Market on edge: Critical tech earnings and political developments

Adding to the complexity of the market dynamics was a noticeable rotation from tech stocks to midcaps. Last week saw investors pulling back from high-flying tech giants and reallocating their capital to midcap stocks, which are often perceived as less risky during periods of uncertainty. This rotation raises the question of whether tech can regain its leadership and turn the tide, especially with several key tech earnings on the horizon.

As we look ahead, the upcoming earnings reports from major tech companies like Alphabet (GOOGL), Tesla (TSLA), Visa (V), IBM, and ServiceNow (NOW) will be critical in determining if the sector can reverse last week's trend. Strong earnings could restore confidence and drive a resurgence in tech stocks, while disappointing results might further entrench the rotation into midcaps and other sectors. The market is at a pivotal juncture, and these earnings will play a crucial role in shaping investor sentiment in the weeks to come.

Tesla's potential impact

Tesla (TSLA)

Tesla is set to release its quarterly earnings report on Tuesday, July 23, 2024, after the market closes. Here are some key expectations and forecasts:

• Earnings Per Share (EPS): Analysts predict an EPS of $0.47 for this quarter, down from $0.78 in the same quarter last year. 1
• Revenue: The expected revenue is around $22.2 billion, which would be a 5% year-over-year decline, marking Tesla’s first negative annual sales growth since 2020. 2
• Profitability: This quarter is anticipated to be Tesla’s least profitable since the second quarter of 2021. 3
• Growth Expectations: Despite the forecasted decline in revenue and profitability for this quarter, Tesla's earnings are projected to grow by 38.92% over the next year, increasing from $1.85 to $2.57 per share. 4

These forecasts suggest that while Tesla may encounter some short-term difficulties, its long-term growth outlook remains strong.

Alphabet's earnings

Alphabet Inc. (GOOGL)

Alphabet Inc., Google’s parent company, is set to release its quarterly earnings report on Tuesday, July 23, 2024, after the market closes. Here are some key expectations and forecasts:

• Earnings Per Share (EPS): Analysts expect Alphabet to post quarterly earnings of $1.85 per share, representing a 28.5% year-over-year increase. 1
• Revenue: The consensus revenue estimate is approximately $84.3 billion, reflecting a 13% rise from the same period last year. 2
• Net Income: Net income is projected to be $23 billion, up from the second quarter of 2023. 3
• Key Metrics: Investors will be looking for sustained growth in Google Cloud, with expected cloud revenue of $10.22 billion. Additionally, updates on Alphabet’s AI initiatives, such as Gemini Live and Project Astra, are highly anticipated. 4

These expectations indicate positive growth for Alphabet, particularly in cloud services and AI developments.

Visa's projections

Visa Inc. (V)

Visa is set to release its quarterly earnings report on Tuesday, July 23, 2024, after the market closes. Here are some key expectations and forecasts:

• Earnings Per Share (EPS): Analysts forecast Visa’s quarterly earnings to be $2.41 per share, representing an 11.6% increase compared to the same quarter last year. 1
• Revenue: The consensus revenue estimate stands at $8.91 billion, marking a 9.7% year-over-year rise. 2
• Net Income: Net income is projected to be $2.73 billion, up from the second quarter of 2023. 3
• Key Metrics: Investors will focus on the growth in payment volumes and cross-border transactions. Additionally, updates on Visa’s digital payment initiatives and fintech partnerships will be closely monitored. 4

These forecasts suggest robust growth for Visa, emphasizing its expanding payment processing capabilities and strategic advancements in digital payments and fintech.

IBM's mixed outlook

IBM (IBM)

IBM is set to release its quarterly earnings report on Wednesday, July 24, 2024, after the market closes. Here are some key expectations and forecasts:

• Earnings Per Share (EPS): Analysts anticipate IBM to report earnings of $2.16 per share, reflecting a slight year-over-year decline of 0.9%. 1
• Revenue: The consensus revenue estimate is approximately $15.58 billion, showing a modest 0.7% increase from the same period last year. 2
• Net Income: Net income is projected to be $3.51 billion, up from the second quarter of 2023. 3
• Key Metrics: Investors will be particularly interested in IBM’s performance in cloud services and AI initiatives. Additionally, updates on the growth of IBM’s consulting and technology services will be closely monitored. 4

These forecasts paint a mixed picture for IBM, highlighting a slight dip in EPS but a small revenue increase. Investors will be looking for signs of sustained growth in IBM’s strategic areas, particularly cloud and AI, as well as insights into how the company’s consulting and technology services are evolving. A strong performance in these areas could reinforce IBM’s position in the tech sector, while any shortcomings might raise concerns about its growth trajectory.

ServiceNow's robust growth

ServiceNow (NOW)

ServiceNow is set to release its quarterly earnings report on Wednesday, July 24, 2024, after the market closes. Here are some key expectations and forecasts:

• Earnings Per Share (EPS): Analysts forecast ServiceNow to report earnings of $2.54 per share, marking a substantial 29.6% increase compared to the same quarter last year. 1
• Revenue: The consensus revenue estimate is around $2.27 billion, reflecting a strong 24.1% year-over-year growth. 2
• Net Income: Net income is projected to be $3.51 billion, up from the second quarter of 2023. 3
• Key Metrics: Investors will be keenly observing the sustained growth in ServiceNow’s cloud services and AI initiatives. Updates on the company’s workflow automation and digital transformation solutions will also be closely monitored. 4

These expectations suggest robust growth for ServiceNow, with significant gains in revenue and earnings. The focus on expanding cloud services and leveraging new technologies positions ServiceNow well in the competitive landscape.

Conclusion

The intersection of political developments, market corrections, and sector rotations creates a complex backdrop for investors. As we await the upcoming tech earnings, the market remains on a knife-edge, with the potential for significant movements in either direction. The ability of tech stocks to turn the tide will be closely watched, and their performance will undoubtedly have far-reaching implications for the broader market. Strong earnings reports from key companies like Tesla, Alphabet, Visa, IBM, and ServiceNow could restore confidence and drive a resurgence in tech stocks, while disappointing results might further entrench the rotation into midcaps and other sectors. Investors will need to stay vigilant and adaptable as the earnings season unfolds and the market navigates through this pivotal period.