Buy the Big 4 Tech Stocks – Nvidia, Meta, Microsoft, Amazon – Sell Apple and Tesla

What makes stock prices go up or down? I don't know, but my guess is that it all depends on how the company performs compared to investors' expectations.

When it comes to the seven biggest tech stocks driving the S&P 500, this hypothesis holds true well when examining their performance through the first three months of 2024.

So-called Fab 4 — Nvidia, Meta Platform
FB
Microsoft
MSFT
,Amazon
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.com — reported better-than-expected growth and outperformed the market. The paper said that the stock prices of two of the remaining three companies, Apple and Tesla, stalled in the first quarter. wall street journal,

Here's how these four stocks performed in the first quarter compared to the S&P 500, which rose 10.7%.

• NVIDIA: +90%
• Metaplatform: +42.7%
• Amazon: 20.4%
• Microsoft: +14.6%

The remaining two were at a disadvantage. Here's how bad they did.

• Tesla: -31%
• Apple: -15.5%

There appears to be a relationship between each of these companies' performance against expectations in their latest financial reports and their stock prices.

Consider buying companies from these lists that you think will beat expectations and raise guidance when they report their next quarterly earnings report. Conversely, consider selling stocks in companies that are expected to underperform investors' expectations.

How the Fabulous Four defied expectations

Nvidia, Meta, Amazon, and Microsoft performed better than expected. The stock's relative performance in the first quarter appears to be in sync with revenue growth.

Nvidia's 265% revenue growth leads the pack

But NVIDIA defied the pessimists when it reported results for the quarter ending January 2024, I wrote in a February 2024 article forbes post.

Investors sent Nvidia shares up more than 14% in after-hours trading on February 21 after the company reported better-than-expected growth last quarter and raised its outlook for the current quarter.

The important numbers are:

• Fourth quarter 2023 revenue grew 265% to $22.1 billion — $1.5 billion above the $20.6 billion analyst consensus for the period ended Jan. 28, according to London Stock Exchange Group.
• Fourth quarter 2023 adjusted earnings per share increased 804% to $5.15 per share — 56 cents per share above the analyst consensus of $4.59, according to baron's.
• Revenue forecast for Q1 2024 is up 300% to $24 billion — $2.4 billion above the analyst consensus of $21.6 billion. wall street journal.

Nvidia stock continued to rise for the remainder of the first quarter of 2024. When the company reports earnings in May, the stock could plummet unless it exceeds the 300% growth rate the chipmaker has predicted.

Meta Platforms' 25% growth and high net income lifts stock price

With a net profit margin of 29% in 2023, Meta grew faster than Amazon and provided better guidance.Meta also started paying a dividend of 50 cents per share, I wrote in a February 2024 article forbes post.

Here are the key numbers for the meta:

• 2023 Q4 revenue: $40.1 billion — an increase of $1 billion, 25% more than analysts had expected. Investors Business Daily.
• 2023 Q4 earnings per share: $5.33 — Reported 203%, or 51 cents per share, above FactSet estimates IBD

  IBD
  .

• Revenue forecast for Q1 2024: $35.8 billion — 11.2% increase at midpoint of range — noted $1.9 billion above FactSet consensus IBD.

Amazon's 14% revenue growth beat expectations.no guidance was provided

Amazon, which generated 17% net margins last year, has slowed growth but is catching up with generative AI, I wrote in a February 2024 Forbes post.

Highlights of Amazon's report include:

• Fourth quarter 2023 revenue: $170 billion — Sales rose by $3.8 billion, a 14% increase over analysts' estimates compiled by the London Stock Exchange. CNBC.
• Fourth quarter 2023 earnings per share: $1.00 — Reportedly 20 cents per share, up from 3 cents a share a year ago and beating LSEG forecasts CNBC.
• Revenue forecast for Q1 2024: $141 billion At the midpoint of the range, it pointed to an upside of 10.5% and $1.1 billion below the LSEG consensus. CNBC.

Both companies cut costs.Mehta said it will cut 22% of its workforce, bringing the number of employees to 67,317 by the end of 2023. IBD. Amazon laid off about 27,000 employees a year ago, but the company said it would have just 1.53 million employees at the end of 2023, compared to the same period last year. wall street journal.

Microsoft's 17.6% revenue growth beats expectations

Microsoft said it missed its guidance for the current quarter, even though the company beat its revenue expectations due to rapid growth in its Azure division. CNBC. Microsoft's acquisition of video game publisher Activision also contributed to results.
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Blizzard, I wrote in January 2024 forbes post.

The important numbers are:

• Second quarter 2024 revenue: $62.02 billion — up 17.6% year over year and nearly $1 billion more than expected. CNBC.
• 2024 Q2 Earnings: $2.93 per share — rose 32% and 15 cents more than expected, according to London Stock Exchange Group consensus.
• Net income for Q2 2024: $21.87 billion — 33% increase compared to the previous year. CNBC.
• Q2 2024 Azure Cloud Revenue Increases 30% — 3 percentage points faster than the 27% expected by analysts. wall street journal. Microsoft says, “Six percentage points of Azure's growth is due to AI demand, which doubled the amount AI contributed to Azure in the last quarter.” journal.
• Revenue forecast for Q3 2024: $60.5 billion in the middle of the range — $430 million short of LSEG consensus.

Why Apple and Tesla fell from grace

Apple and Tesla have delivered disappointing results for investors, and their stock prices have fallen.

As I wrote in January 2024 forbes Tesla then released a disappointing fourth quarter report and gave a weak outlook for 2024.

Tesla's sales rose but fell short of expectations, while the automaker's operating margins fell sharply and the company had expected slower growth. The important numbers are:

• Fourth quarter revenue: $25.17 billion — 3% increase Starting in Q4 2023, LSEG will fall short of expectations by approximately $500 million.. The magazine said “lower average selling prices due to significant price cuts around the world in the second half of the year” contributed to the slight increase in revenue. CNBC.
• 4th quarter operating profit margin: 8.2% — about half of the numbers for Q4 2023, CNBC report.
• Car sales forecast for 2024: Electric car sales growth in 2024 'may be significantly lower' than last year's growth rate – Tesla 'shipped 1.8 million cars in 2023' CNBC I have written. This is different from previous years in that no specific production targets for 2024 have been indicated. Deliveries for 2023 increased by 38%, but fell well short of the target of 50%.Analysts predict a 20% increase in 2024 bloomberg.

Tesla's bad news echoes the company's April 2nd news that first-quarter deliveries were sluggish at 386,810 vehicles, “significantly below analyst consensus estimates of 449,080 vehicles.” But it lasted, said investment manager Louis Navellier.

Competition continued between BYD and Li Auto to steal Chinese market share from Tesla. Tesla's Model 3 and Model Y accounted for his 96% of Tesla's first-quarter deliveries, Navellier said, making pressure on Tesla to introduce the Model 2 “essential.”

Meanwhile, Wall Street analysts predicted the May announcement could cause Apple's revenue to decline for the first time since 2016. Loop Capital analyst Ananda Barua reported that the iPhone maker's profit forecast has been revised downward. quartz.

Baruah estimates that Apple's iPhone sales for the quarter ending March 2024 will total $44 billion, but the company's total revenue will be $3.2 billion below Wall Street's estimate of $91 billion. I am estimating. quartz I got it.

At the root of Mr. Baruah's bearish forecast was a decline in iPhone shipments due to a decline in organic demand and intensified competition, in addition to a flat average selling price. Apple is heavily dependent on China's smartphone market, and the company was reportedly hit by a 7% drop in demand in China and the resurgence of Huawei, which launched a new series of smartphones. quartz.

If Baruah is right, Apple will fall far short of Wall Street's expectations. He said Wall Street's forecasts for iPhone sales and revenue may be 20% too high, while the company's overall revenue and earnings per share could be 10% higher than Apple's expectations. It says that there is. quartz I have written.

The lesson for investors is conceptually simple. Bet on the companies that bring the most innovative products to market and grow the fastest before their rivals.

The challenge is that some of the fastest growing companies have set investor expectations so high that their stock prices could plummet if they don't continue to raise expectations.