reveal who has won the earnings challenge. Investors’ eyes are on the performance of these companies, aware that their results could influence the performance of the S&P 500 and the Nasdaq with effects on the entire global stock market. Only time will tell who emerges victorious in this contest.
Original article published on Money.it Italy 2023-07-31 13:48:06. Original title: Trimestrali Amazon e Apple, le previsioni. Chi vincerà la sfida degli utili?
