The stock market soared in 2020, defying all expectations after a truly surprising recovery in the coronavirus bear market in February and March. The recovery was driven by the speed with which some companies changed direction to adapt to radical changes in economic and business conditions, as well as by investors’ optimism to look beyond the immediate impact of the COVID-19 pandemic to predict a better future.
Now, 2021 is here, and investors are trying to figure out what direction the stock market is going to take next year. The bulls are eager to roll out coronavirus vaccines to bring the economy back to a gallop, while bears fear that something short of a full return to normal may disappoint markets. Speculation about what the next few months will be goes from euphoric to apocalyptic.
Profit reports provide investors with the truth they need to overcome emotional ups and downs and embrace reality. And on Wednesday, January 27, the stock market will really have its day of reckoning. On that day, investors will receive three main earnings reports from Apple (NASDAQ: AAPL), Boeing (NYSE: BA), and Tesla (NASDAQ: TSLA) this could make markets skyrocket or plummet.
Image source: Boeing.
Flying or experiencing turbulence?
Boeing will begin operations on the morning of the 27th. The aerospace giant is expected to release its fourth quarter results ahead of the opening bell on Wednesday morning, with a webcast and conference call starting at 10:30 am EST.
From a business perspective, Boeing was in a free fall all year long in 2020. The company originally expected to have its 737 MAX aircraft flying at the beginning of last year, but it was only in December that Boeing finally obtained authorization from Management Federal Aviation to put the model of the plane back in the air. Even though the aircraft manufacturer has received a considerable request for Ryanair, a large number of cancellations continued to rain, largely because the civil aviation sector remains in ruins due to travel restrictions and reduced demand.
Even before things got better for Boeing, its stock fell sharply from its low. After losing more than 70% of its value in March, Boeing more than doubled from its worst levels at the end of the year. This still leaves the share price far below where it started in 2020. But the current price reflects a lot of optimism for a company that has suspended its dividends and may continue to see losses persist in 2021.
Investors will watch closely to see what CEO David Calhoun and his team have to say about Boeing’s prospects for 2021. If they are not convinced by Calhoun’s strategy, Boeing could suffer further turmoil and the stock market could pull off many conclusions about the health of the entire industrial sector.
Image source: Apple.
Apple has high hopes for the iPhone 12
Apple has become the largest technology stock in the world, with a market capitalization of more than $ 2 trillion and rising. However, after another meteoric rise in 2020, many investors fear that even well-deserved praise for the launch of the 5G-enabled iPhone 12 may have caused Apple’s stock prices to rise too quickly.
All signs suggest that Apple’s fiscal results for the first quarter, which will come after closing on January 27, are expected to be strong. Pending orders for the latest generation iPhone 12 Pro remain high, even at a four-digit price, and some customers still have to wait several weeks to receive shipments. This led Apple to increase production volume in the first half of this year, and suppliers have given a positive direction that suggests better times ahead. Apple is also seeing service revenue grow in a healthy way, with App Store sales reaching record highs during the holiday season.
However, Apple’s shares are now trading more than 25 times, even the most optimistic future earnings estimates for 2022, which would require average annual growth rates of 20% to 25% over fiscal levels in 2020. This is not impossible, but it is ambitious, even with the favorable winds that Apple is getting with the product update cycle. Investors will want to hear what CEO Tim Cook and his team have to say at 5 pm EST on the 27th.
Image source: Tesla.
Tesla still have something in the tank?
Finally, Tesla (NASDAQ: TSLA) is scheduled to release its profits after the market closes on January 27. It will follow with a live question and answer webcast that starts at 6:30 pm EST.
Tesla’s shares rose more than 700% in 2020. This raised the stakes for the electric car maker to maintain its growth pace.
Investors already had a good idea of what the fourth quarter was like. Deliveries of more than 180,500 vehicles brought the total for the year to just under Tesla’s target of 500,000 vehicles. Tesla produced almost 180,000 vehicles during the fourth quarter and almost 510,000 in 2020 in total.
Tesla’s earnings report will fill in some blanks, however. Net income and free cash flow will give a better picture of how efficiently Tesla is operating, along with the huge contribution that regulatory credit sales are making to its financial results. Shareholders also want to know what CEO Elon Musk’s vehicle delivery target for 2021 is, as well as when to expect new vehicles to be available.
What could hurt Tesla in the future, however, is anything short of an extremely optimistic outlook for 2021. Investors have become accustomed to seeing strong growth in the core automotive business and also want to see continued progress in key areas as direction battery technology, and sustainable energy equipment, more broadly. If they are disappointed, the big Tesla race on the rise may come to an end.
Don’t miss
There will be a lot of news about the market movement in the next eight days, so it’s not like anything will happen between now and January 27th. However, if you have to choose a day in this earnings season to pay attention to the market, the last Wednesday in January is the only one to watch.