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Wall Street is starting to cut earnings forecasts for the Mag 7
Only two of the seven haven’t yet cracked.
It’s a slightly muted day on Wall Street, at least by the standards of recent volatility.
But the biggest drag on the market is coming from the likes of giant tech companies like Amazon, Meta, Googleand Microsoft, which, because of their massive market caps, are keeping a lid on shares as we head toward the close.
The never-ending tariff saga aside, there’s not a ton of news on these stocks, though another Wall Street research shop — Wedbush Securities — cut its estimates and price for Amazon, the second such action in as many days, as part of a broad analysis of the internet sector.
“Ahead of 1Q results, we are broadly reducing 2025 estimates (2%-6% revenue and 5%-10% EBITDA/OI) and price targets, reflecting limited visibility into current economic conditions, and capturing the potential implications of a weaker demand environment. We will continue to monitor the situation and revise estimates further as we hear from management teams in the coming weeks to gain better clarity than the current dense fog.”
Wedbush analysts nipped their price target for Amazon from $280 to $225 and trimmed estimates for Q1 net income by about 3%.
The move was the second such slice in as many days, with Morgan Stanley analysts on Monday cutting earnings-per-share estimates and lowering its price target on the stock by 10% to $245.
Now, none of these are super deep cuts, but they’re starting to add up to the point where you can see a clear deceleration.
If we look at Wall Street’s best guess of what the full-year earnings per share for a company would be as of that day, a pattern emerges, as these charts show:
And it’s not just Amazon. Other Mag 7 market titans — which, because of their massive market weights, have in recent years driven an outsized share of gains for major indexes like the S&P 500 — are also seeing slippage in earnings expectations, as Wall Street either prices in an economic slowdown because of tariffs or reverse engineers its earnings calls to correspond to the recent stock market slump. Meta, for one, has gotten a little off the top.
Estimates for Apple, too, have been cut as analysts try to ballpark the effects of tariffs on the iPhone maker due to its heavy reliance on China.
Don’t even get us started on Tesla, which has seen its business outlook collapse in light of the brand damage done by CEO Elon Musk and his foray into right-wing politics.
While estimates for Microsoft and Nvidia haven’t yet cracked, the broad-based move lower for earnings expectations among massive Mag 7 names is important.
These stocks have largely carried the market higher for much of the last few years, in a giant rally that was largely justified by the massive earnings these stocks have raked in amid the AI boom.
But those expectations seem to be changing fast, and could present a serious headwind to a durable recovery in the market.
