This week: Bloodbath or Greenfield?

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What to Expect in the Week Ahead: Earnings from MSFT, Meta, AAPL, and AMZN; FOMC Meeting and US Nonfarm Payrolls

After an underwhelming start to earnings from the Magnificent 7, Microsoft, Meta, Apple, and Amazon will release earnings this week. Microsoft (MSFT.US) is set to report fiscal Q4 earnings after the close on July 30th. Expectations are for an EPS of $2.93 on revenue of $64.38 billion. This marks a 9.3% and 14.6% increase, respectively, compared to last year's period.

Investors will closely observe Microsoft's cloud platform, Azure, for continued growth in sales and earnings. Azure has been boosted by the AI trend, with customers utilizing the platform for AI workloads. Cloud revenue is projected to reach $37.2 billion. Additionally, investors are interested in the company's insights on AI, as Microsoft has positioned itself as a frontrunner in the field.

Meta Platforms(META.US) will report its second-quarter earnings after the market closes on Wednesday, July 31. Wall Street expects an EPS of $4.70 and revenue of $38.29 billion.

The market will be interested to see if expense projections and the impact of AI integration will increase further. Meta has highlighted that the integration of AI in its products contributed to strong Q1 results. Investors will want an update on how this could continue to improve user engagement.

Advertising performance will also be in focus elsewhere. Advertising revenues increased by a solid 27% in Q1.

Apple (AAPL.US) is scheduled to release its Q3 earnings on August 1, after the market closes. Analysts expect the company to report earnings per share (EPS) of $1.34 on revenue of $84.3 billion. iPhone sales remain a key indicator of Apple's performance, accounting for the majority of its total revenue.

The company has faced challenges in iPhone sales due to slowing global cycles and increased competition in China. Market observers will be looking for signs that these challenges are beginning to ease.

In addition, Apple's gross margins, which have been on an upward trend in recent years, will be closely monitored. This is due to the company's efforts to bring more of its supply chain in-house and the growth of its IT services businesses. Analysts anticipate that the service business will continue to perform well, driven by higher App Store sales and increasing subscription services.

Moreover, investors are keen on any updates regarding Apple's new generative AI software, Apple Intelligence. It is anticipated that Apple Intelligence will stimulate a device upgrade cycle that could potentially boost iPhone and iPad sales.

Amazon(AMZN.US)$ is scheduled to release earnings after the market closes on August 1. Wall Street expects EPS of $1.01 and revenue of $148.54 billion, while Amazon guides for 144.00 billion to $149.00 billion.

Earnings before interest and taxes (EBIT) is expected to increase 17% in Q2 and 10% in Q3, boosted by improved profitability in North America and accelerated growth of Amazon Web Services. E-commerce and advertising had a strong showing in Q1, which investors will be keen to see continue this quarter.

$Pfizer(PFE.US)$ ， $Advanced Micro Devices(AMD.US)$ ， $Qualcomm(QCOM.US)$ ， $Arm Holdings(ARM.US)$ ， $Intel(INTC.US)$ ，and $Coinbase(COIN.US)$ are also expected to report their earnings this week.

Key economic reports this week include Wednesday's US Fed interest rate decision and Friday's US nonfarm payrolls for July.

During Jerome Powell's policy statement and press conference, people will be paying close attention to see if the FOMC is confident that inflation is moving toward the 2% target in a sustainable way. The fed funds rate will remain at 5.25% to 5.50% after the July policy meeting, making it the 8th meeting in a row that rates have stayed the same. Currently, the markets are indicating an 88% chance of a rate cut in September due to signs of decreasing inflation and an increase in the unemployment rate.

Economists expect the U.S. economy to have created 177,000 jobs in July, moderating from 206,000 in the prior month. The unemployment rate, which has ticked higher in each of the past three months, is expected to hold steady at 4.1%.

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Palantir's next earnings report is coming up soon. It's a good idea to stay informed and check out the latest updates.👇️ 

As Palantir prepares to release its Q2 earnings on August 5. What’s the latest on Palantir stock?

The shares of Palantir (NYSE:PLTR) have increased by 55% year-to-date, which is a significant outperformance compared to the main market indexes. While some may attribute the rise to AI hype, there are genuine positive factors propelling the big data specialist’s business. Palantir's Artificial Intelligence Platform (AIP) has been a major contributor, driving strong customer acquisition and revenue growth each quarter. In the first quarter, Palantir’s US commercial segment achieved significant results, adding 41 net new customers, marking a 69% increase compared to the same period last year and a 19% sequential growth. This growth represents an acceleration from the 55% year-over-year growth reported in the fourth quarter.

These points were all raised by 5-star investor Beth Kindig, who had highlighted Palantir’s potential in the commercial sector even before the company’s IPO in September 2020, when it was primarily dependent on government contracts.

However, as noted before, the main issue from an investing standpoint is Palantir's high valuation. When compared to other large-cap enterprise software stocks with exposure to AI, whose top-line growth and bottom-line margins resemble Palantir's, the shares are trading at high levels.

This valuation leaves very little room for error.

For instance, Palantir's stock trades at over 24 times forward sales, while ServiceNow's stock trades at less than 14 times forward sales. ServiceNow has reported revenue growth of over 24% in the last three quarters, whereas Palantir's growth has ranged between 17% and 21%. Furthermore, other 'best-of-breed' software stocks such as CrowdStrike, Snowflake, and Cloudflare all trade at lower multiples.

Investors may argue that Palantir should command an 'AI premium' due to its product suite, but they will still need to evaluate it as a mature company rather than as a hypergrowth SaaS, as it is no longer in that category,

That, says Kindig, leaves little room for error for Palantir shares as the market is looking for “nothing short of perfection through the end of fiscal 2024.”

As such, Kindig rates the stock a Hold (i.e., Neutral).

That’s it for this episode!

Is this a buying opportunity or a time to sell? Share your thoughts in the comment section below.

Remember: Investing is a journey, not a destination. It's about making informed decisions, managing risk, and staying committed to your long-term goals. So, take the time to research, experiment, and find the perfect recipe for your balanced portfolio.

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Cheers to wealth, wisdom, and a dash of madness!

The Investing Wise Academy Team

Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor before making any investment decisions.

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