Apple, Tesla and Microsoft lead a slew of earnings set to come out this week, painting a picture of how businesses are surviving the latest Covid-19 surge, WSJ reports.
The Big Picture: More than 100 companies listed on the S&P 500 will release earnings, while roughly a third of the Dow Jones Industrial Average will do so as well. The crop features not only some of the biggest names in tech but key players in restaurants, manufacturing and telecommunications.
Microsoft (Tuesday): Projections show Microsoft posting more than $40 billion in quarterly sales for the first time. Boosting the numbers were improvements in its cloud and gaming businesses — the release of the Xbox Series S and Xbox Series X were met with strong demand.
- Microsoft shares have grown by 36% over the past 12 months.
Apple (Wednesday): Tim Cook & Co. are expected to cross $100 billion in quarterly sales for the first time. The firm is expected to “show strong iPhone sales after the delayed launch of the iPhone 12 weighed on its fourth-quarter revenue.” Personal computers have also been a boon for Apple, an industry that saw its best growth in a decade last year.
- Apple shares have risen 75% in the last 12 months.
Tesla (Wednesday): Elon Musk’s electric vehicle company is expected to post its sixth quarterly profit in a row, and analysts project revenue surpassing $10 billion, according to FactSet.
- Tesla shares rallied more than sevenfold last year.
Other Earnings Coming This Week: Starbucks, McDonald’s, Verizon Communications, AT&T, Comcast, 3M, General Electric, Johnson & Johnson, Advanced Micro Devices, Boeing, Facebook, Mastercard, Visa and Caterpillar.
Overall, quarterly earnings are on track to fall 4.7% compared to this period in the year prior. Revenue, on the other hand, is supposed to improve by 0.7% for the final quarter of 2020 year-over-year.
For reference, here’s what Refinitiv estimates show for Q4 earnings.
On estimates, $MSFT is trading at 21x estimated forward EBITDA.
- Microsoft ($MSFT) is expected to post $40.1 billion in Sales and $17.8 billion in EBITDA for Q4.
- While not particularly “undervalued” at $228 per share, $MSFT is a great asset at a reasonable price.
- Microsoft has acceptable mid-single digit growth for a behemoth with exposure to enterprise software and cloud computing.
On estimates, $AAPL is trading at 25.7x estimated forward EBITDA.
- Apple ($AAPL) is expected to post $103 billion in Sales and $32 billion in EBITDA for Q4.
- This is quite a high valuation for a company with relatively low growth and $AAPL doesn’t seem compelling at this $145 per share.
On estimates, $TSLA is trading at 90x forward Gross Profit and 95x forward EBITDA.
- Tesla ($TSLA) is expected to post $10 billion in Sales and $2.26 billion in EBITDA.
- Tesla is valued at $670 billion, which is 40% of the valuation of Microsoft, yet with only 1/4 of the sales and 1/8 of the profits. All this valuation reiles on the company multiplying over the coming decade and expanding into markets outside of traditional automotive manufacturing.
- It’s no surprise to anyone that Tesla is valued at extremely high levels. It would take a crystal ball looking forward 10-20 years to assess whether the stock warrants such pricing.
- But in a potential market downturn or rising interest rate environment, $TSLA should conceptually fall much harder than $MSFT or $AAPL.