Much excitement comes to Wall Street this week, with four of the world’s biggest tech companies – Facebook, Apple, Amazon, and Alphabet reported their earnings, added to the Netflix’s earnings that come a week earlier. This week’s FAANG stocks will articulate plenty of what’s going on at the Nasdaq, and whether that index may shoot higher in the near future.
A stellar start to earnings season has helped push the S&P 500 and the Dow to all-time highs last week, as investor concerns over the ability of companies to navigate supply-chain bottlenecks, labour shortages and rising price pressures have been allayed for now. Meanwhile for the tech-heavy Nasdaq, the index boasting record closing level on Thursday, together with the S&P 500, which once again pushed to an all-time high thanks partly to gains in Apple, Amazon, and Tesla. Tech and growth stocks also got a boost from a pullback in the U.S. 10-year Treasury yield, which had hit its highest level on inflation and rate-hike concerns.
FAANG quarterly earnings date:
- October 19th: Netflix
- October 25th: Facebook
- October 26th: Alphabet
- October 28th: Amazon
- October 28th: Apple
NETFLIX INC. (NASDAQ: NFLX)
With over 200 million paid memberships across 190 countries, the entertainment juggernaut allows its users to watch content whenever and wherever they want, providing a wide variety of feature films, TV series, and documentaries across many genres and languages. The stock currently trades at $674.05.
Released earlier than its counterparts, Netflix reported its Q3 FY 2021 earnings last week on Tuesday, with results that beat analyst expectations. The company earnings per share (EPS) exceeded consensus estimates, rising 83.3% compared to the year-ago quarter, while its revenue matched analyst forecasts, up 16.3% year over year. Global paid streaming subscribers, which Netflix refers to as "global streaming paid memberships," came in at 213.6 million for the quarter (+9.4% YoY), above analysts' expectations.
The company's shares rose nearly 5% in after-market trading following the report release. Over the past year, Netflix's shares have provided a total return of 29.9%, above the S&P 500's total return of 16.7%.
Netflix forward guidance – For Q4 FY 2021, the company expects EPS of $0.80, which would be down 32.8% YoY. Revenue is expected to rise 16.1% YoY to $7.7 billion, and its global paid streaming subscribers are forecast to grow 9.0% to approximately 222.1 million. Company Q4 FY 2021 is estimated to be released on Jan. 17, 2022.
FACEBOOK INC. (NASDAQ: FB)
Shares of the social media giant have been under heavy selling pressure over the past several weeks, driven by unrelenting bad press, including from a whistle-blower, as well as on ramping regulatory pressure.
Facebook investors shrugged off the headline risk and regulatory scrutiny, rose in extended trading Monday after the company reported better-than-expected Q3 earnings.
In its financial reporting, Facebook reported net income of $9.19 billion, or $3.22 vs. $3.19 per share expected by analysts. The company's total revenue, which primarily consists of ad sales, rose to $29.01 billion from $21.47 billion a year earlier, however, was a tick below the consensus at $29.49 billion. The company ended the quarter with 2.91 billion monthly active users (MAUs), compared to analysts’ forecast of 2.93 billion, while its daily active users (DAUs) at 1.93 billion were in line with expectations. Facebook’s also announced that it had authorized an additional $50 billion in stock repurchase.
During the company’s earnings call, CEO Mark Zuckerberg also said Facebook in the coming years will be seen as metaverse company rather than a social media company (revealed as Meta), as the company makes a number of investments to expand the technology.
Going forward, Facebook expect the Q4 2021 total revenue to be in a range of $31.5 billion to $34 billion, slightly below expectations, with the outlook reflects the significant uncertainty faced following headwinds from Apple's iOS 14 ads changes, and macroeconomic and COVID-related factors.
Facebook stock currently trades at $316.92.
ALPHABET INC. (NASDAQ: GOOGL)
Shares of Google parent Alphabet, up 20% in six months and 62% year to date, compared with 24% rise in the S&P 500 index, and have strongly outperformed their FAANG peers over the past year. As of Friday, GOOGL stock trading at $2,916.98.
Alphabet stock wobbled in extended trading Tuesday, was down 2.2% to $2,725, even after the company shattered expectations with Q3 results that showed the biggest quarterly revenue gain in 14 years.
Alphabet reported net income of $18.94 billion, or $27.99 a share for the third quarter, and its revenue jumped 41% YoY to $65.12 billion. Wall Street’s consensus estimate called for earnings of $23.50 a share and revenue of $63.34 billion, according to FactSet.
Google online advertising remains robust, with CFO Ruth Porat said Apple’s iOS 14 privacy changes had a “modest impact on YouTube revenues.” Google’s advertising revenue rose 43% to $53.13 billion, up from $37.1 billion the same time last year and slightly higher than the prior quarter. YouTube ads rose to $7.21 billion, up from $5.04 billion a year ago. The search giant appears to be cashing in on a rebound in search traffic, especially with keywords related to retail, financial services and travel trends that are picking up globally.
Alphabet's next earnings report (for Q4 FY 2021) is estimated to be released on Feb. 2, 2022.
AMAZON.COM INC. (NASDAQ: AMZN)
Amazon shares dropped more than 4% in extended trading on Thursday after the company reported weaker-than-expected results for the Q3 and delivered disappointing guidance for the critical holiday period. Driven by the unexpected pandemic-induced surge in demand for e-commerce and cloud-computing solutions, Amazon has been one of the market’s strongest winners over the last 18 months.
In its announcement of the financial results for the Q3 ended September 30, 2021, Amazon is reckoned with decelerating sales growth as consumers go back to physical stores and the company faces supply chain challenges. Net income decreased to $3.2 billion in the Q3 compared with $6.3 billion in the Q3 2020, its largest YoY decline since 2017. Earnings stands at $6.12 vs $8.92 per share expected. The company’s revenues, $110.81 billion for the quarter, were also below analysts’ expectations.
Amazon Web Services however, topped estimates, with revenue jumping 39% to $16.11 billion, while analysts expected sales of $15.48 billion. AWS generated $4.88 billion in operating income in the period, while operating profit at the parent company was just $880 million.
For the Q4, Amazon forecast net sales between $130 billion and $140 billion, representing growth between 4% and 12%. Operating income is expected to be between $0 and $3.0 billion, compared with $6.9 billion in Q4 2020. The forward guidance reflects by many factors, such as uncertainty regarding the impacts of the COVID-19 pandemic, labour market and global supply chain constraints, online commerce, and cloud services.
APPLE INC. (NASDAQ: AAPL)
The multinational tech company specializes in consumer electronics, software, and services. With its line of premium products and ecosystem, the company has a very high level of brand loyalty among its millions of users worldwide. The stock is currently worth $152.57.
Apple on Thursday announced financial results for Q4 FY 2021 ended September 25, 2021 (Apple's fiscal year ends in September, meaning that this earnings report corresponds to its fiscal Q4). The company posted a mixed result, seen as a lull before the high-sales holiday end of year. Apple posted a September quarter revenue record of $83.4 billion, up 29% YoY, and quarterly EPS of $1.24, somewhat below expectations compared with analyst estimates of $84.8 billion and $1.24 per share, according to data from Refinitiv.
Apple missed expectations in two key categories. Firstly, the Q4 iPhone sales, which came at sales of $38.9 billion, short of estimates of $41.5 billion, according to Refinitiv data. And secondly, the company's accessories segment, which contains fast-growing categories like its AirPods wireless headphones, came in at $8.8 billion, half a billion dollars lower than analyst expectations of $9.3 billion.
Other segments fared better. Sales for iPads and Macs were $8.3 billion and $9.2 billion, compared with analyst estimates of $7.2 billion and $9.2 billion.
The company's services segment - which contains its App Store business, music and video subscription services, advertising, extended warranties, and licensing – noted the strongest growth, with sales of $18.3 billion in revenue, up 26%, compared with analyst expectations of $17.6 billion. Another bright spot in the company's results were its sales in China, which were up 83% to $14.6 billion.
Shares of the California-based company, which had risen nearly 15% this year, slumped 5% in extended trading on Thursday. Apple hasn’t provided official guidance since the start of the pandemic, but Tim Cook, the CEO said Apple expects “solid year-over-year revenue growth” in the holiday-sales quarter despite the cost and supply chain challenges.