Amazon, other stocks with momentum heading into earnings

Amazon and Key Momentum Stocks: What Investors Should Watch Ahead of Earnings Season

Imagine waiting for your favorite sports team to play in the playoffs—everyone’s excited, hopes are high, and the outcome could shape the whole season. That’s what next week feels like for investors, with big tech companies and other giants about to report their earnings. The results could shake up the stock market and your investments.

Why Investors Should Care

When companies share how much money they made or lost (earnings), it can move the prices of their stocks a lot. This is especially true for huge companies like Apple, Microsoft, Amazon, and Meta Platforms. These firms are so big that their results can even move the entire market, not just their own shares.

Next week, over 150 companies in the S&P 500 will reveal their earnings. Some investors are betting big on a few of these, hoping for strong results that could boost their portfolios.

The Bullish Case: Reasons to Be Optimistic

  • Amazon: Analysts have raised their profit forecasts for Amazon by more than 400% in just three months. Many think Amazon Web Services (its cloud business) will show strong growth, especially thanks to artificial intelligence. Some experts see Amazon’s stock going up by 38% from where it is now.
  • IQVIA Holdings: Even though IQVIA’s stock is down about 8% this year, 80% of analysts still rate it as a “buy.” Some believe fears about the company’s future are overblown, and new trends in healthcare technology are positive for the business. Deutsche Bank predicts the stock could rise 15% in the next year.
  • Vertiv Holdings: This company helps build and power data centers (the places that store all our internet and cloud data). Analysts have boosted their earnings estimates by nearly 400% recently. Vertiv works closely with Nvidia on AI projects, and its shares have soared 80% so far in 2024. Some experts think there’s still more room to run.

The Bearish Case: Reasons to Be Cautious

  • High Expectations: When everyone expects great results, even small disappointments can send stock prices down fast.
  • Tech Sector Risks: Tech stocks have been leading the market, but if their earnings disappoint, it could hurt the whole S&P 500.
  • Healthcare Concerns: Some investors worry that artificial intelligence could disrupt companies like IQVIA, changing how they do business.
  • Market Volatility: Earnings season often brings big swings in stock prices, which can be stressful or risky for short-term investors.
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What the Data Says

According to FactSet, S&P 500 companies that beat earnings expectations usually see their stocks rise by about 2% in the days after their reports. But those that miss often fall by 3% or more. This shows how important earnings season is for investors.

Looking back, the S&P 500 has historically gained about 1.5% on average during earnings season when most companies beat expectations, according to The Wall Street Journal. But when results disappoint, the market can drop instead.

Investor Takeaway

  • Watch the “Magnificent Seven”: Earnings from Apple, Microsoft, Amazon, and Meta Platforms could set the tone for the whole market. Pay attention to their results and guidance.
  • Don’t Chase Hype: Stocks with high expectations can fall hard if they miss, so be careful about buying right before earnings reports.
  • Diversify: Don’t put all your money in one sector or a few big names. Spread out your investments to manage risk.
  • Look for Surprises: Companies like IQVIA or Vertiv that are under the radar might deliver positive surprises—and bigger gains.
  • Stay Calm: Expect some ups and downs in the next week. Focus on your long-term plan, not short-term swings.

For the full original report, see CNBC

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