Amazon is expected to report earnings of 83 cents per share on revenue of $142.495bn. ·REUTERS / Reuters
Earnings season is in full swing, and investors have some high expectations for some of the mega-caps reporting next week such as Amazon and Apple. In the UK, investors should still keep a focus on Anglo American as the bid rejection from BHP is unlikely to be the last move by the Australian miner.
In Europe, the continent's most valuable company Novo Nordisk will show if it still reigns supreme.
Ahead of the company’s quarterly results, several analysts have been reaffirming their bullish views on the stock.
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Amazon is scheduled to report its first-quarter financial results after the US market close on 30 April. The company is expected to report earnings of 83 cents per share on revenue of $142.495bn, according to estimates from Benzinga Pro.
Total net sales of $142.59bn are predicted, up from $127.36bn a year ago.
Wedbush Securities analysts wrote in a note that ads on Prime Video could generate about "$6.5bn of incremental revenue" once it is fully in place across the world.
Amazon CEO Andy Jassy said in his shareholder letter earlier this month that he thinks artificial intelligence could be the "largest technology transformation since the cloud (which itself, is still in the early stages), and perhaps since the Internet."
Amazon’s market cap nearly reached $2tn for the first time in April and even after a slight pull back, the shares are still up by nearly a fifth in 2024 and by two-thirds over the past year (to rank it third among the Magnificent Seven, behind Nvidia [NVDA] and Meta [META]).
“One of the reasons behind this stunning run is Amazon has re-established its powerful earnings momentum, which was briefly lost in late 2021 and early 2022, as fears of a recession gathered, inflation and interest rates rose, and oil prices increased input costs,” according to investment director Russ Mould, head of financial analysis Danni Hewson and investment analyst Dan Coatsworth, all of AJ Bell.
“Another is the perception that Amazon is a winner in the race to lead, and monetise, the development of generative AI, thanks in particular to its cloud-service business AWS [Amazon Web Services] which makes far more money than the US and International retail arms and is the real heart of the business now. That said, North America roared back in 2023 to also record its highest-ever quarterly and annual operating profit, buoyed by free-spending US consumers,” they added.
Apple, one of the most important names in the stock market, but the iPhone maker’s performance as been anything but stellar.
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The stock is down 14% this year, making it one of the weakest performers among mega cap technology companies.
The consensus estimate for sales is $89.8bn, down 5.3% year-on-year (compared to the 2.1% year-on-year increase in Q1). In the unlikely event Apple gives any steer for Q3, analysts are looking for $82.7bn, up 1.0% year-on-year, according to AJ Bell.
For share earnings per share, or EPS, analysts are looking for $1.50 for net income of around $2bn, down a fraction from $1.52 a year ago. In Q3, analysts are looking for $1.31, marginally higher than in the third quarter of fiscal 2023.
Analysts are split over the stock, with Morgan Stanley analysts expecting the iPhone maker will slightly top the consensus estimates.
Bank of America (BofA) also seems bullish, recommending the company given its “rich catalyst path with defensive cash flows”, according to BofA analyst Wamsi Mohan, who has a buy rating and $225 price target on the stock.
Morningstar is wary of iPhone sales that have been hit by a sales slump in China.
“We anticipate a weak quarter for iPhone sales, which Apple has guided Wall Street to expect. This should spur a poorer overall quarter for the firm, as the iPhone remains its primary driver.
“We expect another quarter of strong profitability for Apple helping offset weaker sales growth. Apple benefits from a higher mix of its services business and more consumers opting for premium options like the iPhone Pro models,” Morningstar wrote.
Bloomberg Intelligence is also cautious, writing that Apple, given weaker iPhone demand in China, “will likely give fiscal 3Q sales guidance for the device below consensus’ 2% drop”.
Not reporting but set to keep making markets move in the UK as in these mega deals the first bid rejection is just the start of negotiations to find the right price.
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British mining giant Anglo American has rejected a £31.1bn takeover offer by Australian rival BHP (BHP.L).
The FTSE 100 miner said the bid was “opportunistic” and “significantly undervalues Anglo American and its future prospects”. Strong words but not enough to stop BHP, according to analysts.
“There’s every chance BHP will come back to the table,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
BHP said in a statement Thursday that it valued Anglo American shares at £25.08 ($31.40) apiece, or £31.1bn ($38.9bn) in total.
“It’s no surprise that Anglo American has rejected BHP’s takeover bid. Anglo American has long seen itself as one of the big players in the market and it certainly won’t let a rival swoop on the business when its chips are down,” AJ Bell’s Mould said.
“The usual playbook for mega deals in the resources space is for the original suitor to respond to rejection by coming back with a better offer, or someone else throwing their hat into the ring. That contender could be Rio Tinto (RIO.L) as it will certainly be watching activities with keen interest given it can see the same opportunity as BHP,” he added.
Anglo’s shares surged by 16.1% on Thursday after news of the bid emerged and they are certain to be under the spotlight next week.
The US has the Magnificent 7, Europe has Novo Nordisk and friends, according to UBS. The investment bank has put together an equivalent list of 18 outperformers for Europe so this stock should definitely be on your radar when it reports next week.
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The consensus among analysts is that the pharma company sold 10.4bn Danish kroner’s ($1.5bn/£1.2bn) worth of its weight-loss drug Wegovy in the first quarter, more than twice the year-earlier figure, according to Bloomberg.
It is anticipated that the company will report an EPS of $0.77, marking a 20.31% rise compared to the same quarter of the previous year.
A steady ramp-up in starting dose scripts points to even bigger sales in the second half, Barclays said.
Citi analysts said they would not be surprised to see the company adjust its full-year outlook as consensus is already close to the top of the forecast range.
Novo Nordisk is currently being traded at a Forward P/E ratio of 38.79. This valuation marks a premium compared to its industry's average Forward P/E of 14.05, according to Zacks Equity Research.
Novo Nordisk has become Europe’s most valuable company by market capitalization, taking the crown from luxury group LVMH (LVMUY).
