According to Chuck Carlson, CEO at Horizon Investment Services, the upcoming reports could help determine whether the resurgence in growth stocks will continue.
Last week, tech shares ended with big gains. Due to the big expectations of tech giants’ earnings reports upcoming this week, investors bet on technology-related stocks. Besides, tech companies are expected to gain the most from the economic revival promised by vaccines against COVID-19. Against this background, tech stocks were big winners last week, with the Nasdaq Composite 4.2% up since last Friday, Dow Jones and S&P 500 rising 0.6% and 1.9% respectively.
Companies to Watch This Week
About a quarter of the S&P 500 companies are to report fourth-quarter results this week. Among them are Apple Inc (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), Tesla Inc (NASDAQ: TSLA), Facebook Inc (NASDAQ: FB), Boeing Company (NYSE: BA), Visa Inc (NYSE: V), and Mastercard Inc (NYSE: MA).
According to Chuck Carlson, CEO at Horizon Investment Services, the upcoming reports could help determine whether the resurgence in growth stocks will continue.
Chuck Carlson said:
“That is probably going to be the story of earnings season. What will earnings mean in terms of the sustainability of this rotation that has occurred in the last eight, nine weeks.”
As of Friday, 86% of the S&P 500 companies that had already reported results had posted a positive earnings surprise for the fourth quarter. The major part of them beat Wall Street estimates. The expectations for those who are yet to report are also big. For example, for Facebook, whose core advertising revenue had already grown 22% year-over-year in Q3, another top-line acceleration in the final quarter is expected.
JPMorgan analyst Doug Anmuth stated:
“We look for FB to accelerate revenue growth this year on the back of a strong digital ad market, and begin to monetize newer products including FB Shops/IG Checkout and Reels.”
Further, for Tesla, expectations are even higher. It will be the company’s first quarterly report as a member of the S&P 500.
COVID-19 Vaccine May Be Ineffective
While coronavirus lockdowns devastated the economy, steady growth and resilience of tech shares made them desirable to investors. Now, when some COVID-19 vaccines are already available, investors are even more optimistic. Investors expect the economy to rebound in 2021, however, there is a risk that new coronavirus strains will make the vaccines less effective, which will lead to a further increase of confirmed virus cases.
Some countries are back to the emergency COVID-19 mode. By now, the US has recorded more than 25 million cases and more than 417,500 deaths from coronavirus, the highest figures in the world. Many European countries saw a resurgence in cases again, and most brought back lockdowns and other restrictions to curb infections.
next