In the ever-changing world of the stock market, stock prices are largely influenced by a company’s performance in relation to investor expectations. This was evident in the first quarter of 2024, particularly among the seven biggest tech stocks driving the S&P 500. The Fab Four, including Nvidia, Meta Platforms, Microsoft, and Amazon, outperformed the market after beating growth expectations. On the other hand, Apple and Tesla saw a decline in their stock prices in the first quarter due to underwhelming performances.
Among the Fab Four, Nvidia stood out with a remarkable 265% revenue growth, exceeding analyst expectations by $1.5 billion in the fourth quarter of 2023. This positive outcome led to a significant surge in Nvidia’s stock price, indicating a strong correlation between positive financial results and stock performance. Similarly, Meta Platforms reported a 25% revenue growth and higher net margins, leading to an increase in its stock price. On the other hand, Amazon showed 14% revenue growth but struggled with guidance, resulting in a slower stock price growth.
Microsoft also experienced a 17.6% revenue growth in the second quarter of 2024, beating expectations and demonstrating a positive impact on its stock price. However, the company’s guidance for the future fell short, leading to slight disappointment among investors. The strong performance of these tech giants showcases the importance of exceeding investor expectations to drive stock prices upward.
In contrast, Apple and Tesla faced challenges in the first quarter of 2024, leading to a decline in their stock prices. Tesla reported weak fourth quarter results and below-expectations guidance for 2024, which impacted its stock price. Apple also faced concerns as analysts predicted a potential drop in revenue for the first time since 2016, primarily due to lower iPhone unit shipments and increased competition in the Chinese market.
Investors are advised to consider companies that consistently exceed expectations and demonstrate strong revenue growth. However, it is crucial to monitor companies that have raised investor expectations to unsustainable levels, as failure to meet these high expectations could result in a significant decline in stock prices. By understanding the relationship between company performance and stock price trajectories, investors can make informed decisions in navigating the complex world of the stock market.
