The performance of stock prices is heavily influenced by how well a company performs in comparison to investor expectations. This was evident in the first quarter of 2024, as the seven biggest tech stocks in the S&P 500 had varied outcomes. The “fab four” of Nvidia, Meta Platforms, Microsoft, and Amazon outpaced the market, with shares of two of the other three, Apple and Tesla, experiencing losses.
Nvidia reported impressive revenue growth of 265% in the fourth quarter of 2023, surpassing analyst expectations. The company also raised its guidance for the current quarter, leading to a significant increase in its stock price. Meta Platforms saw a 25% growth in revenue and high net margins, which boosted its stock price. Amazon, despite a 14% revenue growth, fell short in its revenue forecast for the first quarter of 2024. Microsoft exceeded revenue expectations but disappointed in its guidance for the current quarter.
In contrast, Apple and Tesla failed to meet expectations, resulting in a decline in their share prices. Tesla reported weak fourth-quarter results and delivered below-expectations guidance for 2024. Apple is facing the possibility of a revenue decline for the first time since 2016, with analysts predicting lower iPhone unit sales and overall revenue.
Investors are advised to consider buying companies that are likely to exceed expectations and raise guidance in their quarterly reports, while selling shares of companies that are expected to fall short of investor expectations. The lesson for investors is to focus on companies that innovate quickly and effectively, but be cautious of companies that may have raised expectations too high. Stock prices are heavily influenced by a company’s performance relative to investor expectations, making it essential for investors to stay informed and make informed decisions based on financial reports and forecasts.
