ST Note - MAMAA earnings yield ST Note - MAMAA earnings yield ST Note - MAMAA earnings yield

ST Note - MAMAA earnings yield

Junvum Kim

Sales Trader

Summary:  This week we look ahead the earnings release (after market close) of MAMAA - Meta (Thu), Apple (Fri), Microsoft (Wed), Amazon (Fri) and Alphabet (Wed) - that make up nearly quarter of the whole $33T SPX market cap and compare earnings yield as well as credit spreads.

Heading into this Friday’s US 3Q GDP (est 2.3%) and Sep core PCE (est 5.2%) numbers, 10 year TIPS (Treasury inflation-protected securities) yield is sitting at 1.66%, highest level since early April 2010 when CPI was at about 2.3% that is significantly lower compared to the most recent CPI 8.2%. This TIPS yield also seen as real yield has risen up all the way from -1% at the beginning of this year and the YTD performance of the related ETF – iShares TIPS (TIP) is -14% that is better than S&P 500 (SPX) -20% return still in bear market territory but the former also failed to protect against inflation that persisted at high level in 2022, neither did gold (XAUUSD) with slightly better -10% return.

Soaring risk free real yield continues to make other major risky asset classes – equities, high yield corporate bond & bitcoin - not only less attractive but also more expensive dragging down their value. Bitcoin (BTCUSD) that is the only non yielding one among the three hence its YTD return reflects the damage down already with approximately -60% even though $19,000 has shown a lot of resilience as a support area for four months.

Comparison of the risk premiums over US 10 year treasury yield between credit spread (junk corporate bonds below BBB-) and SPX shows divergence as the SPX earnings yield (inverse of PE) still relatively low or in other words, the PE multiple is still quite rich at 18.5 times with earnings of $205 based on the last night’s close 3,797. In fact, the risk premium of SPX is now 50 bps lower than IG (investment grade) credit spread and the last time this happened was back in December 2009.

So far just over 100 companies in SPX reported and aggregate earnings surprise is +4.4% with sales surprise of mere +1.2% that is less than half of 3Q 2020. However given the financial (11% weight) is the only sector that had more than half its companies reported, we are far from getting a real picture of the outcome and outlook as this week we look ahead the earnings release (after market close) of MAMAA – Meta (Thu), Apple (Fri), Microsoft (Wed), Amazon (Fri) and Alphabet (Wed). These five stocks make up nearly quarter of the whole $33T SPX market cap hence VIX still hovers around 30 in the anticipation of any potential downside risks even though a bulk of the main macro backdrops – declining demand, rising costs, high inflation and interest rates – look to have been embedded. All sectors have YTD negative returns except energy with the sectors that include MAMAA are the three worst performers – info tech (-28%), consumer discretionary (-30%) and communication (-36%) - alongside real estate with -33%.

Tesla (TSLA) was the first mega cap stock that has already reported last week and despite some impressive YoY growth figures – 56% sales, 103% earnings, 148% free cash flow - being a cyclical growth stock with high multiple of 65 times, the reaction has been nothing but negative breaching pre split $600 (post split $200) for the first time since 16 June 2021 and also raising concerns of further weakening demand as it announced price cuts for its cars in China. Similarly AMZN could also be vulnerable to any miss to the estimates particularly to the revenue numbers given their low margin that has been falling even lower.

For META and GOOGL (GOOG), disappointing results (slowest quarterly sales growth) from Snap (SNAP) last week should provide some indication of recession sensitivity in terms of advertising spending from the businesses and ongoing competition impact from TikTok. However potential buy-the-fact price action cannot be ruled out by long term bargain buyers for META which has the highest earnings yield of nearly double digit among MAMAA with estimated free cash flow yield of more than 5%.

AAPL and MSFT – both in IT sector - are the two biggest stocks in SPX and they share two things in common with similar yield of about 4% and only two of MAMAA that pays dividends yielding 0.6% and 1% respectively. This is small compared to 3 months treasury yield at 4% but given both high dividend and low EV/EBITDA were the two major factors behind the outperformance, these dividends are expected to remain as a additional buffer for these stocks to navigate through high interest rate environment with strong US dollar which is one of the major factor to watch this earnings season. Double digit sales growth might come to an end for MSFT despite having balanced revenue streams, while main focus for AAPL is expected to be iPhone sales – that takes nearly 2/3 of the total revenue - outlook including the holiday season considering it already reported the production cut on the iPhone 14.

Spread and yield comparison
Earnings estimates

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.