Commodities
Tech Stocks: Should You Buy Before Q3 Earnings?
This week, the biggest names in tech will be releasing their earnings reports for the fiscal third quarter.
Among them are Facebook (FB), Apple (AAPL), Amazon (AMZN) and Alphabet, owned by Google (GOOGL).
If you’re thinking about investing, we’ve got all the information you need.
Apple
Share prices are currently hovering at around the $100 mark, making it more tempting than ever for investors to buy in.
At the outset of the report, set to be released today, earnings are expected to fall by at least 25%.
This is mainly due to a decline in hardware sales.
Avid Apple users are reluctant to purchase new devices until the tech giant releases their next-generation products.
This kind of decline is the first we’ve seen in the history of the smartphone.
Have no fear, though; the decline is only expected to last until the release of the iPhone 7.
The social media mogul looks forward to watching their earnings increase by 62% when they release their quarterly report following the close of the market last Wednesday.
On Friday, shares increased by 0.3%. Facebook is currently trading at 121.18, higher than their previous buy point of 117.09.
Facebook is part of Leaderboard and the IBD 50 list of growing stocks.
On average, one in five companies on the IBD 50 list anticipates at least a 40% earnings increase.
Businesses that make the list tend to be big players in the technology sector.
Amazon
Amazon expects to see their bottom line soar higher than 480% on Thursday, crushing their brick-and-mortar retailer competition.
The leader in online retail is currently trading at 1% below their all-time high, achieved earlier this month.
Amazon recently broke out of a cup-and-handle base just before releasing their Q2 report.
Following that, shares have been on the run, apart from stock prices falling flat last Thursday at $745.
Goldman Sachs maintains that the risk/reward factor remains favorable for investors at this time, predicting a $1.74 billion adjusted operating income.
Amazon hopes to continue the trend by optimizing delivery times and increasing their order frequency.
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Alphabet
Alphabet looks forward to a 15% earnings increase on Thursday after the close of the market, a modest jump compared to some of its tech counterparts.
The company has gained 0.7%, after having broken out of a double-bottom base pattern recently.
Stocks are currently considered in buy range.
The buy point stands at 753.58, higher than its 200-day line as of last Monday.
Alphabet hopes to boost their stock further by enhancing their AI.
One of the ways they hope to achieve this is by promoting their new Google Cloud service in hopes of attracting new customers.
The performance of Google Cloud trails behind their competition over at Microsoft and Amazon.
Despite this, Profit Confidential expects the company to enjoy a new wave of growth in the coming fiscal years.
Should You Buy?
The market may be unpredictable in other sectors, but there’s no doubt that the tech industry is slated to continue their growth.
First, let’s take a look at the Nasdaq Consensus Recommendations for the tech companies listed here (as of July 22, 2016):
- Apple: $98.66, strong buy (23), 1 sell recommendation
- Facebook: $121, strong buy (28), 0 sell recommendations
- Amazon: $744.86, strong buy (26), 0 sell recommendations
- Alphabet: $759.28, strong buy (26), 0 sell recommendations
It’s no surprise that the biggest names in tech will have strong buy recommendations from the Nasdaq.
But let’s analyze risk versus reward about each company’s performance:
- Currently, Apple’s price pattern has fallen flat. Stock prices of $100 are tempting for investors, but they may not see an increase until the tech giant releases their latest line of smartphones.
- The financially secure Facebook continues to grow. Their upcoming plans for an internet delivery drone, named Aquila, could help their earnings see even more gains. However, at this time, Aquila has no effect on the market.
- Amazon’s earnings are soaring. Their progress overshadows many traditional retailers, who have watched their stocks plummet by as much as 70%. Currently, the risk is low for investors while reward remains high, according to Goldman.
- The alphabet is now enjoying a Returns on Assets (ROA) of 11.40%. They hope to boost their earnings in future quarters by enhancing AI.
It’s often considered risky to buy stocks just before the quarterly earnings reports released.
Still, doing so can result in a big payoff for investors.
For more tips on knowing the best time to buy, check out Investor’s Corner’s article on reducing risk using the options strategy during the earning season.
