Alphabet, Microsoft Bear-Market's Leading Earning Season

Alphabet, Microsoft Bear-Market’s Leading Earning Season

Investors are facing a week of success or failure for some of Wall Street’s most influential tech stocks in a historic year for a group that has been in bear market territory.

Investors are facing a week of success or failure for some of Wall Street’s most influential tech stocks in a historic year for a group that has been in bear market territory.

Superlatives followed one after another on the 2022 road trip. Shares of Meta Platforms Inc. lost. 61%, its biggest drop since the company went public a decade ago. apple a company , the alphabet Inc. and Amazon.com Inc. And the Microsoft Corporation. It is preparing for the steepest declines since the global financial crisis.

Now, those companies are set to report quarterly results this week with forecasts showing earnings decline by the most in at least three years. The quintile combined makes up about 40% of the weight of the Nasdaq 100, which has lost $6 trillion in value this year due to massive interest rate increases by the Federal Reserve and the growing possibility of a recession.

“It’s essential to sentiment around technology, no doubt,” said Neil Campling, an analyst at Mirabod Securities. “Investors are now focused on the bottom line and want evidence of lower costs, disciplined spending, and no pursuit of revenue growth at any cost.”

Here’s a look at big technology stock due to Report This week and what investors are watching. Alphabet investors are concerned about the strength of the advertising market in the weakest Economie, a topic underscored by Snap Inc.’s weak growth. last week. However, analysts still plan to achieve full-year revenue growth for Alphabet of about 12%, slightly faster than the S&P 500, with double-digit increases also expected for the next three years.

Any indication after the market close on Tuesday that this outlook is too optimistic could push the stock lower. Keybanc Capital Markets on Monday lowered its estimates for The Google One of the parents, and now expects a revenue increase of just 5% for the year.

Arguably, the stock’s weakness made Alphabet a bargain, trading at just 17 times estimated earnings, discounted from its 10-year average and the Nasdaq 100 overall. Software giant Microsoft, which also announced after the shutdown on Tuesday, is trading at 23 times earnings, a slight increase over its average over the past decade.

While the demand for Cloud Business software products are expected to be solid, even in a recession, the 9.4% quarterly revenue growth projected by analysts will be its slowest pace since 2017.

“The big question mark is, what impact will Microsoft have from a slowing economy and weaker PC?” Wiley Angell, chief market strategist at Ziegler Capital Management. “However, given the overall stability of revenue and stock valuation, I think this is the time to evaluate it.” meta pads After a stock drop that wiped out $587 billion in Meta value this year, some investors love to hear about it Mark Zuckerberg He announced in earnings on Wednesday that he has pulled back on spending to push the company into metaverse. This expensive gambit still has to generate meaningful revenue at a time when investors focus on cutting costs.

Facebook’s parent has been cornered by stunted user growth, competition from TikTok, and Apple’s privacy policy that has reduced its ability to target ads. Also, facing the same weak ad market that put pressure on Snap.

Full-year revenue is expected to decline 0.7%, making it the only company among the five companies expected to post a decline. This is also set to be the first year of lower revenue in the company’s history. Meta shares are trading near their lowest recorded levels, although that wasn’t enough to tempt the bulls. Amazon.com reports Amazon Thursday afternoon, and the report will be scrutinized as a cross-industry leader. The e-commerce business will highlight consumer power, especially in the holiday shopping season, while the Amazon Web Services cloud computing division gives a glimpse into how IT spending has stopped.

Investors are likely to focus on Amazon’s progress in cutting costs, given the recent preference for profitability over growth. Amazon is trading at more than 40 times estimated earnings, more than double the Nasdaq 100 index, albeit less than its long-term average.

Amazon is the first idea for JPMorgan Chase & Co. Among Internet stocks, it considers the valuation attractive. While analyst Doug Anmuth sees some risks – including currency headwinds and slowing discretionary spending – he writes that it “becomes a cleaner story through 2022 as revenue growth accelerates and operating income margins expand through 2023”. Apple iPhone maker was the relative winner for 2022, down 16%. Investors have been drawn to it because its steadily growing balance sheet and strong fortress give it safe haven status.

However, that could leave the stock vulnerable when a report is made on Thursday. Bloomberg News recently reported that it is backing away from plans to ramp up production of new iPhones due to demand trends. The stock is also trading at 23 times forward earnings, above its long-term average and the market in general.

“Apple certainly doesn’t seem to be priced into the recession, and short-term complications can be challenged, given what we’re hearing about market softness,” Angel said. “However, earnings stability should continue to stabilize the stock, while providing a higher floor for the multiplier.”

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