Coca-Cola, Las Vegas Sands, and Capital One are also on tap.
The second quarter earnings season is in full swing as the first of the Magnificent 7 stocks report this week – Alphabet (NASDAQ:GOOG) and Tesla (NASDAQ:TSLA). Both companies report their earnings on Wednesday after the market closes.
Analysts expect Alphabet to generate revenue of $93.7 billion, which would be a 10.6% year-over-year increase. Earnings are anticipated to come in at $2.17 per share, which would be a 14.8% jump from the same quarter a year ago.
The two big businesses for Alphabet are search through its Google property, and cloud computing. Google has long been the dominant player in search and it represents the bulk of its revenue. But its position has been challenged by a federal lawsuit that found Google in violation of antitrust statutes. Alphabet has appealed the ruling.
Search has also been challenged as competitors like Microsoft Bing have started to eat away at its market share. In addition, there is the looming threat of AI search, like ChatGPT. As more and more AI search apps come online, and users get more comfortable with them, might they eat into Google’s dominance? Google has its own version in Gemini, but ChatGPT is the leader in this space.
“Concerns over AI evolution in Search (and regulatory pressures to a lesser degree) have weighed on [Alphabet],” Truist analyst Youssef Squali said in a research note, according to MarketWatch. “We believe that current valuation reflects much of those concerns, and that AI Search remains Google’s war to lose.”
Alphabet stock is flat year-to-date, and up 6% over the past year. But it is also the cheapest Magnificent 7 stock, trading at just 20 times earnings. That should get the attention of investors.
Tesla dealing with declining sales growth
Of the Magnificent 7 stocks, Tesla has struggled the most this year, down about 18%. However, it is up some 47% since bottoming out at around $223 per share in April.
The electric car company has been dealing with declining sales and backlash against its CEO Elon Musk for his political involvement. While Musk has curtailed his work with the Trump Administration, there is now talk of starting a new political party, so it remains to be seen what happens there.
Meanwhile, in the second quarter, Tesla saw its deliveries decline for the second straight quarter. Deliveries were 384,122, which was below analysts’ estimates and down 13.5% from the same quarter a year ago.
Investors will be looking for more details on where sales are headed in the Q2 report. Meanwhile, Tesla stock remains incredibly expensive, trading at 188 times earnings, which makes the declining sales even harder to swallow.
Other notable earnings this week include beverage maker Coca-Cola (NYSE:KO), which reports Tuesday morning. Analysts are anticipating earnings of 84 cents per share, unchanged year-over-year, and revenue of $12.6 billion, up 2.4%.
Also, on Tuesday after the market closes, Capital One (NYSE:COF), which just acquired Discover Financial, reports earnings. Analysts are expecting earnings of $4.03 per share.
In addition, casino stock Las Vegas Sands (NYSE:LVS) reports earnings on Wednesday after the market closes. Analysts are expecting earnings of 53 cents per share, which would be up from 49 cents in Q1 and 48 cents per share in Q2 of 2024.
