Which Magnificent 7 Stock Will Get the Best Earnings Reaction?
Let's take a gander at the Mag 7 names set to take the earnings stage and why I'm adding to this one.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
Market action is mixed on Thursday as investors digest earnings and economic news and try to figure out whether there is a catalyst to keep the indexes pushing higher. The indexes and many stocks are in need of rest, but so far the "sell the news" dynamic has been muted and there has been solid support.
Breadth is running solidly positive with the Russell 2000 IWM leading with a gain of 1%. Interest in the smaller, more speculative names is positive as it indicates a willingness to take higher levels of risks. Investors still fear missing out more than they fear bad news.
With earnings season underway, it is a good time to take a look at the Magnificent Seven and try to game which names will have the best response to earnings. Nvidia’s NVDA quarter ends July 31. It won’t report until much later than the other names, so I’ll put that aside for now.
According to Bank of America’s quantitative metrics, the most likely Magnificent Seven names to beat expectations are Apple AAPL, Amazon AMZN, and Meta META. Beating earnings estimates doesn’t necessarily mean that the stock will fly higher on the news. Much will depend on the technical setup. Microsoft MSFT, for example, is probably the most extended of the group, and even though it does have a great quarter, expectations may be too high.
Apple has been struggling and is further off its highs than most of the other names, so it has lower expectations and could do well on a decent beat. Amazon AMZN has been drifting higher in a lackluster fashion, but it doesn’t have much of a base of support.
The best candidate for a strong reaction to earnings is Meta. Meta hit a new all-time high on June 30 and has pulled back to support around the $700 level. There is some support in the $680-$700 level, and also the 50-day simple moving average offers some support at $680.
There has been substantial news from Meta recently about a big investment in brainpower to develop a Superintelligence Labs, which aims to surpass human cognitive abilities. It is also debating a "closed" model to give it a strategic advantage.
It is very likely that this will be a major focus of discussion on the earnings call and has the ability to push the stock higher if Mark Zuckerberg can make a clear case for how Meta is taking a lead in the AI battles.
I like the META setup here and have started a small position, which I will modify as we move closer to its earnings report after the close on July 30. Current estimates are earnings per share of $5.85 and revenue of $44.7 billion.
At the time of publication, DePorre was long META.
