2 Stocks to Watch For Earnings Season

Earnings season is nearly upon us and among the many companies preparing earnings announcements, two influential technology stocks have attracted some well-deserved attention.

Both have already shown significant strength and growth potential throughout various economic booms and busts, so is now the time to buy them?

Meta Platforms

When Meta Platforms (NASDAQ:META) first company, Facebook, introduced social media in 2004, it dramatically changed the way people interact. Now apps like Messenger, Instagram, and WhatsApp further empower global communication.

Meta has constantly pushed the boundaries of technology, and sometimes been burned for so doing. From simply scrolling through pictures to see what friends were doing to creating experiences via augmented reality and virtual reality using Oculus headsets, Meta has been to the forefront of social media experiences for a few decades now. 

Meta in 2024

The year started well for Meta, with strong forward momentum in both product and service offerings. The company estimates that more than 3.2 billion people use at least one of its apps daily, which is evidence of healthy growth in the United States and around the world.

One reason for the company’s growing success this year is its transition from focusing on the metaverse to artificial intelligence. Meta provides several AI services, such as Meta AI, a versatile, virtual personal assistant.

There are also creator AIs to help boost how communities connect and business AIs to improve customer interactions, which offers advantages for users and businesses alike.

The company continues its progress in the release of an upgraded version of Meta AI, built on the newest Llama 3 model. Its first phase looks incredibly promising and has been well-received. As the largest open-source model, Meta’s Llama 3 is betting that it will attract applications similar to the App Store, albeit for AI.  

Meta Financials

For Q2 2024, the company reported total revenues up by 27.3% YoY, to reach $36.46 billion.

Income from operations ballooned by 91.2% year-over-year and reached $13.82 billion. Net income of $12.37 billion represented a 116% rise year-over-year while earnings-per-share climbed by 114.1%.

By the end of Q4 2024, Meta’s revenue and EPS are projected to increase by 17.8% and 34.9% year-over-year to $158.85 billion and $20.06, respectively.

The company’s trailing-12-month gross profit margin is 81.5%, well above the industry average of 49.93%. The company’s trailing-12-month EBITDA margin of 47.96% is 158.6% higher than the average rival at 18.55%.

Plus, Meta’s trailing-12-month levered FCF margin is 24.62%, further illustrating strong financial performance.

Over the past year, Meta’s shares have gone up by more than 43% and this year alone shares are up by 34%.

Analysts remain positive about Meta’s future. They suggest the price will climb by 3.53%, reaching a target share price of $522.02.

Intel

While NVIDIA garners the headlines in semiconductor design, Intel (NASDAQ:INTC) plans to deliver 100 billion transistors this year and has a goal of delivering one trillion transistors in a single package by 2030.

And while its rival gains attention for making AI possible, Intel is making waves in the field of integrated photonics technology for fast data transmission.

The company’s Integrated Photonics Solutions Group showed the first fully integrated optical compute interconnect (OCI) chipset in the industry.

This OCI chipset makes high-performance computing use-cases in AI for data centers possible and may well help Intel grow faster in the artificial intelligence and data center markets.

It’s clear that smart money has seen value in where Intel is headed because last month, Intel and Apollo Global Management, Inc. (NYSE:APO) announced an agreement for Apollo-managed funds to lead an $11 billion investment whereby Apollo receives 49% equity in a joint venture connected to Intel’s Fab 34, which is located in Leixlip, Ireland.

This is the location where Intel manufactures in high-volumes its newest process technologies called Intel 4 and Intel 3.

Intel Financials

In Q2, 2024, Intel’s net revenue rose by 8.6% year-over-year and reached $12.72 billion while non-GAAP gross margin rose by 27.7% year-over-year to $5.74 billion.

Non-GAAP net income and non-GAAP EPS attributable came in at $759 million and $0.18 per share, respectively. 

While the numbers are reasonable, the future is where the excitement lies. Intel is primed for growth with expected revenue and earnings per share increases for the year ahead.

Revenue is forecasted to rise slightly over last year, reaching $13.02 billion while EPS is expected to be around $0.10 per share.

On a positive note, Intel has surpassed forecasted revenues in three of the past four quarters. By the end of Q4 2024, analysts expect that the company’s revenue will increase by 3% to reach $55.87 billion. Earnings per share are forecasted to rise by 4.6% to $1.10 year-over-year.

Profitability and cash flows appear to be in good shape too. The trailing-12-month EBITDA margin is 19.01%, more than double the industry average and the trailing-12-month net income margin of 7.36% also eclipses rivals.

So is Intel a buy? 39 analysts see 14.8% upside potential to $38 per share. We must caveat that optimism by noting that a 10-year discounted cash flow forecast analysis pegs fair value closer to $35 per share.

While the bears will point to the valuation as being elevated at this time and cite the 32.8x price-to-earnings ratio as evidence, it must be noted that relative to forecasted net income growth, the stock is cheap and trades now at a PEG of just 0.14x.

That’s largely because net income is expected to rise at a 62.7% annual rate over the next 5 years, which would make Intel very cheap at present levels if true. Revenues are also expected to go up at a pretty good pace over the next 5 years of 10%.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.