Chief Investment Strategist
Summary: Tech giants ended 2023 strong, confirming solid growth and profitability despite some cautious notes from Apple. Amazon bounced back with cost-cutting and cloud success, while Meta emerged as the big winner with strong earnings, first-ever dividend, and bullish guidance. Overall, tech enters 2024 with momentum and a focus on sustainable growth, despite individual challenges.
With the most important earnings week almost done we can definitely conclude that Q4 earnings have not changed the overall picture that growth is looking good and profitability has increased. While some technology companies disappointed investors such as Alphabet and Apple (more on that below) the overall bird’s view of technology earnings is that it is job done. Revenue growth is looking good and profitability has improved due cost focus. Sequoia Capital toured Silicon Valley with its famous presentation about a “crucial moment” and “focus on profitability” or face extinction. Technology companies listened and many are benefitting from their focus on profitability. As the chart below shows, Nasdaq 100 operating earnings have soared to a new all-time high supporting the strong rally we have seen in technology stocks. Apple, Amazon, and Meta reported earnings last night and below we go through the key takeaways.
Apple beat on both revenue and EPS in its FY24 Q1 results (ending 31 Dec) with only China disappointing in the quarter. FY24 Q1 revenue was $119.6bn vs est. $118bn and EPS was $2.18 vs est. $2.11. Nevertheless, investors were not pleased with the results as management’s guidance on iPhone revenue to be flat in the current quarter compared to a year ago. In our view, Apple is play it conservatively as they have low visibility on the Chinese economy and the pace of the upgrade cycle on its iPhones. As the charts below show on iPhone and Services revenue, the iPhone business is quite volatile (orange colour indicates Apple’s own guidance) while the Services segment offers stable growth. Unless Apple reinvents a new platform experience with its Vision Pro AR/VR headset then the hardware business will over time mean less and less for profits compared to the Services segment that has a higher profit margin. It similar to Amazon where the more profitable business unit AWS over time took over as the most important segment for its valuation.
Amazon overspent during the pandemic mis-reading the long-term in its e-commerce business. After a year of focus on costs the e-commerce and cloud giant has got its mojo back with its operating margin expanding to a new all-time high in 2023 and revenue growth has also come back ending Q4 at 13.9% y/y as the US holiday shopping proved better than expected. Q4 revenue was $170bn vs est. $166.2bn and EPS was $1.00 vs est. $0.78. Despite a Q1 revenue guidance below consensus estimates investors are cheering as Amazon’s cost focus is paying off for shareholders. The Q1 outlook is also confirming another quarter of more than 10% revenue growth suggesting the economy is not showing recession signs just yet.
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Commodity Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Head of Commodity Strategy
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)