If your focus is large-cap technology stocks with top fundamentals, there’s plenty to like in the latest earnings calendar. After bullish earnings reports from Tesla (TSLA) and ServiceNow (NOW), the stock market’s attention turns to Apple (AAPL), Meta Platforms (META), Google-parent Alphabet (GOOGL), Amazon.com (AMZN) and Microsoft (MSFT).
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S&P 500 Giants Report Earnings. Will Megacap Results Sustain The Tech Rally?
The Nasdaq composite slumped 1.6% in lower volume Wednesday. But Meta Platforms lagged, falling more than 3% in heavy turnover. Results from Meta are due Wednesday after the close, along with numbers from Microsoft (MSFT) and DoorDash (DASH). Meta and DoorDash are Leaderboard stocks.
Meta gapped up when it reported second-quarter results in late July. Quarterly profit jumped 60% to $5.16 a share. The results were better than expected. Revenue that increased 22% to $39.1 billion. For the third quarter, Meta predicted revenue of $38.5 billion to $41 billion. The midpoint of the outlook — $39.75 billion — was above analyst estimates of $39.1 billion at the time.
Capital expenditures have been on the rise, partly due to increased artificial intelligence infrastructure spending.
“The ways (AI) is improving recommendations and helping people find better content, as well as making ad experiences more effective, I think there’s a lot of upside there,” Zuckerberg said on the call. “Those are already products that are at scale. The AI work that we’re doing will improve that.”
In a research note, Barclays noted that hyperscalers like Meta have spent a lot on AI, and the investment should usher in a slew of new products that aren’t baked into revenue forecasts yet. Separately, Bank of America called Meta the top consumer internet AI play.
Apple Stock: Earnings On Deck
Results from Apple are due Thursday after the close, as are Amazon’s. Apple stock is sitting near the top of a 13-week consolidation and holding just above its 10-week moving average.
Apple’s last earnings report in early August showed an 11% increase in quarterly profit, with revenue up 5% to $85.8 billion. But the stock pared a 3.3% intraday gain to less than 1% by the close. A day later, on Aug. 5, shares crashed nearly 5% on news that Warren Buffett slashed his Apple stake by nearly 50%.
IPhone, iPad and services revenue all topped expectations. IPhone sales fell 1% on a year-over-year basis to $39.3 billion, but the number topped estimates of $38.8 billion. IPhone sales made up 46% of the company’s total revenue in the quarter.
But Apple’s iPhone 16 has been slow to catch on with consumers. In late September, Ming-Chi Kuo, a highly regarded Apple stock analyst from TF International Securities, estimated that Apple sold 37 million units in the first weekend of iPhone 16 sales. That’s down more than 12% from iPhone 15 sales in the year-ago period. In a note earlier this week, Kuo noted that iPhone 16 orders were cut by 10 million units heading into the end of the year, with most cuts impacting the non-Pro models.
According to FactSet, earnings for the current quarter are expected to increase 9% to $1.59 a share, with revenue up 5% to $94.4 billion.
Watching Amazon, Others
Amazon, meanwhile, has been lagging the market after the stock hit a high of 201.20 on July 8. Amazon’s relative strength line has been trending lower since then, and sluggish price performance has pushed the stock’s Relative Strength Rating to 74.
Amazon gapped down sharply on Aug 2 after the company reported weaker-than-expected revenue for the second quarter. Revenue rose 10% to $148 billion, but that was below the $148.56 billion estimate from analysts. The company predicted revenue of $154 billion to $158.5 billion, but the midpoint of the outlook was below estimates of $158.24 billion at the time.
Amazon Web Services, the company’s cloud unit known as AWS, produced revenue of $26.3 billion, up 19%, and just above expectations. Operating income at AWS swelled to $9.3 billion, well above analyst views at the time of $8.5 billion.
For the third quarter, adjusted profit is seen rising 21% to $11.4 a share. Look for revenue to be up 10% to $157.2 billion.
Several Leaderboard stocks are set to report earnings in the coming week, including insurance brokerage Brown & Brown (BRO), which is still trying to clear a flat base with a 106.02 buy point.
Other top-performing Leaderboard stocks like DaVita (DVA), DoorDash and SharkNinja (SN) are also on the earnings calendar, along with several other top price performers like PayPal (PYPL), Royal Caribbean (RCL) and GoDaddy (GDDY).
Options Trading Strategy
A basic options trading strategy around earnings — using call options — allows you to buy a stock at a predetermined price without taking a lot of risk. Here’s how the option trading strategy works, and what a call-option trade recently looked like for Apple.
Time The Market With IBD’s ETF Market Strategy
First, identify top-rated stocks with a bullish chart. Some might be setting up in sound early-stage bases. Further, others already might have broken out and are getting support at their 10-week lines for the first time. And a few might be trading tightly near highs and refusing to give up much ground. Avoid extended stocks that are too far past proper entry points.
A call option is a bullish bet on a stock. Put options are bearish bets. One call option contract gives the holder the right to buy 100 shares of a stock at a specified price, known as the strike price.
Once you’ve identified a bullish setup in the earnings calendar, check strike prices with your online trading platform, or at Cboe.com. Also, make sure the option is liquid with a relatively tight spread between the bid and ask.
Look for a strike price just above the underlying stock price — that’s out of the money — and check the premium. Ideally, the premium should not exceed 4% of the underlying stock price at the time. In some cases, an in-the-money strike price is OK as long as the premium isn’t too expensive.
Choose an expiration date that fits your risk objective. But keep in mind that time is money in the options market. Near-term expiration dates will have cheaper premiums than those further out. Buying time in the options market comes at a higher cost.
Earnings Calendar Option Trade On Apple Stock
When Apple traded at around 230.50, a slightly out-of-the-money weekly call option with a 232.50 strike price and a Nov. 8 expiration came with a premium of around $4.95 per contract. That was 2.1% of the underlying stock price at the time and within the 4% threshold of IBD’s strategy.
One contract gave the holder the right to buy 100 shares of Apple at 232.50 per share. The most that could be lost was $495 — the amount paid for the 100-share contract. To break even, Apple stock would need to rise to 237.45, factoring in the premium paid.
The expected move in the options market for Apple, based on the at-the-money strike price of 230, was about nine points up or down. This was determined by adding the at-the-money call premium to the put premium for the Nov. 1 contract, the expiration nearest the earnings report.
Follow Ken Shreve on X/Twitter @IBD_KShreve for more stock market analysis and insight.
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