Your Mag 7 Earnings Guide

Short sellers took a beating last week following Tesla’s post-earnings romp that shot the stock higher by more than 25%.

TSLA posted its best trading day in over a decade when management announced it topped Q3 profit estimates and improved automotive gross margins. Just two days later, the shorts banked losses of $4.2 billion closing out bets against the stock during its historic rally, according to data from S3 Partners.

Not bad for a company so many investors love to hate…

It’s no secret Tesla is a company that evokes strong emotions from just about everybody. Whether we’re talking about Elon Musk’s politics or online trolling, the latest Cybertruck recalls, or dwindling demand throughout the EV space, even casual investors held negative opinions on Tesla following its ugly first-half performance.

Tesla shares were driven into the ground despite a roaring bull market for mega-cap tech earlier this year. And even as the stock began to show signs of bottoming out over the summer, most investors continued to expect the worst.

I started getting bulled up on TSLA in late June as the beaten-down stock approached a potential breakout at $200. My reasoning was simple: The stock chart was quickly improving, posting a positive reaction to mediocre earnings back in April. Meanwhile, the bearish arguments were getting louder.

Well, that $200 breakout lit the fuse for a quick 30% rally in July. And after a hard reset, shares were once again perking up as the fourth quarter began. Following last week’s earnings beat, the stock is now green on the year and threatening to run to $300… and beyond.

Why does any of this matter?

Because TSLA’s earnings rally was a potential preview of what’s coming when more of the Mag 7 mega-caps report this week.

The Biggest Earnings Week of the Season

Earnings are unavoidable for anyone with a trading timeframe longer than a couple of months. But momentum and swing traders can mostly avoid earnings surprises if they so choose. That’s usually my style: selling (or partially selling) open swing trades ahead of earnings announcements, and making a point to avoid jumping into a new play directly in front of an earnings release.

But I do keep a close watch on earnings, specifically how the Street reacts to the numbers. If TSLA is any indication, we could be in for more than a few powerful post-earnings rallies this week as many of the biggest names report.

Here’s what you should expect…

Alphabet Inc. (GOOG)
Market cap: $2.06 trillion
Reports Tuesday (Oct 29) After the Close

Estimates:
Earnings – $1.84 per share
Revenue – $86.39B

Previous Call:
Earnings – Consensus: $2.95 per share
Actual: $2.94 per share

Revenue – Consensus: 64.38B
Actual: $68.71B

Google (I refuse to call this company Alphabet) missed its annual earnings estimates for the 2022 fiscal year. But revenue remained on track. The company is back in the habit of beating earnings regularly, crushing April’s estimates by 25%.

Turning to the chart, we have a lovely setup for a post-earnings rally should the numbers impress investors:

GOOG is up more than 90% since the Nov. 2022 bottom, yet it’s approximately 15% off its all-time highs logged on July 10.

The stock decisively cleared its 2021 peak in April, breaking into new all-time highs. Price has retested those former highs, found support, and now challenges the upper bounds of a multi-month consolidation.

I love springboard plays like this where price retests an area of resistance-turned support. GOOG has already started to bounce – and could quickly run back to those all-time highs near $200 following a positive earnings reaction.

Apple Inc. (AAPL)
Market cap: $3.56 trillion
Reports Wednesday (Oct 30) After the Close

Estimates:
Earnings – $1.59 per share
Revenue – $94.46B

Previous Call:
Earnings – Consensus: $1.34 per share
Actual: $1.40 per share

Revenue – Consensus: $393.09B
Actual: $383.29B

AAPL is a beast, and arguably the most magnificent of the seven mega-caps. The company has exceeded earning estimates since 2020 – no small feat! And it has crushed its past four earnings reports.

Oh, and did I mention the chart is a thing of beauty?

Check it out:

The stock is up more than 85% off its early 2023 lows. And despite a maximum drop of approximately 30% during its most recent drawdown, the stock continues to power higher off each and every one of those lows.

AAPL shares are coiled tightly just below all-time highs. Barring a major negative surprise or a seismic shift in the market, it’s difficult to imagine this stock failing to post new highs in the weeks ahead.

Microsoft (MSFT)
Market cap: $3.18 trillion
Reports Wednesday (Oct 30) After the Close

Estimates:
Earnings – $3.10 per share
Revenue – $64.57B

Previous Call:
Earnings – Consensus: $2.94 per share
Actual: $2.95 per share

Revenue – Consensus: $244.82B
Actual: $245.12B

Like many companies, Microsoft had a tough time during the 2022 bear market, missing top and bottom line estimates. But it’s back on track and exceeding quarterly projections. Everyone on Wall Street is expecting a strong performance.

If MSFT’s performance off its 2022 lows is any indication, we should see a continuation higher:

MSFT has more than doubled since Nov. 2022.

But the stock has essentially moved sideways for the past eight months. It’s now about 10% off its all-time high set back in July.

The big question: Can MSFT escape its choppy, sideways range and continue higher? We’ll see if Wednesday’s earnings can ignite a fresh move higher to begin the journey…

Meta (META)
Market cap: $1.46 trillion
Reports Thursday (Oct. 31) Halloween Night

Estimates:
Earnings – $5.21 per share
Revenue – $40.19 B

Previous Call:
Earnings – Consensus: $14.41 per share
Actual: $14.87 per share

Revenue – Consensus: $133.68B
Actual: $134.90B

Meta was one of the hardest-hit tech names of the 2022 bear market. The company had just changed its name from Facebook to Meta and was feeling the heat, falling short of earnings estimates as the stock sunk into the abyss.

But Meta has miraculously gone from worst to first since bottoming out in late 2022. Now, it’s back on track delivering beats since Q1 of last year.

Just look at that comeback rally:

Say what you like about Zuck and his metaverse plans – META is up 545% off its 2022 lows. Today it sits just about 5% off its all-time highs posted earlier this month.

The stock just completed a 5-month consolidation on its way to new all-time highs, making it the strongest chart of the Mag 7s heading into earnings. A solid beat could keep the party going to $600 and beyond…

Amazon (AMZN)
Market cap: $1.99 trillion
Reports Thursday (Oct. 31) Halloween Night

Estimates:
Earnings – $1.14 per share
Revenue – $157.26 B

Previous Call:
Earnings – Consensus: $2.70 per share
Actual: $2.90 per share

Revenue – Consensus: $570.87B
Actual: $574.78B

Here’s the thing about AMZN: those boxes will keep showing up on your doorstep, no matter what.

But the company hasn’t exactly set the world on fire lately. Revenue fell short in 2021 and earnings missed in 2022, yet it steadily beats estimates since the start of 2023.

Is there a bigger comeback in the works?

Let’s check the chart:

If you had to pick a dog to run with TSLA, it has to be AMZN. While we’ve witnessed a strong comeback from its 2022 lows, the stock has yet to post a significant rally above its 2021 peak.

If AMZN can impress investors this week, could we finally see a bigger breakout? It’s possible! This is a great chart from a risk/reward standpoint.