Mohit Oberoi
Meta Platforms (NYSE: META) stock is trading sharply higher today after reporting impressive earnings for the fourth quarter of 2022. Markets now eye the earnings of Big Tech companies including Apple, Amazon, and Alphabet—all of which report their earnings today.
Talking of Meta Platforms, the Mark Zuckerberg-led company posted better-than-expected revenues in Q4 2022. However, its revenues fell YoY for the third consecutive quarter. Also, it posted a YoY fall in revenues for the first time ever.
Nonetheless, Meta Platforms touted “efficiency” and “productivity” as the key themes for 2023 and also lowered the guidance for total 2023 expenses by $5 billion. It also announced a $40 billion stock buyback plan.
Meta Platforms was the worst-performing FAANG stock of 2022 and markets had somber expectations from the company after Snap reported dismal sets of numbers a day before.
Meta, however, impressed markets with the earnings even as Zuckerburg admitted that the super high growth that the company saw until now might not be repeated in the future. Many analysts still find Meta Platforms stock undervalued and advise buying META stock.
Fed Raised Rates by 25 Basis Points
The Nasdaq Composite has closed with gains for four consecutive weeks after a tumultuous 2022 where it lost around 33%. It has however rebounded in 2023 and gained 11% in January which was the best start to the year since 2001.
Things are looking good for the tech-heavy index and after the 2% rise yesterday, futures point to a strong opening today.
Yesterday, the Fed raised rates by 25 basis points which was in line with expectations. However, what pleased markets was the tone of Fed chair Jerome Powell who sounded quite less hawkish than he has in the past.
For the first time in the current rate hike cycle, Powel talked about “disinflation.” While he ruled out a rate cut in 2023, he also suggested that the Fed might not go much beyond these rates.
Fed fund rates currently stand at 4.50-4.75% and Powell said that it is “certainly possible” that the rates stay below 5%.
This week was anyways quite crucial for markets as apart from the Fed meeting we have a flurry of earnings.
FAANG Earnings Have Been Better-Than-Expected So Far
The tech earnings calendar is quite busy today. Apple, Amazon, and Alphabet would release their earnings today. FAANG stocks plunged in 2022 and only Apple outperformed the Nasdaq.
However, tech stocks have looked strong so far in 2023. Netflix also impressed markets with its Q4 2022 earnings. While its earnings were below what markets were expecting, it added 7.7 million subscribers in the fourth quarter which was way ahead of the 4.5 million that it had previously guided for.
Netflix stock gained smartly from its 2022 lows and has more than doubled from those levels. There is a guide on buying Netflix stock.
Meanwhile, the earnings of FAANG stocks also reflect the pain that Big Tech companies are facing. For instance, Netflix’s revenues rose a mere 1.9% in Q4 2022 and 6.5% in the full year. Even Meta Platforms reported the first revenue decline in history.
Watch out for Big Tech Earnings Today
Markets would now watch the earnings of the other FAANGs today. To be sure, markets have tepid expectations from tech companies as the growth slowdown is no secret now.
Talking of Apple, analysts expect the company’s revenues to fall YoY in the December quarter. The company forecasted that its sales growth in the quarter would be below that in the September quarter.
However, Apple faced significant supply chain issues in the quarter due to the COVID-19 outbreak at Foxconn’s plant in China. The iPhone maker also reportedly faced demand issues and might provide more color on the demand environment during the upcoming earnings call.
Amazon Q4 2022 Earnings Estimates
Analysts expect Amazon to report a 6% YoY growth in its Q4 2022 revenues. The estimates are in line with the 2-8% growth that Amazon predicted during the Q3 2022 earnings call. However, analysts expect the company’s e-commerce sales to contract in the quarter while AWS growth is expected to slump further.
In Q3 2022, AWS’s growth was anyways the lowest since Amazon started to report the earnings of that business separately. In the full year, analysts expect Amazon’s sales to rise 8.7% which would be the slowest pace of growth in decades.
Analysts have tepid expectations from Alphabet also and its revenue growth is expected to have fallen to 10% in 2022. The company recently announced mass layoffs and joined other tech peers who have laid off employees.
Overall, the next couple of days look action-packed for investors as markets digest the flurry of earnings. The Nasdaq looks set for the fifth consecutive week of gains unless we get some really nasty surprises in the earnings.
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This article was written for Business 2 Community by Mohit Oberoi.
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