After the closing bell, we will hear from tech giants Apple, Microsoft, Alphabet, and AMD among others. Ahead of those results, we have seen US futures recover from their overnight lows after the rout in Chinese stocks continued amid Beijing's regulatory crackdown. Will the US tech giants provide renewed support for the stock markets, or have investors gone overboard with their optimism with tech shares hitting repeated all-time highs?
Let’s look at Apple, Microsoft and Alphabet in closer detail…
Apple has a tendency to beat analyst expectations and the iPhone maker is expected to post another solid set of numbers for its third quarter performance on Tuesday. Demand for Apple’s products and services grew strongly during the pandemic and analysts are expecting the company’s revenue for the latest quarter to have grown by more than 22% year-over-year to over $73.2 billion from $59.7 billion previously. The key risk impacting overall sales is the issue of chip shortages. In terms of EPS, well it is expected to have climbed sharply to $1.01 from $0.65.
AAPL shares have been hitting new highs like many other big tech names on Wall Street. The base of the recent breakout around $137-$138 is a key support area that needs to be monitored closely in case we see AAPL shares dip post its earnings. Below this we have the trend line followed by the 200-day moving average at $127.90. On the upside, there are not many obvious levels to watch given that it is trading at or near all-time highs. That being said, do watch out for potential profit-taking near the Fibonacci extension levels shown on the chart.
Microsoft (MSFT) will be posting its results after the closing bell and economists are expecting the company’s adjusted EPS to come in at $1.90 on revenue of $44.1 billion.
The big theme of working from home has boosted Microsoft sales during lockdown, and analysts are expecting that growth to have continued in the previous quarter with company IT budgets recovering and continued strength in personal computer sales. Almost every office worker is familiar with Microsoft’s workspace communication tool Teams, which has grown in popularity over the recent months. Analysts are expecting even stronger adoption of Teams given that many people are still working remotely around the world with many companies likely to offer WFH flexibility for years to come. Of course, Microsoft’s sales of other software packages in the “Productivity and Business Processes” segment of its business will have likely grown strongly as well. Then you have the fast-growing cloud computing platform, Azure. This will also be a key focal point. Microsoft has expanded its cloud availability to many new regions.
The key question is how much of this growth is already priced in, with Microsoft shares continuing to hit new record highs in recent months. We reckon the company will need to post even stronger results than those expected for its shares to remain supported.
MSFT shares have been hitting new record peaks. With the stocks making higher highs and holding above the 21-day exponential moving average, you don’t have to be a rocket scientist to figure out that it is a very strong market. Unless its earnings disappoint badly, I am expecting any shallow pullbacks to be bought. Keep an eye on short-term support levels around 280 and 263, with the bullish trend line around 255-260 likely to be a key support level should the stock stage a deeper correction post its earnings.
Google-parent
Alphabet is also reporting after the closing bell. The key focus will be on digital ads, which have rebounded sharply judging by the powerful revenue growth reported by social media companies Twitter and Snap last week. Analysts expect Alphabet Q2 earnings of $19.35 a share on revenue of $56.2 billion. If the company matches or beats those numbers, it will be a big improvement from a year-ago period.
Again, how much of the positivity is already priced in
GOOG remains to be seen, with the stock hitting repeated all-time highs ahead of the publication of its numbers tonight:
Source for all charts: TradingView.com and ThinkMarkets
Corporate results and macro data highlights on tap for this week
Tuesday