HomeBusinessApple and Amazon Results...

Apple and Amazon Results Pose Tech Rally’s Toughest Hurdle Yet

(Bloomberg) — Results from Apple Inc. and Amazon.com Inc. after Thursday’s close represent the next big hurdle for the market’s tech-fueled rally, and it may be the hardest to clear.

Most Read from Bloomberg

Both stocks have been critical to the S&P 500’s advance this year, attracting investors with their relatively durable revenue streams and market dominance. But whether they can fuel further gains is in question, given they trade at lofty multiples, face headwinds in their core businesses, and have limited direct exposure to artificial intelligence — a key driver behind this year’s jump.

“At these valuations, multiples either need to come down, or earnings need to rebound in a very robust way, which might be difficult since a lot of AI excitement has been priced in,” said Irene Tunkel, chief US equity strategist at BCA Research. “But that remains a buzzword more than something that is moving the needle in terms of growth.”

Rate sensitive tech stocks suffered a blow on Wednesday after Treasury yields soared in the wake of Fitch’s downgrade of US sovereign debt. A tech-fueled rally has added more than $6 trillion in value to the S&P 500 index this year, but the sector has struggled to advance after coming within 5% of the Nasdaq 100’s all-time high last month, despite better-than-expected reports from Alphabet Inc. and Meta Platforms Inc.

Apple, whose 48% gain in 2023 has made it the only company valued at more than $3 trillion, will be especially critical if the rally is to get back on track. The stock accounts for nearly 8% of the S&P 500 Index, giving it enormous sway over the benchmark.

The iPhone maker is expected to report a 1.7% drop in revenue in its fiscal third quarter, which would be its third consecutive year-over-year contraction. It is also facing a risk from a weak smartphone market in China, one of its biggest markets, while a tepid revenue forecast from Qualcomm Inc. on Wednesday underlined weak demand for mobile devices. However, Apple trades at nearly 30 times estimated earnings, above its long-term average and at a premium to the market overall.

“Apple seems like a stable story, rather than one that will sprint ahead in growth, and I don’t know what it can do to jazz investors further given the run its had,” said David Klink, senior equity analyst at Huntington Private Bank. “It looks expensive, and presumably everyone who wants to own it already does, so you really have to wonder what it could do to get a pop.”

After rising 53% in 2023, Amazon trades at about 40 times estimated earnings. While this is below its long-term average, a key driver of the company’s profitability comes from its Amazon Web Services cloud business. In a potential warning sign, Microsoft Corp. last week warned of a continued slowdown in its cloud-computing business.

“The results from Microsoft were decent, but even decent results won’t be well received with Amazon,” said Klink. “It is still the market leader in cloud, and if it also shows things slowing, then investors probably got ahead of themselves.”

Tech Chart of the Day

The CBOE’s Nasdaq-100 volatility index gained 12.5% on Wednesday, its biggest one-day percentage gain in nearly a year. The spike in volatility came as the Nasdaq 100 sank 2.2% in a broad decline.

Top Tech Stories

  • Qualcomm Inc., the largest maker of smartphone processors, fell as much as 8.2% in late trading after giving a tepid sales forecast for the current quarter, indicating that demand for mobile devices remains weak.

  • PayPal Holdings Inc. shares slumped after the payments giant said a key measure of profits shrank in the second quarter as the company had to set aside more money to cover souring loans it has made to merchants.

  • Altice USA has replaced Yossi Benchetrit as its head of procurement as an investigation linked to suspected fraud at its European counterpart Altice Europe NV widens.

  • Lions Gate Entertainment Corp. is close to a deal to buy the EOne film and TV studio from toymaker Hasbro Inc. for a little under $400 million, according to people familiar with the matter.

  • Tesla Inc. is offering shopping vouchers worth 3,000 yuan ($420) to new customers in Shanghai, in conjunction with a local government incentive program aimed at boosting consumption and the flagging economy.

  • Investors continued to pile into some Korean stocks seen as related to superconductors amid claims about a breakthrough in the technology, even as the exchange warned of speculative bets and unfair trades.

Earnings Due Thursday

  • Premarket

    • Entegris

    • Trimble

    • Black Knight

    • Cognex

    • Arrow Electronics

    • Wix.com

    • Belden

    • Itron

    • ACI Worldwide

    • SolarWinds

    • CommScope

    • BCE

    • Tegna

    • Expedia

  • Postmarket

    • Apple

    • Amazon

    • Booking

    • Airbnb

    • Fortinet

    • Microchip

    • Motorola Solutions

    • Atlassian

    • Cloudflare

    • GoPro

    • Epam Systems

    • GoDaddy

    • Open Text

    • Dropbox

    • Dolby Labs

    • Universal Display

    • Qualys

    • Appian

    • Synaptics

    • Cable One

    • Yelp

    • Block

–With assistance from Subrat Patnaik and Paul Jarvis.

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.

Source link

Most Popular


Please enter your comment!
Please enter your name here

More from Author

Read Now

Coachella Weekend 1 Recap, J Balvin’s Out Of This World Coachella Set, Metro Boomin & Future Top Hot 100 | Billboard News

It’s Monday April 15th, Billboard counts down the top 10 on the Hot 100, we’re running down all the headliners and special guest performers and some notable audience members that went down at the first weekend of Coachella, J Balvin gives us a behind the scene...

ACKO’s game-changing campaign with Disney+ Hotstar for ICC Men’s Cricket World Cup 2023 – Exchange4media

Amidst the exhilarating atmosphere that surrounded the ICC Men's Cricket World Cup 2023, where...

China’s Economy, Propelled by Its Factories, Grew More Than Expected

The Chinese economy grew more than expected in the first three months of the year, new data shows, as China built more factories and exported huge amounts of goods to counter a severe real estate crisis and sluggish spending at home.To stimulate growth, China, the world’s...

Angel Reese Picked 7th by Sky in 2024 WNBA Draft as Fans Hype Kamilla Cardoso Pairing

Welcome to Chicago, Angel Reese. The Sky made the former LSU star the No. 7 overall selection at Monday night's WNBA draft, adding the high-profile forward to the mix alongside No. 3 overall pick Kamilla...

GM says it will move headquarters from RenCen to Hudson’s site in 2025

Detroit — General Motors Co. announced Monday it will move its global headquarters to the Hudson’s Detroit development next year as it works with billionaire mortgage mogul Dan Gilbert's real estate firm to redevelop the Renaissance Center, its current home a mile away.GM CEO Mary Barra,...

Spotify planning to launch Music Pro subscription with lossless

A recent report revealed that Spotify is planning to raise the price of its subscription soon, at least in some countries. And for those who think that paying $10.99 a month for a music streaming platform is already too much, the company may soon introduce an...

Ryan Gosling’s Viral Beavis and Butt-Head Skit Was 5 Years in the Making

People watch Saturday Night Live to laugh, of course, but there are laughs and then there are sketches that last forever. This past weekend, Ryan Gosling hosted SNL and the episode may have featured one of those all-time sketches. What starts as a discussion of AI...

Angel Reese, Caitlin Clark dazzle on WNBA draft’s orange carpet

For the top picks of the 2024 WNBA draft, what they wear could be almost as memorable as where they land.Editor's Picks1 RelatedThe latest crop of hoops prospects -- including Caitlin Clark, Angel Reese and Kamilla Cardoso -- will learn where their pro basketball careers will...

Tesla lays off more than 10% of its workforce – BBC News

By Shiona McCallumTechnology reporter15 April 2024, 13:00 BSTUpdated 1 hour agoImage source, Getty ImagesTesla will lay off more than 10% of its global electric vehicle workforce.In a memo, first reported by news website Electrek, billionaire owner Elon Musk told staff there was nothing he hated more,...

Longtime Yankees voice Sterling retires after 35-year run

The legendary radio voice of the Yankees, John Sterling, is retiring effective immediately after more than three decades in the booth, he and the team said Monday.The Yankees and Sterling made the announcement after The Athletic reported on a planned news conference for this weekend in...