Nasdaq 100 Forecast: “Magnificent Seven” Q1 2024 Earnings Preview

Nasdaq 100 Key Points

• All of the Magnificent Seven have seen significant upward adjustments to earnings estimates for Q1 and the 2024 as a whole…except for Tesla and Apple.
• Notably, the “S&P 493” has been playing a larger role in driving the performance of the broader US index and is expected to see larger earnings growth than the Magnificent Seven by Q4.
• The Nasdaq 100 is finally showing signs of breaking down from its 2-month sideways range between about 17,800 and 18,400

Magnificent Seven Earnings Preview – MSFT, AAPL, GOOG, AMZN, NVDA, META, TSLA

Throughout most of last year, the “Magnificent Seven” big technology stocks (Microsoft, Apple, Nvidia, Alphabet/Google, Meta/Facebook, and Tesla) broadly moved as a monolithic unit, rising and falling in unison with the (mostly) ups and (fewer) downs of the broader market.

Since we’ve flipped the calendar to 2024, the individual differences between these massive entities have become more stark, with growth laggards like Apple and Tesla falling despite generally bullish conditions and standouts like Nvidia and Meta gaining more than 50% (!!) year-to-date:

Source: StoneX, TradingView

Each of the Magnificent Seven stocks faces its own set of opportunities and challenges, but some common themes to monitor are the health of the consumer (especially amid rising gas prices) and timing of any interest rate cuts from the Federal Reserve, as well as the impact of AI and growth of augmented/virtual reality devices.

Not surprisingly, earnings expectations have generally mirrored the performance of the stocks, with all of the Magnificent Seven seeing significant upward adjustments to earnings estimates for Q1 and the 2024 as a whole…except for Tesla and Apple. This has led some analysts to reduce the number of stocks to watch to a “Fantastic Five” (ex-Apple and -Tesla) or “Super Six” (ex-Tesla), but given the still-gigantic market capitalizations at play, it still makes sense to look at the Magnificent Seven as a whole for now.

According to DataTrek Research, analysts have revised up their Q1 earnings estimates for the Magnificent Seven as a whole by 5.5% so far this year, and that estimate jumps to 10% excluding underperforming Tesla. Magnificent Seven earnings estimates across the whole year have revised up by more than 3%, compared with essentially no change in earnings estimates for the S&P 500 as a whole.

Source: FactSet

Though the “Magnificent Seven” stocks are still set to carry most of the proverbial water this earnings season, the chart below shows that the “S&P 493” are expected to pick up the baton and see higher earnings growth than those megacap names by the fourth quarter of this year:

Source: WSJ

One other key theme to watch through is earnings season is that the stock market rally has broadened out relative to last year. As the chart below shows, the Magnificent Seven jointly drove “just” about 4% of the S&P 500’s 11% surge in Q1; in other words, the “S&P 493” has been playing a larger role in driving the performance of the broader US index:

Source: Capital IQ, First Trust Advisors

Regardless, if you’re trading indices (and even if you’re not), it’s worth keeping a close eye on the Magnificent Seven stocks’ earnings results for the foreseeable future.

Below, we highlight the earnings dates and the market’s expectations for each of the Magnificent Seven stocks in order of their reporting dates:

• Tesla – April 23. EPS expected at $0.53.
• Facebook/Meta Platforms – April 24. EPS expected at $4.29.
• Microsoft – April 25. EPS expected at $2.83.
• Alphabet/Google – April 25. EPS expected at $1.51.
• Amazon – April 25*. EPS expected at $0.83.
• Apple – May 2. EPS expected at $1.51.
• Nvidia – May 22. EPS expected at $5.53.

* Estimated date

Nasdaq 100 Technical Analysis – NDX Daily Chart

Source: TradingView, StoneX

For an index that was viewed as inextricable from the raw performance “Magnificent Seven” just a few months ago, the Nasdaq 100 has held up relatively well despite the mixed performance of the technology behemoths so far this year.

As the chart above shows, the Nasdaq 100 is finally showing signs of breaking down from its 2-month sideways range between about 17,800 and 18,400 as we go to press. The index is trading below its 50-day EMA for the first time since November, hinting that the 6-month surge may be coming to an end (or at least downshifting to a slower pace of ascent!).

If the earnings results in the coming weeks are able to meet or beat expectations, the tech-heavy index is likely to resume its uptrend and potentially test the record high near 18,400. However, if weak earnings reports start to accumulate and the index is unable to recapture the 17,800 level, it could set the stage for a continuation down toward the upper-16,000s next.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX