Last night’s earnings blitz included two of the Magnificent Seven stocks, leaving just three more of the major earnings reports left for the season. 
Amazon (AMZN) is scheduled to announce their earnings next Tuesday. Apple (AAPL) will report their results after the close next Thursday. And finally, Nvidia (NVDA) will be close to closing the earnings season out as the company is slated for much later in the season on May 22.
Let’s take a few minutes to answer the question “which is the best stock to buy from last night’s reports?”
Microsoft
Microsoft (MSFT) posted an impressive earnings report last night as the company beat their earnings per share EPS target by $0.12 on a strong revenue beat.
The company affirmed their guidance for the next quarter, though the conference call referred to revenue targets that were at the low end of Wall Street’s expectations.
Azure was the bright spot in the report. The company’s cloud-based services grew by an impressive 31% against market expectations of 28%. This is the main reason for the stock’s 2.5% rally.
The lack of a robust revenue guide from the company is what is keeping a lid on today’s rally along with the stock’s technical chart.
Shares surged to $413 in early trading this morning, but that’s where the pop stopped. Looking at the chart, Microsoft faces some tough technical resistance just above that price from its short-term 20- and 50-day moving averages.
Both widely watched trendlines are in a bearish trend and combine for staunch technical resistance at $415.
For now, the stock appear to have more risk of revisiting $400 with a possible break to its 200-day moving average at $370, which would be a 10% decline from here.
Bottom Line
Hold off on adding Microsoft shares as the market works through some headwinds. Eye MSFT shares as a potential buy at $370.
Alphabet
The clear winner of the Magnificent Seven earnings season so far is Alphabet (GOOGL). The company released their results yesterday along with a few bonuses.
First, the earnings report beat analysts’ expectations by $0.38 as revenue increased by 15.4% on a year-over-year basis. That revenue growth is one of the strongest that we’ve seen in the large-cap technology sector. It also suggests that Alphabet is monetizing their investments in AI very well compared to the rest of the pack.
Like Meta (META), Alphabet announced a significant increase in the company’s capital expenditures to advance their AI initiative. Unlike Meta, Alphabet investors reacted positively to the news because the company is showing strong return on those investments.
In addition to a great earnings report, Alphabet management approved the buyback of $70 billion of Alphabet stock and the company’s first cash dividend of $0.20 per share to be paid on June 17, 2024.
This report catapulted the already strong performer 12% higher this morning. Shares are maintaining that strength into the day with Alphabet stock trading at $174, a 10% increase in price.
The technical picture is supportive of this rally continuing. GOOGL’s short- and long-term trendlines are all trading in bullish trends and with the stock leading them higher.
Last month, the stock advanced into new all-time high territory as it broke above $150. The move has broken Alphabet into something I refer to as a “Volatility Rally.” The last similar rally started in August 2020 carrying Alphabet shares 82% higher over the following 13 months.
Bottom Line
Do I have to say it? Alphabet is the clear winner of the Two Magnificent Seven earnings reports last night.
The stock is one of the few “Mag Seven” stocks to engage in a new long-term bull market rally that is likely to accelerate the stock towards $225 and higher through 2024.
Keep in mind that the market will throw some headwinds in its way, but the long-term view of Alphabet is one of the strongest among the Magnificent Seven stocks right now.
Shares may give you an opportunity to add a position at $170 if the market runs into headwinds. My preferred method of investing in Alphabet’s long-term bullish outlook is through the use of long-term equity anticipation securities, LEAPS, options (calls) expiring January 2026.
About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.