Every earnings season there is one day that has the ability to completely change the mood of investors. In this earnings season that date is October 29. On that day we will get earnings reports from four different components of the so-called FAANG stocks. The only one of the group not reporting that day is Netflix (NFLX). The other four will report that night—Facebook (FB), Amazon (AMZN), Apple (AAPL), and Google/Alphabet (GOOG).
So far this earnings season it appears that companies that are beating their earnings and revenue forecasts aren’t being rewarded as greatly as usual and companies that miss are getting punished more than usual. Approximately 84% of companies are beating estimates and that is slightly higher than the average quarter.
What is really interesting is how stocks are reacting after the reports. The average move higher for stocks beating EPS estimates is 0.32%. For stocks that are missing on EPS estimates, the average decline is 4.07%. Those figures were from Bloomberg TV this morning. For companies that miss on their earnings estimate, the historical average is for a decline of just over 2%.
One concern going in to Thursday is that the tech sector has seen the worst declines after earnings so far this earnings season. The overall average move for stocks in the sector is -2.9%. Comparatively, the average move for healthcare stocks is +2.9%.
The FAANG stocks are a combination of tech, communication services, and consumer discretionary companies. As you can imagine, the sentiment toward the four stocks is pretty bullish heading in to the earnings announcements.
We see that Apple has the lowest buy percentage is 64.1% and that is slightly below average. The other three stocks all have buy percentages over 85% and are well above average. The short interest ratios are all four well below average, making it highly unlikely that we will see a short covering rally on any of them.
The Tickeron scorecard has Alphabet rated as a “strong buy”, Facebook and Amazon are both have “buy” ratings, and Apple is rated as a “sell”.