Tag: 2024

Hyundai vs. Tesla: Who Leads the EV Race in Asia?

Posted on by Chelsea

Electric vehicle (EV) adoption is rapidly surging worldwide, driven by rising environmental awareness, government incentives and policies, technological advancements improving battery efficiency and extending driving ranges, and fluctuations in oil prices. According to the International Energy Agency’s (IEA) Global EV Outlook 2024 report, EV sales reached 14 million in 2023, up 35% year-over-year.

Last year, China accounted for around 60% of global EV sales, with Europe comprising 25% of EV sales, followed by the United States at 12%. Moreover, the total number of electric cars on the road surpassed 40 million by the end of 2023.

The EV market in Asia is well-poised to grow and evolve significantly, with two key players standing out: Tesla, Inc. (TSLA) and Hyundai Motor Company (HTMTF). As both EV makers vie for dominance in the region, their strategies, growth trajectories, and technological advancements are coming into sharper focus.

This article explores the current standings of TSLA and HYMTF in Asia, comparing their sales growth, technological innovations, and production capabilities to assess which is better positioned to lead the EV race.

Tesla: A Strong Comeback in China

Tesla's presence in Asia is most prominent in China, the world’s largest EV market. After grappling with competitive pressures from local automakers like BYD Company Limited (BYDDF) and the aftermath of the COVID-19 pandemic, TSLA seems to be on the road to recovery in this key EV market.

For the week ending September 15, Tesla witnessed 15,600 insurance registrations in China, according to CnEVPost. The EV maker sold 63,456 vehicles in China in August, the highest of the year, an increase of 37.3% from July. This resurgence in China follows a series of price cuts aimed at boosting demand, as well as the company’s investment in expanding Gigafactory Shanghai.

China remains pivotal for Tesla’s global strategy. With the Model 3 and Model Y leading sales, Tesla continues to build brand loyalty through technological superiority, its well-established Supercharger network, and a focus on in-house battery production. Tesla’s adoption of 4680 battery cells and Full-Self Driving (FSD) capabilities also give it an edge in autonomous driving features and range efficiency, crucial selling points in China’s tech-savvy EV market.

Beyond China, Tesla’s impact in other Asian markets, including Japan and South Korea, is growing as it expands its product offerings. Statista projects that Asia will see a considerable increase in revenue for Tesla (Passenger Cars), reaching $2 billion this year. Further, the market is estimated to grow at an annual rate of 7% from 2024 to 2028.

Hyundai: Building Momentum Across Asia

While TSLA has dominated headlines lately, HTMTF has been quietly building its EV presence in Asia with a robust pipeline of new models and strategic investments in technology. Hyundai's diverse portfolio caters to a wide range of consumer preferences, from the new ISNTR and KONA Electric compact SUV to the electrified streamliner IONIQ 6 and the high-performance IONIC 5 N.

Also, the company’s IONIQ 5 and IONIQ 6 models have gained significant traction, especially in South Korea. The company is also making inroads in Southeast Asia, which Tesla has yet to fully penetrate. Hyundai’s strength lies in its diversified approach to electrification. While expanding its battery electric vehicle (BEV) lineup, Hyundai is also developing hydrogen fuel cell vehicles, targeting markets where hydrogen infrastructure may play a future role.

Production capacity is another area in which Hyundai is making strides. The company has announced plans to increase production at its Ulsan plant in South Korea, the world’s single largest automobile plant, and made significant investments in EV infrastructure across Asia.

Comparing Sales Growth and Profits

Regarding the sheer sales numbers in Asia, Tesla continues to hold an advantage, particularly in China. However, Hyundai is steadily gaining ground, particularly in markets like South Korea and Southeast Asia, with a strong brand presence and an expanding EV lineup.

During the second quarter of 2024, TSLA produced nearly 411,000 vehicles and delivered around 444,000 vehicles. The company’s total revenues increased 2.3% year-over-year to $25.50 billion. Its gross profit was $4.58 billion, up marginally year-over-year. However, the EV maker reported a net income of $1.49 billion, or 0.42 per share, down 42.8% and 46.1% from the prior year’s quarter, respectively.

HTMTF’s sales rose 6.6% year-over-year to KRW45.02 trillion ($33.84 billion) for the second quarter that ended June 30, 2024. The company’s gross profit grew 9.4% from the year-ago value to KRW9.74 trillion ($7.32 billion). Its operating income was KRW4.28 trillion ($3.22 billion), a marginal increase year-over-year. Also, Hyundai posted a net income of KRW4.17 trillion ($3.13 billion), up 24.7% year-over-year.

Bottom Line

The EV race in Asia is heating up, with both Tesla and Hyundai having unique strengths. Both TSLA and HTMTF present attractive opportunities for investors, albeit with different risk-reward profiles. Tesla’s dominance in China and global market dominance, particularly in autonomous driving and battery technology, make it an attractive buy for those betting on continued growth in the world’s largest EV market.

Meanwhile, Hyundai’s expanding EV product pipeline, growing presence in key Asian markets, and diversified electrification strategy, including both BEVs and hydrogen fuel cell vehicles, make it a compelling option for investors seeking long-term growth with a balanced approach.

Is Ford's Recall a Buying Opportunity or a Red Flag?

Posted on by The INO.com Team

Ford Motor Company (F) will recall 90,736 vehicles due to a potential issue with engine intake valves that may break while driving, as stated by the National Highway Traffic Safety Administration (NHTSA). This recall affects certain 2021-2022 models, including the Bronco, F-150, Edge, Explorer, Lincoln Nautilus, and Lincoln Aviator, equipped with either a 2.7L or 3.0L Nano EcoBoost engine.

The recall, initiated by U.S. regulators, has prompted concerns among investors regarding the potential financial and reputational impact on F. This situation raises an important question: Does this recall represent a buying opportunity due to an overreaction in the stock price, or is it a red flag signaling deeper issues within the automaker?

Recall’s Financial and Reputational Impact on Ford

The recall could carry significant financial implications for Ford. While the exact cost of the recall will depend on the number of engines that need to be replaced, the expense of performing engine cycle tests and potential engine replacements will likely be substantial. However, it is essential to consider the company’s financial health when assessing the impact of recall.

For the second quarter that ended June 30, 2024, F’s revenue increased 6.2% year-over-year to $47.80 billion. However, the company failed to surpass analysts’ estimate of $44.90 billion. Also, Ford reported adjusted EPS of $0.47, down 34.7% year-over-year. That missed the consensus EPS estimate of $0.68.

The company’s second-quarter adjusted free cash flow grew 10.3% from the prior year’s quarter to $3.20 billion. Ford’s cash and cash equivalents stood at $19.95 billion as of June 30, 2024. The automaker raised its full-year guidance for free cash flow while maintaining its 2024 earnings guidance. F’s guidance range for adjusted EBIT is $10-$12 billion, and expectations for adjusted FCF increased by $1 billion to between $7.5 billion and $8.5 billion.

From a reputational standpoint, Ford’s recall could undermine consumer confidence, especially in the models affected. The vehicles involved include some of the automaker’s best-sellers, such as the F-150 and the Bronco, which play critical roles in Ford’s product lineup.

Recalls, particularly those related to engine issues, can tarnish the brand’s image and lead to concerns about its vehicles' overall quality and reliability. This could potentially affect Ford’s sales in the short term, as customers may hesitate to purchase models involved in the recall.

Immediate Impact on Ford’s Stock

In the immediate aftermath of the recall announcement, investor sentiment around F could turn negative, leading to a decline in the stock price. Market overreactions to such news are common, mainly when the recall involves critical components like engines. However, the dip in the stock price could present a buying opportunity for long-term investors who believe in Ford’s ability to navigate through these challenges.

Ford has been making significant strides in the electric vehicle (EV) and autonomous driving sectors, which are well-poised to witness substantial growth in the near future. Fortune Business Insights projects the global EV market to expand from $671.47 billion in 2024 to $1.89 trillion by 2032, exhibiting a CAGR of 13.8% during the forecast period.

F, announced in earlier 2022, has committed to investing $50 billion in EVs by 2026, aiming to produce 2 million EVs annually. The company’s push into autonomous driving technologies also positions it well in a rapidly evolving automotive landscape. These promising long-term growth prospects could outweigh the short-term challenges posed by the recall, making the current dip in stock price an attractive entry point for investors with a long-term horizon.

Competitor Analysis: Opportunities for GM and STLA

While Ford deals with the fallout from this recall, competitors like General Motors Company (GM) and Stellantis N.V. (STLA) could seize the opportunity to capture market share. Both companies are heavily invested in the EV market and have been gaining traction with their respective product lines.

With its solid portfolio of electric vehicles, including the Chevrolet Bolt and the upcoming Hummer EV, GM is well-positioned to benefit if F’s recall leads to a loss of consumer confidence. Similarly, STLA, with its diverse product lineup and focus on electrification, could attract customers who might otherwise have considered Ford vehicles.

Therefore, investors may consider buying GM and STLA as they could see an uptick in sales and market share at Ford’s expense.

Bottom Line

F’s recent recall over the engine value issue, initiated by NHTSA, presents a complex situation for investors. On one hand, the recall could lead to a short-term decline in stock price due to negative investor sentiment and potential financial costs. On the other hand, this dip could offer a buying opportunity for those who believe in Ford’s long-term prospects in EVs and autonomous driving.

Moreover, the recall opens up potential opportunities for competitors like General Motors and Stellantis to capitalize on any loss of market share that Ford might witness. As such, investors may find value in diversifying their portfolios by considering GM and STLA, which are also well-positioned in the evolving EV landscape.

While Ford’s recall is a concerning development, it may not be a long-term red flag. Instead, it could be a temporary setback for the automaker, creating a buying opportunity for discerning investors. However, it is crucial to monitor the situation closely, as the extent of the recall’s impact on F’s reputation and financials will ultimately determine whether this is a buying opportunity or a sign of deeper issues within the company.

Can Boeing Recover? Analyzing the Company’s Path to Profitability

Posted on by The INO.com Team

Since the start of 2024, aerospace giant The Boeing Company (BA) has faced a turbulent ride, with its stock plummeting over 30%. The decline was primarily triggered by heightened regulatory scrutiny following a severe safety incident involving one of its planes earlier this year. 

Boeing has been working hard to enhance its safety protocols and address regulatory concerns. While these efforts show progress, the company’s latest Q2 earnings report has done little to restore investor confidence. The results revealed a larger-than-expected loss and weaker revenue, culminating in a significant leadership shakeup, with the CEO stepping down.

What’s Going on With Boeing?

Last month, Boeing missed the earnings targets by a wide margin. Revenue for the second quarter that ended June 30, 2024, came in at $16.87 billion, down 15% year-over-year. It fell short of the $17.35 billion revenue analysts had anticipated. On the bottom line, the company posted a non-GAAP net loss of $2.90 per share, much worse than the expected negative $2.01 per share. That compared to a loss per share of $0.82 a year ago.

Moreover, the company’s free cash flow, which was positive in last year's second quarter, has now turned negative. The company has burned more than $8.26 billion so far this year, leaving with just $12.60 billion in its cash reserves against a hefty debt of $57.90 billion. Also, it reported a cash burn of $4.3 billion in just one quarter.

The management attributed the disappointing second-quarter results to two main factors: lower commercial aircraft deliveries and significant losses on fixed-price defense development programs. During the quarter, Boeing delivered just 92 commercial planes (down 32% year-over-year), leading to a corresponding 32% decline in revenue from what was once its largest business segment.

Meanwhile, the defense, space, and security unit experienced a smaller 2% sales dip but posted a loss of $913 million, nearly double the previous year’s loss of $527 million. Profit margins continued to worsen across these segments. The global services division was the only area with slight improvement, reflecting a 3% revenue increase and a 2% rise in operating earnings, but even here, profit margins declined.

Boeing’s disappointing results came during a period of intense scrutiny, as it faces multiple investigations into its safety practices and manufacturing standards. The company recently pleaded guilty to a federal fraud charge tied to its 737 Max following two fatal crashes that killed 346 people. As a result, the FAA has increased its oversight and limited BA's production capacity after a serious incident involving an Alaska Airlines Max.

Furthermore, CFO Brian West warned that due to “near-term working capital pressures,” the third quarter will likely see another outflow of cash.

Boeing’s Critical Challenges

Boeing’s troubles are no secret; its repair list is long and daunting. For instance, the company’s commercial airplanes unit has struggled with recurring quality control problems, including serious incidents like doors falling off planes.

In the defense sector, Boeing is struggling with the Pentagon’s push for fixed-price contracts, leading to significant financial write-downs, like those from the Air Force tanker deal. That puts Boeing in a tough spot: accept risky fixed-price contracts or risk losing future defense agreements to competitors who will agree to them.

The company's space segment isn’t faring much better. Boeing’s Starliner crew transport, essential to fulfilling its commercial crew contract with NASA, has been stranded at the International Space Station for over two months. Boeing might face hefty write-downs and losses if it fails to safely return the astronauts. Thus, addressing these challenges head-on seems crucial for the company’s path to recovery.

A New Leader for Boeing: What’s Next?

As Boeing grapples with its ongoing challenges, outgoing CEO Dave Calhoun assured that the company is “making substantial progress” in enhancing its quality management system and preparing for the future. However, Calhoun will not be steering BA through these transitions, as he announced his retirement shortly after the second quarter earnings report.

On August 8, former Rockwell Collins and RTX executive Robert Kelly Ortberg was appointed Boeing’s new CEO. Unlike his recent predecessors, Ortberg brings a background in Mechanical Engineering, which signals a shift towards prioritizing engineering and safety. This move could address previous criticisms of cost-cutting measures and refocus the company on improving aircraft safety, ultimately benefiting shareholders by mitigating the risk of future incidents.

Can Boeing Recover?

Despite recent safety setbacks, BA’s demand for its planes remains surprisingly strong. By the end of the second quarter, the company had amassed a hefty backlog of $516 billion, which includes over 5,400 commercial plane orders. The Farnborough Airshow further highlighted this demand with 118 new orders and commitments worth $17.1 billion.

This indicates that, despite its current challenges, the appetite for the company’s planes is robust. The path to recovery will depend on Boeing’s ability to address safety issues and lift the FAA’s production cap on the 737 MAX. If the company can make these adjustments, it could quickly regain its footing, especially since it showed promising progress in 2023.

Moreover, the air travel market is set to hit new highs this year, with Airbus projecting increased air traffic in the coming years. This provides Boeing with ample growth opportunities, provided it can navigate its current issues. Street expects the company’s revenue to increase by 20.7% year-over-year in the fiscal year 2025, with a projected EPS of $4.06.

Despite the promising growth prospects, investors should be aware of several risks. There’s no guarantee that Boeing won’t face another safety incident, as seen earlier this year, which could disrupt production and financial stability. Additionally, Airbus continues to outpace the company, and the emerging Chinese C919 could erode market share if Boeing faces more setbacks. While the aerospace giant has promising prospects, navigating these risks will be crucial to sustaining long-term growth and investor confidence.

Should you Invest in Boeing?

While BA's market cap of $110.36 billion might suggest stability, it's far from a safe bet. With no dividends since 2020 and a streak of unprofitability since 2018, BA's investment appeal hinges on its turnaround potential.

The big question is whether or not the new CEO, Kelly Ortberg, can turn things around and revive the company’s fortunes. If Ortberg successfully navigates the company's current challenges, there could be a significant upside. However, until then, investing in BA is decidedly riskier than it once was.

Why TSMC Is Essential to the AI Ecosystem: An Investor’s Perspective

Posted on by The INO.com Team

Taiwan Semiconductor Manufacturing Company Limited (TSM), valued at $866.70 billion market cap, is a cornerstone of the global semiconductor industry and is increasingly pivotal to the rapidly evolving artificial intelligence (AI) ecosystem. As the world’s largest pure-play semiconductor foundry, TSMC’s role in AI innovation and development is profound and indispensable.

This article explores why TSMC is crucial to the AI ecosystem and why investors should closely monitor this semiconductor giant.

Vital Role of TSMC in the AI Revolution

TSM, headquartered in Hsinchu City, Taiwan, is the world’s leading semiconductor foundry. The company nurtures a dynamic ecosystem of global customers and partners by offering the industry’s leading process technologies and a portfolio of design enablement solutions, driving innovation across the global semiconductor sector.

The company’s commitment to research and development (R&D) is a key driver of its success. TSMC invests heavily in developing new process technologies and enhancing its manufacturing capabilities. The continuous innovation enables TSMC to meet the evolving needs of AI applications and maintain its competitive edge. For investors, TSMC’s focus on R&D represents a strong growth driver and a safeguard against technological obsolescence.

TSMC offers the most advanced and extensive range of dedicated foundry process technologies, including 2nm technologies, 3nm technology, 5nm technology, and 7nm technology, among others. This comprehensive portfolio supports several applications, from cutting-edge consumer electronics to high-performance computing and AI-driven innovations.

At its 2024 North America Technology Symposium in April, the chip giant introduced its latest semiconductor process, advanced packaging, and 3D IC technologies, showcasing its silicon leadership for the next wave of AI innovations. It debuted the TSMC A16™ technology, which features cutting-edge nanosheet transistors with an innovative backside power rail solution, set for production in 2026. The new technology promises significant enhancements in logic density and performance.

Meanwhile, expanding the reach of TSMC’s advanced technology to a broader range of applications, the company announced N4C, an extension of the N4P technology with up to an 8.5% reduction in die cost and minimal adoption effort, and is slated for volume production in 2025.

Additionally, TSMC introduced its System-on-Wafer (TSMC-SoW™) technology, a groundbreaking solution designed to deliver revolutionary performance to the wafer level in addressing the future AI needs of hyperscaler data centers. Also, the company is advancing its Compact Universal Photonic Engine (COUPE™) technology to support the rapid increase in data transmission demands driven by the AI boom.

Moreover, major tech companies, includingc, Advanced Micro Devices, Inc. (AMD), and Apple Inc. (AAPL), rely on TSMC for the production of their most advanced processors and GPUs.

Second-Quarter 2024 Revenue and Profit Beat Analyst Expectations

TSM’s revenue and earnings surpassed analyst estimates in the second quarter of 2024 as demand for advanced chips utilized in AI applications continues to rise. For the second quarter that ended June 30, 2024, the company’s net revenue increased 40.1% year-over-year to $20.82 billion. That beat analysts’ revenue estimate of $20.09 billion.

During the second quarter, the company’s shipments of 3-nanometer made up 15% of total wafer revenue, 5-nanometer accounted for 35%, and 7-nanometer constituted 17%. Advanced technologies, defined as 7-nanometer and more advanced technologies, accounted for 67% of total wafer revenue.

The company’s gross profit was $11.07 billion, up 37.6% from the previous year’s quarter. TSMC’s non-GAAP income from operations rose 41.9% year-over-year to $8.86 billion. Its net income and earnings per ADR came in at $7.66 billion and $1.48, increases of 36.3% year-over-year, respectively. Its earnings per ADR compared to the consensus estimate of $1.42.

As of June 30, 2024, TSMC’s cash and cash equivalents were $55.38 billion, and its total assets amounted to $184.13 billion.

“Our business in the second quarter was supported by strong demand for our industry-leading 3nm and 5nm technologies, partially offset by continued smartphone seasonality,” said Wendell Huang, Chief Financial Officer of TSMC. “Moving into third quarter 2024, we expect our business to be supported by strong smartphone and AI-related demand for our leading-edge process technologies.”

Furthermore, TSMC expects third-quarter revenue between $22.40 billion and $23.20 billion. That compares to $17.30 billion in revenue reported in the same period of 2024. The company’s gross profit margin is projected to be between 53.5% and 55.5%, and its operating profit margin is expected to be between 42.5% and 44.5%.

Bottom Line

TSMC remains a prominent player in the rapidly expanding AI ecosystem. As the world’s largest pure-play semiconductor foundry, TSMC’s leadership in advanced process technologies and commitment to continuous innovation ensure its pivotal role in powering next-generation AI applications.

The company’s comprehensive range of dedicated foundry process technologies, including industry-leading 2nm, 3nm, and 5nm technologies, alongside recent breakthroughs such as the TSMC A16™ and System-on-Wafer (TSMC-SoW™) technologies, underscores its strategic importance for shaping the future of AI.

The impressive financial performance in the second quarter of 2024, where revenue and EPS surpassed analyst expectations, highlights TSMC’s strong market position and resilience. As demand for advanced chips continues to surge, particularly in AI and high-performance computing, TSMC’s innovative solutions and robust financial health position it well for sustained growth and profitability.

Susquehanna analyst Mehdi Hosseini maintained Positive on TSM shares, with a price target of $250. Moreover, in July, Needham reaffirmed a Buy rating on shares of TSM with a price target of $210.

Amid this backdrop, investors could consider adding TSMC to their portfolio, particularly if they want to gain exposure to the burgeoning AI sector. However, it is also essential to remain mindful of potential risks, including geopolitical tensions and market fluctuations, which could impact the semiconductor industry.

The Magnificent 7 Earnings: How to Position Your Portfolio

Posted on by The INO.com Team

As earnings season ramps up, investors closely watch the “Magnificent Seven,” a group of high-profile tech companies that play a pivotal role in market dynamics. This week, three of these tech giants—Amazon.com, Inc. (AMZN), Apple Inc. (AAPL), and Meta Platforms, Inc. (META)—are set to report their quarterly earnings.

On July 30, the Nasdaq Composite declined sharply ahead of Microsoft Corporation (MSFT) earnings. Microsoft shares fell nearly 7% in extended trading on Tuesday as disappointing cloud results overshadowed better-than-expected revenue and earnings.

For the fourth quarter that ended June 30, 2024, MSFT’s revenue increased 15% year-over-year to $64.70 billion. That slightly surpassed the consensus revenue estimate of $64.44 billion. The company’s top segment, Intelligent Cloud, which includes its Azure services, reported $28.52 billion in revenue. It was up around 19% but fell short of analysts’ expectations of $28.68 billion.

Microsoft’s cloud business holds significant importance for Wall Street, as the company competes with Amazon Web Services and Google for AI workloads. All three firms heavily invest in enhancing AI capabilities, aiming to attract startups and large corporations as generative AI models advance rapidly.

In addition, MSFT posted fourth-quarter net income and earnings per share of $22 billion and $2.95, up 10% year-over-year. That compared to analysts’ EPS estimate of $2.94.

Mega-cap tech stocks had surged tremendously on high hopes for growth driven by artificial intelligence (AI). The upcoming earnings reports from major tech giants, including AMZN, AAPL, and META, will have far-reaching implications for the market. Positive results could reinvigorate confidence in Big Tech, while disappointing numbers might accelerate the shift to underperforming sectors like mid- and small-cap stocks.

Moreover, the earnings season coincides with a pivotal Federal Reserve meeting. Fed officials are expected to hold rates steady but may signal a potential rate cut in September following better news on inflation and signs the labor market is cooling. This decision will add another layer of complexity to market dynamics, influencing investor sentiment and market movements.

Key Earnings Reports: What to Watch For

Amazon.com, Inc. (AMZN)

With a $1.89 trillion market cap, Amazon.com, Inc. (AMZN) engages in the retail sale of consumer products, advertising, and subscription services via online and physical stores. The company operates through North America, International, and Amazon Web Services (AWS) segments.

Amazon’s second-quarter earnings, scheduled to be released on August 1, will shed light on consumer spending and enterprise cloud adoption. Investors will be keen to see how AWS is performing, as it is a significant revenue driver for the company. In the last reported first quarter, AWS segment sales rose 17% year-over-year to $25 billion.

“The combination of companies renewing their infrastructure modernization efforts and the appeal of AWS’s AI capabilities is reaccelerating AWS’s growth rate (now at a $100 billion annual revenue run rate); our Stores business continues to expand selection, provide everyday low prices, and accelerate delivery speed (setting another record on speed for Prime customers in Q1) while lowering our cost to serve; and, our Advertising efforts continue to benefit from the growth of our Stores and Prime Video businesses,” said Andy Jassy, AMZN’s President and CEO in first-quarter earnings release.

“It’s very early days in all of our businesses and we remain excited by how much more we can make customers’ lives better and easier moving forward,” Jassy added.

For the second quarter 2024 guidance, the tech giant’s net sales are expected to be between $144 billion and $149 billion, or grow between 7% and 11% compared to the second quarter of 2023. AMZN’s operating income is anticipated to be between $10 billion and $14 billion, compared with $7.7 billion in the second quarter of 2023.

Notably, on July 18, Amazon announced record-breaking sales for the 2024 Prime Day shopping event. During the 48-hour event, Prime members shopped millions of deals with over 35 categories and purchased more items than any prior Prime Day shopping event. Rufus, the company’s new AI-powered conversational shopping assistant, has assisted millions of customers quickly and easily navigating Amazon’s extensive selection.

Analysts appear bullish about the e-commerce giant’s prospects. Street expects AMZN’s revenue and EPS for the second quarter (ended June 2024) to increase 10.6% and 56.9% to $148.62 billion and $1.02, respectively. Moreover, the company topped consensus revenue and EPS estimates in all four trailing quarters, which is remarkable.

Shares of AMZN have surged about 14% over the past six months and more than 19% year-to-date. However, the stock has plunged around 6% over the past month.

Solid AWS growth in the second quarter and resilient consumer spending might justify increasing exposure to Amazon. However, slowing growth or rising costs could suggest reducing positions or hedging.

Apple Inc. (AAPL)

Apple Inc. (AAPL), valued at a $3.36 trillion market cap, is a global leader in consumer electronics, software, and services. Apple is renowned for its innovative products, including the iPhone, its flagship product which accounts for a significant portion of the company’s revenue, Mac computers, iPad, Apple Watch, AirPods, and services like the App Store, Apple Music, iCloud, and more.

AAPL’s third-quarter earnings, scheduled for August 1, will reflect the performance of its key product lines. For the second quarter that ended March 30, 2024, the company posted revenue of $90.75 billion, down 4% year-over-year. However, the revenue surpassed analysts’ estimate of $90.45 billion. Also, iPhone sales fell 10% year-over-year during the quarter. The company realized $5 billion in delayed iPhone 14 sales from Covid-based supply issues.

Furthermore, the company’s net income was $23.64 billion for the third quarter, down 2% from the prior year’s quarter. Apple reported quarterly earnings per share of $1.53, compared to the consensus estimate of $1.51.

In the last quarter, the company announced that its Board of Directors authorized $110 billion in share repurchases, an impressive 22% rise from last year’s $90 billion share authorization. It’s the largest buyback in the company’s history.

Apple did not offer formal guidance, but CEO Tim Cook told CNBC’s Steve Kovach that overall sales are expected to grow in the “low single digits” for the June quarter.

During an earnings call with analysts, AAPL CFO Luca Maestri indicated that the company will deliver double-digit year-over-year growth in iPad sales for the to-be-reported quarter. Additionally, he noted that the Services division is projected to continue growing at the current high rate observed over the past two quarters.

Analysts expect AAPL’s revenue and EPS for the third quarter to increase 3.2% and 6.5% to $84.38 billion and $1.34, respectively. Additionally, Apple surpassed consensus EPS estimates in each of the trailing four quarters.

Over the past month, AAPL’s stock has soared more than 2.5%. Further, the stock climbed approximately 16% over the past six months and around 13% year-to-date. Robust sales across key product lines could indicate solid consumer demand, driving Apple’s shares. However, updates on supply chain challenges and mitigation strategies will be crucial in the upcoming earnings report.

Meta Platforms (META)

With a market cap of $1.18 trillion, Meta Platforms, Inc. (META), formerly known as Facebook, Inc., is a tech conglomerate with key products, such as Facebook, Instagram, WhatsApp, and Messenger. It operates in two segments: Family of Apps and Reality Labs.

META is expected to report its second-quarter 2024 earnings on July 31 after the market closes. Meta’s first-quarter revenue was $36.46 billion, compared to the consensus estimate of $36.22 billion. Its revenue was up 27.3% year-over-year. The company’s ad impressions delivered across its Family of Apps grew by 20% year-over-year, and the average price per ad grew by 6%.

Further, the company reported an EPS of $4.71 for the March quarter, exceeding analysts’ expectations of $4.36 and being up 114% year over year.

Meta Platforms no longer provide data on daily active users (DAUs) and monthly active users (MAUs). Instead, it reports a consolidated figure called family daily active people (DAP). DAP was 3.24 billion on average for March, an increase of 7% year-over-year.

In the last earnings release, Meta’s founder and CEO, Mark Zuckerberg, said, “It's been a good start to the year. The new version of Meta AI with Llama 3 is another step towards building the world's leading AI. We're seeing healthy growth across our apps and we continue making steady progress building the metaverse as well.”

In April, META announced the latest version of Meta AI with Llama 3, one of the world’s leading AI assistants. This version is free and readily available in several countries. Meta AI is available across its apps, including Facebook, Instagram, WhatsApp, and Messenger, to get things done, learn, create, and access real-time information. The new advances in Meta AI with Llama 3 are expected to extend META’s market reach and boost its profitability.

For the second quarter of 2024, META expects sales between $36.50 billion to $39 billion. The midpoint of the range, $37.75 billion, will represent nearly 18% year-over-year growth. Meanwhile, analysts anticipate the company’s revenue for the June quarter to increase 19.7% year-over-year to $38.31 billion, and the consensus EPS estimate of $4.78 indicates an improvement of 60.5% year-over-year.

Meta has raised investor expectations due to its improved financial performance in recent quarters, leaving little room for error. The stock is up about 2% over the past five days and nearly 30% year-to-date. In February 2023, META CEO Mark Zuckerberg announced it would be the “year of efficiency,” which sparked the rally.

At that time, Zuckerberg stated that the company would focus on eliminating unnecessary projects and reducing bloat, aiming to transform Meta into a “stronger and more nimble organization.” Consequently, the company cut about 21,000 jobs in the first half of 2023, with Zuckerberg indicating in February this year that hiring would be “relatively minimal compared to historical levels.”

The headcount decreased by 10% in the first quarter of 2024 compared to the previous year, bringing it down to 69,329 employees.

Meta’s capital expenditures for fiscal 2024 are projected to be between $35 billion and $40 billion, up from a prior forecast of $30 billion to $37 billion. This increase is attributed to accelerated infrastructure investments to support the company’s artificial intelligence (AI) roadmap, META said.

Bottom Line

As earnings reports from tech giants, including META, AAPL, and AMZN, approach, investors should prepare for potential market shifts. Investors can better position their portfolios by closely monitoring these results and considering broader economic signals, such as the Federal Reserve’s actions. A balanced approach with diversification, sector rotation, and hedging can help manage risks and capitalize on opportunities in this critical earnings season.