Can the tech reports cheer up the New York stock market?

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26.04.2022 | 3 minutters lesetid

US stock markets fell back last week, with S&P500 down 2.75% while Nasdaq fell back 3.83%. Most of that decline occurred on Friday, April 22. Interest rate hikes from the Fed continue being in the investor's focus. Much of this is about the US economy's risk of sinking into a recession as the rate hikes lower consumer confidence. There is also uncertainty about ending the Ukraine war and whether it could lead to further conflicts.

Meanwhile, price movements were smaller on European stock markets last week, with the FTSE (London) being one of the weaker ones. Predominately, FTSE represents a mixture of Energy and Defensive stocks.

Asian stock markets have better pre-conditions since Japan and China's central banks stimulate their national economies with increased liquidity, unlike the Fed. Meanwhile, China's government has closed Shanghai due to Covid outbreaks. There is now a risk that they also shut down Beijing for the same reason, which would not benefit economic activity.

S&P500 index (in USD) daily one-year chart


Source: Infront.

After the past week, some 20% of S&P500 companies have reported their Q1/2022 results, with the percentage of positive earnings surprises rising to 79%, while 2% came in as anticipated and 19% were worse than forecast. Energy, Raw Materials, and Industrial sectors accounted for the most significant profit increases. At the same time, Financials and Consumer Discretionary reported the most crucial profit declines in Q1/2022. But overall, the Q1 earnings season does not seem to give much support to the stock prices. At the end of last week, there were some less encouraging interim results from Verizon, AMEX, and HCA Health Care, which contributed to the fall in the S&P500-index.

S&P500 index (in USD), five-year chart


Source: Infront.

Time to pick up some Apples ahead of Thursday's Q2 report?

This week, 175 companies in the S&P500 index will present their Q1 2022 results (or for the equivalent fiscal period). The time has now come for the tech companies to disguise whether they have managed any better than Wall Street analysts predict them to do. Today, on Tuesday, April 26, Alphabet, Juniper Networks, Microsoft, and Texas Instruments will post their quarterly earnings. On Wednesday, April 27, Meta Platforms, Qualcomm, and Spotify will follow with their interim figures, while Amazon, Apple, and Twitter will publish their quarterly results on Thursday, April 28.

As far as technology companies, including FANG, are concerned, there is a significant difference between more mature companies such as Apple and Amazon and companies that still qualify as hopefuls, such as Tesla. Companies like Apple and Amazon could almost count as value stocks in our view.

We focus on Apple that reports on Thursday, April 28 at 4.30 pm Eastern Time in the United States. A press conference will follow at 5.00 pm Eastern Time. Wall Street analyst expects that Apple will report an EPS of 1.43 and revenues of USD 94.11 billion. Any upside in the iPhone market is probably restrained this quarter due to shutdowns in China. At the same time, the company is amidst a significant upgrade of its 5G phones.

In the Q1 report published on January 27, 2022, revenues were up 11 percent to a new all-time high. That included all product lines (iPhone, MAC, Wearables, and Services). Earnings were also higher in Q1 (EPS of 2.19) without having any positive impact on the Apple share price.

We argue that earnings in Apple are more predictable than an average FANG company, which should make valuation less sensitive to increased interest rates. Hence, the current depressed share price in Apple might be overdone.

A possible trigger in the Q2 report is that Apple might increase its quarterly dividend policy or enlarge its share-buyback scheme.


Apple (in USD) daily one-year share price chart


Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

The MA50 has gradually declined. However, the MA200 at around USD 160 per share looks set to form a support for the share price. At the same time, MACD gives a sell signal. Overall, it is a mixed picture, as we see a total fundamental attractive share while the technical analysis focuses more on the declining phase.

Apple (in USD), five-year price chart


Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.


The full name for abbreviations used in the previous text:

EMA 9: 9-day exponential moving average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers.

MA20: 20-day moving average

MA50: 50-day moving average

MA100: 100-day moving average

MA200: 200-day moving average

MACD: Moving average convergence divergence


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