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For Wall Street, first quarter is best forgotten. The broader S&P 500 performed its worst under Trump Presidency, posting its first ever quarterly drop since 2015.
It’s actually even worse when you consider the stellar January show. The S&P 500 jumped nearly 6% in January, mostly led by market darlings ‘FAAMNG’ stocks — Facebook, Inc. , Amazon.com, Inc. (AMZN - Free Report) , Apple Inc. (AAPL - Free Report) , Microsoft Corporation (MSFT - Free Report) , Netflix, Inc. (NFLX - Free Report) and Google, whose parent company is Alphabet Inc. (GOOGL - Free Report) .
Amid such volatility, how did the widely-favored FAAMNG stocks do in the first quarter?
One of them was the cream of the crop, four have excellent upside potential and one somehow disappointed. Let’s take a closer look.
Facebook Earnings Look Past Data Privacy Scandal
Facebook has been under tremendous pressure following the uproar over its user data fiasco. Everyone has raised questions over how Cambridge Analytica, which worked on Trump’s election campaign, had gained access to personal data of roughly 87 million Facebook users without their knowledge. But, the company dismissed all odds with blowout quarterly results.
Facebook posted first-quarter profits of $4.99 billion that topped analysts’ estimate of $4.01 billion, while the social media giant added 70 million users in the same period despite numerous public calls against the social media app. Facebook currently boasts 1.45 billion daily users and nearly 2.2 billion monthly members. Chief Executive Mark Zuckerberg said in the conference call that “despite facing important challenges, our community and business are off to a strong start in 2018.”
Market pundits, hence, have seen 15 upward earnings estimate revisions, compared with one lower, at least when looking at the current-year time frame. And the Zacks Consensus Estimate for current-year earnings increased 5.6% in the last 60 days.
Amazon Gains on Budding Web Services
Amazon’s first-quarter profits more than doubled from year-ago levels and sales continued to gain on an increase in Prime subscription prices. The Prime membership service reached 100 million subscribers after adding the highest number of members in 2017. In fact, the total count of Amazon Web Services active users, including the Prime numbers, was up 250% last year.
Amazon is positioned to capture the next wave of online retail. Amazon acquired Whole Foods Market last year and is aiming to expand its fresh food offerings.
Thus, investors have seen 12 upward earnings estimate revisions, compared with one lower, at least when looking at the current-year time frame. And the consensus estimate for Amazon has trended 27.3% upward over the past 60 days.
iPhone Sales Fall Short
Apple registered net income of $13.8 billion for fiscal second quarter, up from $11 billion a year earlier. While the upside was driven by capital-returns program, iPhone sales were a disappointment. Apple sold 52.2 million iPhones in the first three months of this year, falling short of analysts’ expectations of about 53 million iPhones.
JPMorgan Chase & Co. (JPM - Free Report) has expressed concerns about the slack in iPhone orders and expects the trend to persist through the end of June. Needless to say, iPhone sales peaked earlier than usual and there isn’t any significant change that could bolster consumer demand. Taiwan Semiconductor’s weak guidance, a chipmaker that closely works with Apple, indicates a slash in iPhone targets this year.
JP Morgan added that perhaps the most troubling part is that it won’t matter if Apple beats forecasts. This is because traders continue to exert broad-based selling pressure on tech shares irrespective of individual quarterly performance.
Analysts thus have seen none upward earnings estimate revisions, compared with four lower, at least when looking at the current-year time frame. The Zacks Consensus Estimate for current-year earnings dropped 1.2% in the last 60 days.
Microsoft Heads for $1-Trillion Market Cap
Microsoft’s shares hover around the $95 mark following upbeat fiscal third-quarter earnings. The company needs to meet the $130 mark to reach the $1-trillion market cap milestone.
The Redmond-based company has posted earnings of 95 cents per share and revenues of $26.82 billion, both of which have topped the consensus estimate. In fact, each of the company’s major business segments, including Productivity and Business Processes, Intelligent Cloud, and More Personal Computing, came out with results that exceeded analysts’ expectations.
Hence, traders have seen 12 upward earnings estimate revisions, compared with none lower, at least when looking at the current-year time frame. And the consensus estimate for Microsoft has trended 3.8% up over the past 60 days.
Streaming Service Boosts Netflix’s Revenues
Netflix posted $290.1 million in net income in the first quarter, higher than the profits generated by the streaming giant in the entire year of 2016. And if the company is able to meet its forecasted $358-million profit in the second quarter, it will be able to earn more than what it generated in 2017. An expanding customer base along with higher prices for the streaming service gave a boost to Netflix’s revenues.
The company said that its streaming revenues have improved 43% year over year in the first quarter — the best in history. The company’s revenues totaled $3.7 billion, topping the Zacks Consensus Estimate of $3.69 billion.
Stockholders have thus seen 13 upward earnings estimate revisions, compared with three lower, at least when looking at the current-year time frame. And the Zacks Consensus Estimate for its current-year earnings advanced 4.3% in the last 60 days.
Alphabet Beats on Q1 Earnings
Google’s corporate parent Alphabet raked in around $31.15 billion in first-quarter revenues, compared with $24.75 billion in the year-ago quarter. Net income in the quarter came in at $9.4 billion, compared with $5.43 billion last year. This translates to earnings per share of $13.33, compared with $7.71 in the first quarter of last year.
Earnings, however, jumped on a change in accounting policy that compelled Google to recognize the value of its stake in Uber. As a result, the Zacks Consensus Estimate for current-year earnings declined 2.4% in the last 60 days. On the bright side, investors have seen eight upward earnings estimate revisions, compared with five lower, at least when looking at the current-year time frame.
Wind Up
The tech behemoths in the first quarter put up a spectacular show amid rising interest rate concerns on higher inflation expectations and geopolitical turmoil. Facebook made more ad money from each customer despite recent scandals; Microsoft’s quarterly sales got a push from its cloud computing and related cloud software, Netflix’s subscriber growth breezed past estimates and Google somehow managed to stay afloat — thanks to a change in accounting policy. All of them, thus, have a Zacks Rank #3 (Hold).
But, it’s Amazon that flaunts a Zacks Rank #1 (Strong Buy), as the e-commerce giant smashed earnings by increasing the value of its Prime membership. Meanwhile, Apple’s discouraging iPhone sales cast a doubt over its prospects, justifying its Zacks Rank #4 (Sell).
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
FAAMNG Stocks Pack a Punch in Q1 Earnings
For Wall Street, first quarter is best forgotten. The broader S&P 500 performed its worst under Trump Presidency, posting its first ever quarterly drop since 2015.
It’s actually even worse when you consider the stellar January show. The S&P 500 jumped nearly 6% in January, mostly led by market darlings ‘FAAMNG’ stocks — Facebook, Inc. , Amazon.com, Inc. (AMZN - Free Report) , Apple Inc. (AAPL - Free Report) , Microsoft Corporation (MSFT - Free Report) , Netflix, Inc. (NFLX - Free Report) and Google, whose parent company is Alphabet Inc. (GOOGL - Free Report) .
Amid such volatility, how did the widely-favored FAAMNG stocks do in the first quarter?
One of them was the cream of the crop, four have excellent upside potential and one somehow disappointed. Let’s take a closer look.
Facebook Earnings Look Past Data Privacy Scandal
Facebook has been under tremendous pressure following the uproar over its user data fiasco. Everyone has raised questions over how Cambridge Analytica, which worked on Trump’s election campaign, had gained access to personal data of roughly 87 million Facebook users without their knowledge. But, the company dismissed all odds with blowout quarterly results.
Facebook posted first-quarter profits of $4.99 billion that topped analysts’ estimate of $4.01 billion, while the social media giant added 70 million users in the same period despite numerous public calls against the social media app. Facebook currently boasts 1.45 billion daily users and nearly 2.2 billion monthly members. Chief Executive Mark Zuckerberg said in the conference call that “despite facing important challenges, our community and business are off to a strong start in 2018.”
Market pundits, hence, have seen 15 upward earnings estimate revisions, compared with one lower, at least when looking at the current-year time frame. And the Zacks Consensus Estimate for current-year earnings increased 5.6% in the last 60 days.
Amazon Gains on Budding Web Services
Amazon’s first-quarter profits more than doubled from year-ago levels and sales continued to gain on an increase in Prime subscription prices. The Prime membership service reached 100 million subscribers after adding the highest number of members in 2017. In fact, the total count of Amazon Web Services active users, including the Prime numbers, was up 250% last year.
Amazon is positioned to capture the next wave of online retail. Amazon acquired Whole Foods Market last year and is aiming to expand its fresh food offerings.
Thus, investors have seen 12 upward earnings estimate revisions, compared with one lower, at least when looking at the current-year time frame. And the consensus estimate for Amazon has trended 27.3% upward over the past 60 days.
iPhone Sales Fall Short
Apple registered net income of $13.8 billion for fiscal second quarter, up from $11 billion a year earlier. While the upside was driven by capital-returns program, iPhone sales were a disappointment. Apple sold 52.2 million iPhones in the first three months of this year, falling short of analysts’ expectations of about 53 million iPhones.
JPMorgan Chase & Co. (JPM - Free Report) has expressed concerns about the slack in iPhone orders and expects the trend to persist through the end of June. Needless to say, iPhone sales peaked earlier than usual and there isn’t any significant change that could bolster consumer demand. Taiwan Semiconductor’s weak guidance, a chipmaker that closely works with Apple, indicates a slash in iPhone targets this year.
JP Morgan added that perhaps the most troubling part is that it won’t matter if Apple beats forecasts. This is because traders continue to exert broad-based selling pressure on tech shares irrespective of individual quarterly performance.
Analysts thus have seen none upward earnings estimate revisions, compared with four lower, at least when looking at the current-year time frame. The Zacks Consensus Estimate for current-year earnings dropped 1.2% in the last 60 days.
Microsoft Heads for $1-Trillion Market Cap
Microsoft’s shares hover around the $95 mark following upbeat fiscal third-quarter earnings. The company needs to meet the $130 mark to reach the $1-trillion market cap milestone.
The Redmond-based company has posted earnings of 95 cents per share and revenues of $26.82 billion, both of which have topped the consensus estimate. In fact, each of the company’s major business segments, including Productivity and Business Processes, Intelligent Cloud, and More Personal Computing, came out with results that exceeded analysts’ expectations.
Hence, traders have seen 12 upward earnings estimate revisions, compared with none lower, at least when looking at the current-year time frame. And the consensus estimate for Microsoft has trended 3.8% up over the past 60 days.
Streaming Service Boosts Netflix’s Revenues
Netflix posted $290.1 million in net income in the first quarter, higher than the profits generated by the streaming giant in the entire year of 2016. And if the company is able to meet its forecasted $358-million profit in the second quarter, it will be able to earn more than what it generated in 2017. An expanding customer base along with higher prices for the streaming service gave a boost to Netflix’s revenues.
The company said that its streaming revenues have improved 43% year over year in the first quarter — the best in history. The company’s revenues totaled $3.7 billion, topping the Zacks Consensus Estimate of $3.69 billion.
Stockholders have thus seen 13 upward earnings estimate revisions, compared with three lower, at least when looking at the current-year time frame. And the Zacks Consensus Estimate for its current-year earnings advanced 4.3% in the last 60 days.
Alphabet Beats on Q1 Earnings
Google’s corporate parent Alphabet raked in around $31.15 billion in first-quarter revenues, compared with $24.75 billion in the year-ago quarter. Net income in the quarter came in at $9.4 billion, compared with $5.43 billion last year. This translates to earnings per share of $13.33, compared with $7.71 in the first quarter of last year.
Earnings, however, jumped on a change in accounting policy that compelled Google to recognize the value of its stake in Uber. As a result, the Zacks Consensus Estimate for current-year earnings declined 2.4% in the last 60 days. On the bright side, investors have seen eight upward earnings estimate revisions, compared with five lower, at least when looking at the current-year time frame.
Wind Up
The tech behemoths in the first quarter put up a spectacular show amid rising interest rate concerns on higher inflation expectations and geopolitical turmoil. Facebook made more ad money from each customer despite recent scandals; Microsoft’s quarterly sales got a push from its cloud computing and related cloud software, Netflix’s subscriber growth breezed past estimates and Google somehow managed to stay afloat — thanks to a change in accounting policy. All of them, thus, have a Zacks Rank #3 (Hold).
But, it’s Amazon that flaunts a Zacks Rank #1 (Strong Buy), as the e-commerce giant smashed earnings by increasing the value of its Prime membership. Meanwhile, Apple’s discouraging iPhone sales cast a doubt over its prospects, justifying its Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>