Next week is a huge week for the market with four of the top five largest companies are set to announce their earnings. Alongside those behemoths, there are many other companies that have market caps well into the mega cap territory that help us peer into the world of the consumer and the overall health of the economy. In the midst of COVID closures and many other complications, the mood of the market will largely depend on the guidance coming from these companies.
As you consider expectations, there are a few areas to consider. The first is what analysts are currently expecting for the earnings and revenues of the company for the current quarter. If a company misses on one or both of these measures, it can lead to large declines in the price after the report.
The second consideration is the company’s guidance for future earnings and revenue. If a company lowers their earnings and revenue range for the next quarter, current year or next year, that changes their current valuation.
The last consideration is what the options market is anticipating for the degree of movement on the earnings. In a volatile market, this means that the expectations may be bigger than what actually happens. Understanding these expectations may give you an understanding of how to trade or hedge over the earnings announcement.
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Here are four mega caps announcing next week with the analyst and options market expectations for the stock price and earnings.
Mega Cap #1: Apple Inc (NASDAQ: AAPL)
Apple has had a consistent history of beating analyst estimates over earnings. As you look at expectations for the report next week, analysts are expecting a 7.3% EPS decline year-over-year and a 4.5% increase to its current year EPS. The company has experienced some small positive revisions to their earnings in the past week, but the bar has essentially been the same for the past 90 days. As you look at the range of estimates for the upcoming earnings, the range is pretty wise with a high estimate of $2.47 and a low estimate of $1.55.
The company is scheduled to report earnings on July 30 after the market closes. Using the July 31 options expiration, the current expected move is +/- $24.56. That represents the one standard deviation range of the price for next week and therefore encompasses the movement over the earnings.
Mega Cap #2: Amazon.com, Inc (NASDAQ: AMZN)
Amazon is expected to see sales growth of 27.8% for last quarter and 24.2% for the current year. Those phenomenal growth numbers and reflects its positioning as the place people go to shop online. In their previous earnings report, the company discussed increased costs due to the COVID protective measures the company is taking. As a result, analysts are forecasting a 74% decline to last quarter’s earnings compared to last year. However, that impairment is expected to go away by the next quarter as EPS is expected to increase 4.7%.
The company is scheduled to report earnings on July 30 after the market closes. Using the July 31 options expiration, the current expected move is +/- $249.25.
Mega Cap #3: Alphabet Inc Class C (NASDAQ: GOOG)
Alphabet is a company that heavily relies on advertising spending. The company responded well following the last report, despite missing analyst estimates. The market seemed to welcome the potential to diversify their revenues with their cloud business and other metrics looking up. However, the company is expected to see EPS decline 41.1% from last year on 4.1% lower revenue growth. EOS estimates overall have remained stable since being cut significantly following the last report.
The company is scheduled to report earnings on July 30 after the market closes. Using the July 31 options expiration, the current expected move is +/- $91.77.
Mega Cap #4: Facebook, Inc (NASDAQ: FB)
If Google is dependent on advertising, then Facebook is even more. The ad boycott that many companies announced won’t be felt in the earnings that will be reported but will be reflected in the company’s guidance for next quarter and current year. Many companies planned to boycott ad spending on the Facebook platform for a month but there were many that will reevaluate in 2021. Analysts are expecting a 52.7% increase in EPS in next week’s report on 3% higher revenues but does expect next quarter’s earnings to fall by 18.9%.
The company is scheduled to report earnings on July 29 after the market closes. Using the July 31 options expiration, the current expected move is +/- $19.10.