The day has arrived.

Alphabet, the parent company of Google, will kick off the earnings season for the Magnificent Seven stocks, reporting its results after the bell. Advanced Micro Devices, also a key AI stock, will release its earnings this evening.

While this week will be the busiest week for the earnings season, none is more important than the Magnificent Seven stocks since it will likely shape the market’s sentiment over the next few weeks.

The market is trading at lofty valuations, so investors will want Big Tech companies to deliver strong results to justify them. They have spent big money on AI projects, and it is time for them to show actual profit growth from these projects.

But of course, the presidential election is approaching. We will see if investors would make big bets ahead of the election or hold back until we know who will take the White House. The market might move at a modest size if Big Tech earnings come in as expected.

• “This week’s megacap tech earnings and jobs data will provide plenty of potential fuel for near-term market momentum, but it remains to be seen whether investors will want to sit on their hands until after next week’s election, especially given the volatility around the past two,” said Chris Larkin at E*Trade from Morgan Stanley.

Saira Malik at Nuveen believes that the election might drive the price action in short-term, but the market’s long-term fate will be determined by the economy and corporate earnings growth.

• “With that in mind, corporate earnings, inflation and the direction of interest rates should continue to be the structural drivers of financial markets,” she said.
• “This was evident in the recent backup in US Treasury yields after they bottomed in mid-September following the Fed’s rate cut. Since then, the uptick in yields, paired with underlying fundamentals, may have created another attractive entry point for one of our favored fixed-income sectors.”

Economic data dominated the last few market moves, but the upcoming data might not have similar pulling power. The reason is simple. There have been two major events that will distort the economic reports — strikes and hurricanes. So, investors are unlikely to value much for this Friday’s September jobs report.

• “We’re heading into a busy two weeks,” Callie Cox at Ritholtz Wealth Management said. “The election conversation will be the loudest, but the packed slate of earnings and economic data could be what markets care about the most. And the results could be noisy, especially from the jobs side.”

All in all, Jason Draho at UBS believes the market will move based on economic data once the election is over.

• “With a week to go to the election and polls indicating a dead heat, investors are unlikely to take on much new risk, and may even prefer to de-risk until the outcome is known,” said Jason Draho at UBS Global Wealth Management.
• “Once the dust settles and the outcome is clear, the macro fundamentals should reclaim their spot in the driver’s seat, determining the market direction.”

By the way, want to see the best performing tech stocks in the last 10 years?

Take a look at the chart below:

Today’s Pick: Ituran Location And Control Ltd. (ITRN)

Subscriptions make one of the best business models in the world — if not, the best. Here is why. They offer predictable revenue, and you will see many subscription-based companies showing consistent growth over the years.

Ituran is no different. It provides a car security system and charges subscription fees to the car owners. Their customers are made up of individual car owners and fleet management clients.

The company does business with a wide range of recognizable brands, earning revenues around the world that includes the USA, UK, Israel, Ukraine, India, Brazil and so on.

And if you only learn three things about the company, remember these three points:

1. They own a valuable subscriber base of locked-in, recurring revenue
2. This locked-revenue forms the foundation for steady, consistent growth
3. The company is laser focused on profitability

First, the subscriber base. Ituran boasts 2.29 million paying subscribers whose recurring revenue forms a solid base for the company’s business. The company makes 70%+ of their revenue from subscriptions and 30% from the sale of new hardware.

They acquire customers through two primary channels: OEM and aftermarket.

Ituran’s subscriber base is growing. In their most recent investor presentation, the company points out that their aftermarket subscriptions are growing at 11% organically every year.

Co-CEO Eyal Sheratzky is really committed to maintaining a profitable business. An analyst asked him previously about expanding its United States business. Of course, everyone wants a slice of the world’s biggest economy. However, Sheratzky clarified:

• “I would say our strategy is to keep profits, keep profitability, even giving up some growth, because when we are analyzing the market for more than 15 years, we sold it most, if not all of our competitors, which are bigger than us, always lost money, most of them bankrupt and changed ownership during the years. We have always made money.”

In describing the difficulty penetrating new markets without giving away the farm, Sheratzky continued:

• “We always keep everything for profits, because to start giving, for example, units for free or going and advertising for $50 million, and then sells hundreds of thousands a year, it’s very nice, but no one proved that even in a long term, it’s turning to profits…”
• “…And the business in the end of the day is to serve shareholders by creating profits. So we will not sacrifice our profits. We always try to balance between growing and profitability.”

And just to make sure he was clear, Sheratzky finished with:

• “This is our holy thing; profits, profits and profits.”

Ituran reported a profit margin 15.42%. What do they do with their profits? The company loves to return cash to shareholders through dividends and share buybacks.

Its dividend yield is at 5.67% which is impressive for the company with this growth rate. Its cash is nearly 10% of its market cap.