This is an important week in the market… for some obvious reasons and some less obvious reasons.
Let me lay it out for you.
Technology has been the strongest sector in the market since Jan. 25, according to the proprietary buying and selling data in my Quantum Edge system.
You can see for yourself that Big Money buys (green bars) have easily outpaced Big Money sells.
No wonder the Invesco QQQ Trust (QQQ), which tracks the Nasdaq-100 index of the largest non-financial companies listed on Nasdaq, has soared nearly 20% in less than four full months of the year.
With that in mind, four of the biggest companies on the Nasdaq — and in the entire world for that matter — report quarterly results this week.
It’s like a who’s-who of tech reporting with Alphabet (GOOGL), Amazon (AMZN), Meta Platforms (META), and Microsoft (MSFT).
These are important because they are among the most widely owned stocks in the world. Their massive businesses are barometers for the economy and especially technology. What they say will have at least some impact on what investors are thinking and feeling.
And, because they are so massive and are heavily weighted in multiple indexes, any price fluctuations result in forced buying or selling by funds and managers that track those indexes.
Let’s see how these four bellwethers rate in my Quantum Edge system and talk about what we might expect from their upcoming reports. In alphabetical order, we’ll start with — well, Alphabet.
Alphabet (GOOGL) — April 25
Alphabet (I still want to call it Google) reports after the market closes tomorrow. The stock is up 20% this year, and that helps it rate a Quantum Score of 72.4. That’s a strong score and in my target zone of 70 to 85 when I am considering investing in a stock.
Looking at the fundamentals, Alphabet comes in with a superb score of 79.2. Near-term growth is solid but not spectacular, while three-year estimated earnings growth scores higher at 30.8%. Profit margins are strong, debt is acceptable, and a forward PE ratio of 20.6 times expected earnings is pretty attractive.
The technicals are good but not as strong at 67.7, GOOGL has done well this year, but it has traded in a range for a little over a month now. It has also been nearly a year since its 52-week high.
My system has picked up only two Big Money buy signals this year — on Feb. 2 and April 6. That last one is pretty recent, so a decent report could easily generate another buy signal or two.
Amazon (AMZN) — April 27
Amazon is the last of four to report this week with its results coming out on Thursday. It has gained 26.5% this year, even after its last report in February disappointed investors on the bottom line and with light guidance for the first quarter. We’ll soon find out how accurate that was.
Even though the stock has gained more than GOOGL this year, its Quantum Score is significantly lower at 58.6. That’s below what I like to see.
The technicals are decent at 64.7, and AMZN has been trending higher since mid-March. Still, it remains well below its 52-week high, and the one-year chart is kind of meh.
The fundamentals rank even lower at 50. Sales and earnings growth are OK to good over one and three years, but the current profit margin is negative (-0.5%) and Amazon carries more debt than equity. Even so, shares are richly valued at 71.9 times expected earnings.
We have seen three Big Money buy signals so far in 2023, but they all came between Jan. 27 and Feb. 2, which were the days leading up to the last earnings report that ended up being a disappointment.
Meta Platforms (META) — April 26
Meta — or Facebook as most of us still call the company — reports on Wednesday. Shares surged 23% after the last report in February, which is astounding for a company valued at $500 billion.
The numbers weren’t even that phenomenal. It was more about Mark Zuckerberg saying the company would become more efficient in 2023 after years of spending big money on things like virtual reality and the metaverse.
It’s interesting, then, that META ties for the highest Quantum Score of the group at 77.6. Fundamentals are solid at 70.9, despite shrinking revenue over the past year. Sales are projected to resume growing, and estimated earnings growth over the next one and three years is strong at 25.4% and 18.8% respectively. I also like the nice profit margin of 20% and low debt at 21.7% of equity.
META’s technical score rocks at 82.3. Shares have zoomed 77% just in 2023 and are bumping up against their 52-week high from a year ago. They also trade above key moving averages, and we’ve seen seven Big Money buy signals so far this year (the green bars below) and no Big Money sells.
I’m not counting on another 23% pop after results are released this time around, but META looks interesting right now. Expectations are low — sales falling 1% and earnings falling 25% — which ironically makes an upside surprise more possible.
Microsoft (MSFT) — April 25
Microsoft also post a strong Quantum Score of 77.6, and it reports results tomorrow after the close. It has gained 17.5% this year, trading around $280 for the last month or so.
Microsoft looks the most appealing because of that Quantum Score, yes, but also because of the way it breaks down. Its technicals are strong at 79.4 — but not overheated — and its fundamentals are not far behind at 75.
And Big Money has been flowing into the stock all year.
Microsoft remains a key player in big growth trends from cloud computing to artificial intelligence. It’s a tech stalwart that has held up better than most of its tech brethren in a tough market and slower economy. Earnings and sales continue to grow, and Big Money has always liked MSFT with my system picking up 131 unusual buying signals over the last nine years.
Early indications show that earnings are working so far… or at least aren’t as bad as feared. According to the latest FactSet Earnings Insight, of the 90 S&P 500 companies that have reported so far, 76% exceeded earnings expectations and 63% beat revenue estimates.
All eyes will be on these tech giants this week, and rightfully so. The impact of their results and how investors react will be felt. But the overall trend remains bullish, and thanks to my Quantum Edge system, I see plenty of other powerhouse stocks out there as well with the likelihood of making investors good money.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends