U.S. tech heavyweights had a spectacular journey in the June quarter, with shares moving up despite the economic upheaval owing to the coronavirus pandemic. This is mostly because such companies are gaining immensely from secular trends like cloud computing and telecommunications infrastructure amid the health crisis.

 

And with a large number of people opting to stay at home, trends such as streaming media, online video chats and online connections with friends and co-workers picked up. These trends, undoubtedly, boosted the need for newer technologies.

 

But the recent earnings results of some of the tech behemoths indicate that not everything was as rosy in the said quarter. For instance, Intel Corporation (INTC Quick QuoteINTC - Free Report) added that its next generation chips will be delayed. Snap Inc. (SNAP Quick QuoteSNAP - Free Report) , in the meantime, reported that the spike in its app users at the start of the pandemic has starting tapering off.

 

This uncertainty about quarterly results perfectly sets the scene for a momentous tech earnings week, with reports due from Facebook, Inc. , Amazon.com, Inc. (AMZN Quick QuoteAMZN - Free Report) , Alphabet Inc. (GOOGL Quick QuoteGOOGL - Free Report) and Apple Inc. (AAPL Quick QuoteAAPL - Free Report) . The massive run-up in shares of these companies in recent times and questions about their overvaluation ensure investor interest in their June-quarter performance for future price movements.

 

Notably, these stocks account for almost one-fifth of the value of the S&P 500 and have returned nearly 35% so far this year, while other stocks in the index have collectively lost 5%, per Goldman Sachs. Let us, thus, take a look at what’s in store for them –

 

Facebook will be kicking off big tech earnings on Jul 29, after market close. Facebook’s ad revenues for the June quarter are expected to have taken a beating from coronavirus-related headwinds. After all, the pandemic did eat into profit margins of many companies, including travel and automobile players, which compelled them to announce freeze on ad spending on social media platforms in the said quarter. Needless to say, Facebook faced stiff competition in the quarter from Alphabet and Twitter for ad dollars.

 

But Facebook is widely expected to have seen a surge in the usage of its services like Messenger, Instagram and WhatsApp in the second quarter. The pandemic helped the company increase user engagement with its several social media platforms as people had to stay at home amid stringent lockdown measures imposed to curtail the spread of the deadly virus. Thus, the company’s expected revenues for the June quarter is $17.31 billion, indicating a year-over-year increase of 2.5%. Similarly, the company expects earnings per share of $1.44, indicating a 58.2% increase compared to the same period last year. What’s more, the Zacks Rank #3 (Hold) company has an Earnings ESP of +5.28%. Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

By the way, Amazon’s focus on cloud might have saved it from a coronavirus crash in the quarter ending June 2020. This is because as majority of people remotely worked during the period, most companies had to move a bulk portion of their workloads to the cloud. To top it, consumers have started to shop online due to the widespread lockdowns. Thus, any consumer-oriented business needs to have a digital presence built on the cloud in order to survive the virus onslaught on businesses.

 

Amazon is also in the spotlight as it is currently one of the biggest players in the cloud infrastructure market. The Seattle-based company has a solid presence throughout the Internet via Amazon Web Services (“AWS”). And some of big names, including General Motors, Baidu, Spotify, McDonald’s, Twitter and Johnson & Johnson, use AWS.

 

Meanwhile, unemployment benefits and financial relief measures implemented by the Trump administration resulted in an increase in disposable income in the June quarter, which in all likelihood drove Amazon’s online sales. However, supply side disruptions as a result of the pandemic remain a concern. Nonetheless, the Zacks Rank #3 company currently has an Earnings ESP of +40.45%. Amazon is slated to report results on Jul 30, after market close.

 

Alphabet will also be reporting June-quarter results on Jul 30, after market close. The company’s strengthening cloud unit and expanding data centers certainly raise hopes of a stellar quarterly report. Further, major updates in its search segment that enhanced the search results are a positive.

 

Meanwhile, YouTube’s subscription revenues are likely to have risen in the said quarter. Needless to say, trends like streaming media picked up in the June quarter as majority of people remained at home. The Zacks Rank #3 company has an Earnings ESP of +0.32%.

 

Finally, iPhone maker Apple is scheduled to report third-quarter fiscal 2020 earnings on Jul 30, after market close. Apple’s sales are expected at $51.13 billion, indicating a year-over-year decline of nearly 5%. Earnings per share are also likely to come in at $1.99, suggesting an 8.7% decline year over year. But traditionally, Apple’s third-quarter fiscal results are always the weakest.

 

Nonetheless, Apple’s efforts to reopen stores must have had a positive impact on revenues. With more people working from home, there has been a rise in MacBook Pro sales, with indications that the company’s new iPhone SE sales have improved in the fiscal third quarter. Meanwhile, Apple Watch, CFO Luca Maestri, said that “Apple Watch continues to expand its reach as over 75% of the customers purchasing Apple Watch around the world during the quarter were new to the product.” The

Zacks Rank #3 company currently has an Earnings ESP of +4.41%.

 

 

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020? 

 

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