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The Giants of the Day!

27 January 2021

This will be a busy and important day in the US for data and earnings, with Durable Goods and the FOMC Monetary Policy Statement and conference on the slate. Earnings include Apple, Tesla and Facebook. Hence as we are in the midst of Earnings Season, the focus turns today to these tech giants after the impressive and unique rally all three of them saw last year. In 2020 the first two proceeded with a stock split, with Apple splitting its stock 4-for-1, while Tesla split 5-for-1, as both companies aimed to make their shares more affordable to individual investors. After the split the high-flying shares of Apple Inc and Tesla Inc surged as they attracted more buying from investors. Hence overall Apple shares soared more than 75% in the last year, while Tesla was the greatest winner of all with shares surging more than 650%. Out of the three Facebook benefited the least, with a spike only 30% higher on a year over year basis.

Barchart Analysis Rating & Earnings Estimate

Nevertheless, Apple, Tesla and Facebook report their fourth Quarter earnings report for 2020 after today’s closing bell on Wall Street. Considering their previous quarterly releases they are expected to have great earnings reports with expectations extremely high for all three of them. Electric car maker Tesla  is also reporting  full-year 2020 financial results, for which the majority of the Analysts are expecting sharp revenue growth and a nearly doubling of the company’s non-GAAP earnings per share on a year-over-year basis.

Hence the key figure, other than revenue for 2020 and any surprise on EPS, will be the vehicle delivery section, especially because of the ongoing and repeated lockdowns and restrictions globally.

This could ultimately have the greatest impact on market sentiment along with the company’s forecasts for vehicles deliveries for 2021. Vehicle deliveries is a key aspect for the electric car maker since it provides an important guidance for the company’s growth on auto sales, which remains the top business at its core.  Hence based on Barchart and Reuters forecasts, the market remains optimistic in regards to  production however Tesla’s consensus recommendation remains  “Hold”, corresponding to the majority of the consensus recommendation for the Online Services peer group.

Reuters Earnings Estimate

Additionally, as shown by Thomson Reuters Eikon (2021), the electric carmaker giant is expected to have $1.01 in earnings per share during the fourth Quarter of 2020, which represents an incline from the $0.41 reported EPS for Q4 2019. Revenue is expected to be released at $10.32 Bln from the $7.9 Bln in the third quarter of 2020. This is based on the fact that in the third and fourth quarter of 2020, unit sales rose 44% and 61% year over year. Further, Tesla had new production lines under construction at three different factories at the time of its third-quarter update, setting up the automaker well for 2021.

Apple, in the meantime, has a great earnings surprise track record with just 1 miss in the last 5 years, all the way back in early 2016. Apple’s consensus recommendation is “Buy to Strong Buy”, corresponding to the majority of the consensus recommendation for the Online Services peer group. The same stands for Reuters as well, as  30 out of 40 Analysts recommend “Buy” (Figure below). According to the Eikon Reuters platform, the tech giant is expected to have $1.41 in earnings per share during the fourth Quarter of 2020, which represents a spike by nearly 1.4% since the reported EPS for the fiscal Quarter ending September 2020.  Revenue is expected to be released at $103.28 billion, with a mean change of 1.28% and an 11.8% y/y increase.  According to Zacks, “Apple stock saw no earnings estimate revision over the past 30 days for the fiscal first quarter and its earnings surprise history is strong. It delivered an earnings surprise of 16.20%, on average, over the past four quarters. Apple is expected to report substantial earnings growth of 11.2% from the year-ago quarter. “

Last but not least is the social media giant. Facebook is expected to confirm its global digitalization due to the rise in remote working and learning, as the second wave of the pandemic, similarly to the first wave, also looks to have given a big push to e-commerce. An analyst at Bank of America stated that: “Facebook has rolled out new features and functionality at a time when e-commerce has shot up, so it should be a pretty good fourth quarter”. Hence consensus recommendation is “Strong Buy”, corresponding to the majority of the consensus recommendation for the Barchart and Zacks Online Services peer group but also Eikon Reuters. According to the Eikon Reuters platform, the social network giant is expected to have $3.22 in earnings per share during the fourth Quarter of 2020, which represents a 25.8% growth since the reported EPS for the fiscal Quarter ending December 2019.  Revenue is expected to be released at $26.43 billion, 24.6% up.

Aside from the EPS number, investors will probably turn their attention exclusively to revenue and advertising as the advertising sector saw a significant rise  in 2020 growth outcome across geographies and despite the reduction in price per ad.  Here we have to point out that in 2020 many businesses shifted more of their marketing to digital ads during the pandemic, especially at the end of the year due to the holiday period, including Christmas, New Year’s Eve, Black Friday, Halloween etc.

Despite the robust earnings reports so far, the Facebook stock price was seen consolidating since September with the stock steady between $250-$300. Turning to the technical side, if the company (Apple and Tesla as well) achieves accuracy with its forecast, then a positive earnings outcome without any negative surprises on revenue and users/ads/sales growth could attract some bulls back into the market. This could boost price action higher.



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