Mag 7 ETFs to Watch This Earnings Season

view original post

The fourth-quarter earnings season is underway, and the so-called “Magnificent 7″ companies are in focus. The “Mag 7,” the stock market darlings, have roared higher on the AI craze. 

The seven stocks are Apple AAPL, Microsoft MSFT, Alphabet (GOOG, GOOGL), Amazon AMZN, NVIDIA NVDA, Tesla TSLA and Meta Platforms META. Among the seven, Tesla, Microsoft and Meta Platform will be the first to report, with their releases scheduled after market close on Jan. 29. Apple is scheduled to report on Jan. 30, followed by Alphabet on Feb. 4 and Amazon on Feb. 6. NVIDIA is likely to report later next month. 

The fourth-quarter earnings of the “Mag 7” companies are expected to be up 20.9% from the same period last year on 12.2% higher revenues. This would follow the 32.9% earnings growth on 15.4% higher revenues in the third quarter. Per Bloomberg Intelligence, profits for the “Mag 7” are projected to increase by 22% in the fourth quarter from a year earlier, the smallest jump since the first quarter of 2023 (read: Can “Magnificent Seven” ETFs Retain Their Glory in 2025?).

Stay up-to-date with all quarterly releases:See Zacks Earnings Calendar.

Tesla

Tesla has an Earnings ESP of +1.68% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The electric carmaker saw a negative earnings estimate revision of a couple of cents over the past seven days for the to-be-reported quarter. The Zacks Consensus Estimate for first-quarter earnings indicates substantial year-over-year growth of 4.2% and revenue growth of 9.3%. The earnings track record of the company is moderate as it delivered a four-quarter average earnings surprise of 0.13%. The electric carmaker has gained about 55% in the last three months, outperforming the industry’s average growth of 24%.

Tesla has made a solid comeback, especially after Trump’s election victory, and reclaimed its trillion-dollar market cap. The EV maker is expected to benefit from Trump’s administration for a number of reasons. Tesla has the scale and scope that is unmatched in the EV industry and this dynamic could give the EV maker a clear competitive advantage in a non-EV subsidy environment. Additionally, the potential for higher China tariffs would likely keep cheaper Chinese EV manufacturers like BYD and Nio (NIO) from flooding the U.S. market in the coming years. Trump’s administration will also help expedite regulatory approval of the company’s autonomous driving technology. 

However, Tesla stock took a hit as the company missed estimates for fourth-quarter deliveries and recorded its first year-over-year decline in full-year vehicle deliveries in the company’s history. Trump, last week, rolled back pro-EV policies, which also weighed on shares. Tesla shares fell 12% in a month (read: Tesla Slips on Q4 Delivery Miss: ETFs in Focus).

Microsoft

Microsoft has an Earnings ESP of -2.43% and a Zacks Rank #4 (Sell). Microsoft saw a negative earnings estimate revision of a penny over the past 30 days for the second quarter of fiscal 2025. Its earnings track record is impressive, with the fourth-quarter earnings surprise being 4.91%, on average. The Zacks Consensus Estimate indicates earnings growth of 6.8% and revenue growth of 10.8% from the year-ago quarter. Microsoft has gained about 4% over the past three months, underperforming the industry’s average growth of 11.8%.

The world’s largest software company is one of the biggest beneficiaries of the AI boom. It has been investing billions of dollars in expanding its global network of data centers and other physical infrastructure required to develop AI technology that can compose documents, make images and serve as a lifelike personal assistant at work or home. Though Azure growth will continue to slow down, Microsoft expects its AI business to be on track to bring in more than $10 billion in sales sometime in the next quarter.

Microsoft expects revenues of $68.1-$69.1 billion for the fiscal second quarter of 2025, implying 10.6% growth at the mid-point.

Meta Platforms

Meta Platforms has an Earnings ESP of +6.74% and Zacks Rank #3. The social media giant saw a solid earnings estimate revision of 15 cents for the fourth quarter over the past seven days. Analysts increasing estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The Zacks Consensus Estimate for the yet-to-be-reported quarter indicates substantial year-over-year earnings growth of 29.5%. Revenues are expected to increase 17.1% year over year. Meta Platforms delivered an earnings surprise of 11.34%, on average, in the last four quarters. Shares of META have gained about 12% over the past three months, slightly ahead of the industry’s average growth of 11.7%. 

Meta received a price target boost from a couple of analysts ahead of its earnings release. Wedbush raised the price target for the stock from 680 to 700 and BofA Global Securities lifted the price target to 710 from 660.

The world’s largest social media platform expects to post revenues in the range of $45-$48 billion for the fourth quarter. However, Meta expects a “significant acceleration” in infrastructure spending this year as it continues to pour money into developing AI. Chief executive Mark Zuckerberg pledged to spend significantly on infrastructure and other projects like the metaverse and AI-powered glasses. Meta plans to invest around $60 to $65 billion in AI in 2025, up from the $40 billion spent in 2024. Management also plans to launch its own GPUs by the end of the year. 

Apple

Apple has an Earnings ESP of -1.51% and a Zacks Rank #4. Apple saw no earnings estimate revision over the past 30 days for the fiscal first quarter of 2025. The iPhone maker has a strong track record of positive earnings surprises. It delivered an average earnings surprise of 5.05% in the trailing four quarters. The Zacks Consensus Estimate indicates a modest year-over-year increase of 8.3% for earnings and 3.7% for revenues. The stock has underperformed the industry, having shed 4.6% over the past three months.

The iPhone manufacturer rolled out the first wave of Apple Intelligence applications on Oct. 28 and the second wave on Dec. 11. Since both AI applications are only for English-language users, these features haven’t boosted sales of iPhone 16 handsets.  As such, Jefferies downgraded Apple to underperform, which was rare. Apple expects to add AI features in other languages starting in April.

On the last earnings call, Apple offered weak sales guidance for the fiscal first quarter. It expects “low to mid-single digit” sales growth. 

Alphabet 

Alphabet has an Earnings ESP of +5.96% and Zacks Rank #3. It saw no earnings estimate revision over the past 30 days for the fourth quarter. The company’s earnings surprise track record over the past four quarters is good, with the average being 11.84%. Earnings are expected to increase 29.3%, while revenues are expected to grow 12.5% from the year-ago quarter. The Internet behemoth has risen 20% in the last three months, outperforming the industry’s average growth of 11.7%.

Google is facing headwinds from antitrust lawsuits and intensifying competition in the AI space. Analysts are concerned about the impact of generative AI on Google’s core search business.

Amazon

Amazon has an Earnings ESP of +8.62% and a Zacks Rank #2. The stock saw a positive earnings estimate revision of 4 cents over the past 30 days for the fourth quarter. The Zacks Consensus Estimate indicates a year-over-year earnings increase of 52.48% and substantial revenue growth of 10.1% for the to-be-reported quarter. Additionally, Amazon’s earnings surprise history is impressive, with the four-quarter average surprise being 25.85%. The stock has risen 20% in the past three months, higher than the industry’s growth of 11.7%.

Amazon soared to new all-time highs last week, given its continued dominance in e-commerce and expanding footprint in cloud computing, advertising, and various other sectors. Amazon’s AI business, already up by triple-digit percentages, is growing much faster than the cloud business at a comparable stage of evolution. The world’s largest online retailer expects revenues in the range of $181.5-$188.5 billion for the fourth quarter of 2024. 

Like other tech companies, Amazon has been ramping up investments in data centers, chips and the power needed for AI workloads.

Story Continues