Earnings season is now in full swing, and this week more than 150 S&P 500 companies will report their second quarter results. But John Blank, chief equity strategist at Zacks Investment Research, believes there are just four stocks investors “need to really pay attention to.” Blank was referring to four big tech stocks that will be released in the coming days: Apple, Microsoft, Alphabet and Amazon. Not only are these tech giants dominant in their respective industries, but they also have an outsized impact on the broader S&P 500. Together, they represent over 20% of the S&P 500’s market cap, Blank told CNBC’s “Squawk Box Europe.” on Tuesday, citing data from April 20. Apple has a 7.1% weighting in the S&P 500, while Microsoft has a 6% weighting. According to the data, Alphabet and Amazon have weightings of 4.2% and 3.7%, respectively. “There is no way these stocks can go up or down and can’t take the market with them. Their market betas aren’t actually that high, but they just carry that much weight. There’s just no way to escape it,” Blank added. “If you’re a quarter of the market weight of the S&P 500, those stocks are all you really need to look at when it comes to how the entire index is going to perform.” Alphabet and Microsoft are set to announce earnings today, while Apple and Amazon will follow suit on Thursday. Earnings Predictions Here’s what Blank expects from the four tech titans this earnings season. He believes Google parent Alphabet will disappoint with its second-quarter earnings. “The market just doesn’t think Google will be able to outrun the advertising headwinds, which is probably true,” he said. Blank has given the stock an Earnings Expected Surprise Prediction (ESP) score of 0.03%, meaning he expects earnings to surprise on the downside. On the downside, he expects Apple and Microsoft — two companies he says have never missed out on quarterly earnings — to surprise on the upside again. “These two companies are probably best positioned [among] the hardware companies – the true technology companies. So they will probably do fine. They manage their earnings pretty well. They’ll probably give us a hit,” Blank said. “It won’t be very great and probably won’t move stocks. But at least we’ll get some stability out of them.” He expects Apple and Microsoft to post larger earnings increases in comparison – giving them earnings ESPs of 1% and 0.5%, respectively. Blank also expects Amazon to deliver a Big Earnings surprise this quarter: “Amazon suffered big earnings slumps last quarter as it showed us the lowest sales growth rate in its history. But in our system, we have a huge win surprise for Amazon,” he added. Blank believes Amazon will beat consensus estimates by a whopping 34%. Outlook Despite near-term headwinds, Blank remains optimistic about the longer-term outlook. He believes high barriers to entry will ensure the tech giants remain dominant in their respective businesses. “After 20 to 25 years, these companies have merged into, frankly, very similar business models, and they’ve conquered so much of the underlying space out there that there’s just no way for anyone to break into the big niche in the US market Find and come here,” Blank said. He has predicted annual earnings per share growth of 26.1% for Amazon, 17.9% for Alphabet, and more than 12% for Microsoft and Apple over the next three to five years Meanwhile, he advises investors to stay on the sidelines given stocks’ current valuations and the possibility of further rate hikes: “These are still expensive stocks. And I don’t think this is the bottom for the stocks. I don’t think I would look for an entry on these, especially if the [U.S. Federal Reserve] gotta get out of the way,” Blank said.
https://www.cnbc.com/2022/07/26/strategist-watch-these-sp-500-stocks-this-earnings-season-.html Check out these S&P 500 stocks this earnings season