Big-tech earnings jitters mount as pandemic darlings get crushed
BNN Bloomberg
The trouble in megacap tech is showing no signs of stopping, and earnings from some of the most-prominent names are adding to investors’ list of worries.
The trouble in megacap tech is showing no signs of stopping, and earnings from some of the most-prominent names are adding to investors’ list of worries.
Marquee companies like Apple Inc. and Microsoft Corp., which are due to report their results next week, have come under additional pressure, with the Nasdaq 100 now on pace for its worst month since the 2008 financial crisis. A grim outlook from streaming giant Netflix Inc. was the latest excuse to sell the industry’s shares. Amazon.com Inc. and Facebook parent Meta Platforms Inc. were down over 20 per cent from their records.
More than US$1.7 trillion in value has been erased from the Nasdaq 100 in January, with the tech-heavy gauge entering a correction this week after falling more than 10 per cent from a recent peak. The industry that has powered the bull-market rally from the depths of the pandemic has recently suffered on concern that skyrocketing valuations, the potential for slowing earnings and Federal Reserve tightening will make it harder to justify more gains going forward.
“We don’t know where valuations will stabilize, but we do know that the economic environment and the monetary policy backdrop aren’t as positive as what we had in 2020 and 2021,” said Michael O’Rourke, chief market strategist at JonesTrading. The earnings season will provide clarity into business conditions, he added, but in the meantime, megacap names continue to trade at elevated valuations.
“That’s a reason to be cautious,” he noted.
