Earnings for Alphabet, Microsoft, Meta, Amazon and Apple this week will be critical in settling or exacerbating investor concerns about Fed policy tightening and the dismal results from Netflix last week.
It’s already been a big week in terms of corporate earnings, with 179 S&P 500 announcements, pressure escalating as it arrives on the back of what traders have described as a “worry wall” market, with global stock indices sliding towards the end of last week and continuing today where they left off.
Much of the attention and confidence will be taken from the performance of the trillion-dollar tech giants and other FAANG stocks, which Tuesday saw earnings from Microsoft Corp and owner Google Alphabet Inc (NASDAQ:GOOG) after the closing bell, with Facebook subsidiary Meta Platforms Inc. (NASDAQ:FB) was reported late Wednesday and was followed the next evening by Apple Inc (NASDAQ:AAPL) and Amazon.com Inc (NASDAQ:AMZN).
“In short, Street needs to see underlying drivers running on the cloud, enterprise, and consumer front to show that the ‘scary slowdown’ is more a bark than a bite at this point in the cycle,” said US analyst Daniel Ives.
While the first-quarter earnings season in the US is off to a strong start, with nearly 80% of companies beating earnings expectations, according to UBS, a sudden drop in Netflix subscribers, amid reports of consumers cutting back on non-essential spending, has sent Waves of fears through technology names in the market in particular, with the Nasdaq Composite Index down more than 6% since Thursday to approach a nearly 20% drop in the year to date.
The companies formerly known as FAANG (and Microsoft) have lost more than $2.1 trillion in combined market value since December, accounting for nearly half of the S&P 500’s $4.4 trillion loss over the same period.
This has left five out of six in “bear market” territory with a drop of more than 20%, with the sole exception of Apple.
This “raises the risks” for Apple’s second-quarter results, said analyst Ross Mold at AJ Bell, “Any degree of disappointment here – or poor third-quarter guidance – could put additional pressure on Big Tech’s share prices and possibly the broader US stock market.” .
With the overall valuation back to what it was in June 2021, Mold said, if these really are the beginnings of a major tech bear market, “investors haven’t seen anything yet, at least if the 2000-2003 crash is evidence.”
Ives and his team anticipate strong numbers from Microsoft and Apple as part of a bifurcation in the tech story, where software, semiconductors, cybersecurity, and product-driven names like Apple are on the winner’s side in an ongoing digital transformation, while WFH’s “sticker kids” like Netflix and Meta will see and Zoom Video Communications Inc (NASDAQ:ZM) compressed their assessments as results slip from their epidemic levels.
Ives said earnings from Microsoft and Apple “could dictate the trajectory of tech stocks over the coming months.”
Wedbush predicts that large transactional cloud deals in the Redmond-based giant are up north 50%, with deal volumes continuing to increase significantly as companies accelerate digital transformation.
For Apple, Apple is estimated to have gained nearly 3% market share in China over the past 12 months following the 5G iPhone 12 / iPhone 13 product cycle.
“The street’s focus has naturally been on the shortage of chips for Apple (and every other tech/auto player) and the shutdown of the Covid China factory, however the Cupertino’s primary iPhone 13 order story both domestically and in China is heading ahead of street expectations.”
With a renewed focus on profits, Mold suggests, “we may have reached the stage of the market cycle where fundamentals and valuation matter much more than financial engineering.”
Other tech-related companies whose results will be released include Activision Blizzard on Monday; LG, Qualcomm and Spotify on Wednesday; With Samsung, Intel and Twitter on Thursday.
Analysts at Deutsche Bank highlighted that consumption patterns will be in focus with results for Coca-Cola on Monday, Mondelez (NASDAQ:MDLZ) and Chipotle on Tuesday, Kraft Heinz on Wednesday, and McDonald’s on Thursday, while a handful of banks across the around the world so. Taking a close scrutiny of consumer credit, including HSBC on Tuesday, Barclays on Thursday and NatWest on Friday, along with European peers UBS, Credit Suisse and Santander and US payments giants Visa, PayPal (NASDAQ:PYPL) and Mastercard from Tuesday to Thursday on straight.
In healthcare, another sector that has benefited from the pandemic, journalists will include GlaxoSmithKline and AstraZeneca in London on Wednesday and Friday, along with Novartis on Tuesday and Eli Lilly, Merck and Sanofi on Thursday.
Deutsche’s team said markets will also see “how a commodity rally and focus on the energy transition has affected major commodity companies around the world,” with results from Iberdrola and Vale on Wednesday; Total and Repsol on Thursday; Exxon, Ørsted, Chevron and Eni on Friday.
US Earning Season April 25-29, 2022
Monday: Coca-Cola, Activision Blizzard, Whirlpool (NYSE: WHR)
Tuesday: Microsoft, Alphabet, Visa, PepsiCo (NASDAQ: PEP), UPS, Texas Instruments, General Electric (NYSE: GE), Mondelez (NASDAQ: MDLZ), 3M, General Motors, Wolfspeed
WednesdayPlatforms: Meta, Qualcomm, Boeing, Kraft Heinz, Xilinx, United Rentals (NYSE: URI), Spotify
Thursday: Apple, Amazon, Mastercard, Comcast (NASDAQ: CMCSA), Intel, McDonald’s, Caterpillar, Altria, Ford, KLA Corporation, Hershey, Twitter, Southwest Airlines (NYSE: LUV), Royal Caribbean Cruises and Skyworks
Friday: ExxonMobil, Chevron, Honeywell (NYSE: HON), Colgate-Palmolive