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Earnings: 3 hot stocks to watch this week

Earnings season is underway – and investors are watching closely. For the most part, observers have the same question for every company reporting earnings: what is the impact of COVID-19 lockdowns and social restrictions on businesses?

This week is particularly important because it includes some tech stocks which have been all the rage recently: Facebook (FB 1.39% ), Apple ( AMZN 1.61% )and Amazon.co.uk ( AMZN 1.61% ). Do they live up to market expectations? Ahead of their earnings reports this week, here’s a look at each company.

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Facebook: to what extent has the advertising activity of the social network been affected?

Social network Facebook is due to release its second-quarter results after market close on Thursday, July 30. The company was previously scheduled to release its results for the period on Wednesday, but the report was postponed “due to a scheduling conflict.”

Even though Facebook shares have risen 14% this year and crushed the market, analysts expect a tough second quarter from the company. On average, analysts expect revenue to grow just 3% year-over-year to $17.4 billion. That compares to 18% revenue growth in the first quarter.

Although management did not provide guidance for its second quarter, Facebook Chief Financial Officer David Wehner said in the company’s statement. call for first quarter results that second quarter revenue at the time of the update was flat year over year.

“April’s trends reflect weakness across all of our geographies of use, as most of our major countries have some sort of shelter-in-place guidelines in place,” Wehner said.

Apple: Can services keep up the momentum?

Tech giant Apple has also seen its stock soar, although analysts have a bleak outlook for the company in the near term. On average, analysts expect Apple’s fiscal third-quarter revenue to decline 3.6% year over year to $51.2 billion. Yet Apple shares are up 29% year-to-date.

But there’s one area where Apple’s business investors expect strong growth over the period: services. As the company’s second-largest segment by revenue and its most lucrative segment by gross profit margin, investors are hoping lockdowns and social restrictions have fueled rapid growth in the segment, which includes revenue from l ‘App Store, Apple Pay and other services. .

Services revenue grew 17% year over year in the fiscal second quarter to $13.3 billion. Additionally, the segment posted a gross margin of 65.4% year-over-year. This exceeded the company’s consolidated gross margin of 38.4%.

Expect stronger momentum in services in fiscal Q3.

Apple also releases its quarterly results after the market closes on July 30.

Amazon: Great expectations for e-commerce

Amazon shares have soared this year, rising more than 65% year-to-date. Analysts aren’t modeling the same slowdown in revenue growth they expect from Facebook and Amazon. On the contrary, they expect year-over-year revenue growth to accelerate to a 28% rate, compared to 26% growth in the first quarter of 2020 and 21% growth in the fourth. quarter 2019.

E-commerce, of course, should be a driver for the quarter. Needless to say, e-commerce performed well, with more consumers sheltering at home and many retailers closing for at least part of the quarter.

Like Facebook and Apple, Amazon releases its second-quarter results after the market closes on July 30.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.