How "Magnificent" Will AMZN, APPLE Earnings Be

The remaining "Magnificent Seven" companies are scheduled to report with a focus on whether demand from China has kept pace with the surprise GDP growth.

Amazon and Advertising

Amazon, the largest online retailer by market share, is expected to report a substantial profit increase when announcing first-quarter earnings after the market close. Forecasts suggest profits per share will rise 165% to £0.82, mainly due to internal factors, as revenue is only forecast to grow 12% year-on-year (YOY) to £142.5 billion. After launching video ads on its Prime service earlier this year, analysts will likely show interest in the company's advertising business.

As competition in the online retail space continues from digital offerings by Walmart and Target, investor focus is projected to be on the AWS division and cloud revenue. Cloud sales are anticipated to accelerate to a 15% annual increase, marking two consecutive quarters of double-digit growth, fuelled by expanding demand for AI technology.

Apple Focus on China, Guidance

Apple's stock has seen weaker performance in recent months due to sluggish sales of the iPhone, its flagship product. Demand has been soft in China, its third-largest market. However, China exceeded all expectations with its first-quarter growth figures, indicating consumer sentiment may be improving in the region. With sentiment rising, Apple could see increased sales. Guidance from Apple for future projections will also be important. Particular focus will be on the resilience of consumer demand. So far, macroeconomic data has shown mixed results. Apple already reported a 19% fall in iPhone deliveries to China in the first quarter, the worst performance since the pandemic began.

Analyst consensus estimates for Apple's May 2 quarterly earnings see a decline slightly to $1.51 per share. This represents a small 0.7% decrease from the previous quarter, including the key holiday period. Conversely, revenue is projected to grow 5.1% to nearly $90 billion. As Apple lost market share to Android brands like Samsung, investors will want to understand Apple's plans to recapture momentum. Therefore, management commentary on the sales outlook may be a key factor for the company.

Apple Confirmed Double Bottom

Apple formed a double bottom at $165, still requiring validation through exceeding $179. Whilst three successive daily increases have followed the weak attempt to break lower, the risk of falling back to $160 and $156 remains unless rising above the range-top. This may be followed by an extension to $190 and $196 before revisiting the high of 200.

Source: SpreadEx / Apple

Key Takeaways

Amazon and Apple are two of the remaining "Magnificent Seven" companies scheduled to report this week. Amazon expects substantial profit increases when announcing earnings. Profits are forecast to rise 165% whilst revenue grows 12%. Analysts will likely show interest in the advertising business. On the other hand, Apple saw soft demand in China, but exceeding GDP growth expectations suggests improving sentiment in the region. Guidance and consumer commentary will be important, given a 19% iPhone fall. Estimates see Apple's earnings decline slightly but 5.1% revenue growth. Management commentary on sales outlook may be key.