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IBM, Netflix, Twitter Earnings Eyed as Nasdaq 100 Faces "Reality Check"

IBM, Netflix, Twitter Earnings Eyed as Nasdaq 100 Faces "Reality Check"

Margaret Yang, CFA, Strategist

NASDAQ 100 FORECAST: BULLISH

  • The Nasdaq 100 index pulled back from record levels as earnings season arrives
  • Investors are anticipating a 64% YoY earnings growth rate for the broader market
  • IBM, Netflix, Intel and Twitter results are in focus this week. What will markets look for?

A slew of upbeat bank results kicked off a robust Q2 earnings season, sending the Dow Jones, S&P 500 and Nasdaq 100 indices to record highs. 22 S&P 500 companies have reported results so far. Among them, 21 have beaten the Street’s forecasts with an average earnings surprise of +19%.

According to Factset, the S&P 500 is expected to deliver an earnings growth rate of 64% YoY for the second quarter, marking the best season in over a decade. The actual growth rate could be even higher as the majority of corporate America tends to give conservative EPS forecasts and deliver positive surprises.Higher EPS readings may effectively bring down the price-to-earnings (PE) ratio for major US indices, paving the way for them to drive deeper into record territory.

Big tech firms will start to release their results this week, with IBM, Netflix, Intel and Twitter in focus. Here is a brief preview.

Major Tech Earnings EPS Forecast – Week 19-23 July

Source: Bloomberg, DailyFX

IBM:

  • EPS of $2.275 and revenue of $18.26 billion expected for Q2
  • The global trend toward digitalization is expected to drive the Cloud and Cognitive Software segment, which has already grown 4% in the first quarter.
  • The acquisition of Red Hat is likely to contribute to cloud revenues too
  • The Global Business Services segment may benefit from rising client investment in digital technologies
  • The departure of Jim Whitehurst, IBM’s former president, may be a focal point on the earnings call

Netflix:

  • EPS of $2.248 and revenue of $7.323 billion expected for Q2
  • After a year of booming subscriber growth, Netflix may see some moderation due to a high watermark set during the pandemic
  • Most analysts are anticipating less than 2 million new users added for the quarter
  • Recent price hikes and pent-up demand for outdoor entertainment may feed into uncertainties in Q3 guidance
  • Netflix has attempted to shift away from a subscriber-focused narrative towards more stable average revenue per user (ARPU) metrics

Intel:

  • EPS of $1.065 and revenue of $17.84 billion expected for Q2
  • Intel is expected to see lower EPS and revenue on a YoY basis
  • While PC and server shipments may be a bright spot, growth in its semiconductor segment remains lagging behind competitors such as Nvidia and AMD

Twitter:

  • EPS of $0.064 and revenue of $1.058 billion expected for Q2
  • The resumption of live events and sports could drive engagement trends and boost daily active user figures, while advertisers may increase spending amid reopening from Covid lockdowns

Stay tuned for more earnings update from DailyFX. Click HERE to download out quarterly equity forecasts.

Source: Bloomberg, DailyFX

--- Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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