Big tech companies’ quarterly reporting season: Netflix, Intel, IBM, Twitter, SAP, AT&T, Seagate, Texas Instruments, Snap and more kicks off this week. The first reports will answer the questions of whether the analytic forecasts for the industries on Wall Street are valid.
Tech stock investors will receive a lot of news starting Monday:
global video streaming giant Netflix (NFLX) will report its financial results on Tuesday July 20;
Texas Instruments (TI) – Wednesday 21 July;
Intel (INTC) and Snap (SNAP) reports are expected on Thursday July 22nd (after market close).
Market analysts expect tech sector revenue growth to be strong overall, but some are likely to face negative trends. Whether this is the case investors will see from the results of the report for the quarter ended in June.
Wall Street believes the past quarter should still be a strong quarter for retailers of mobile phones, cloud computing, online advertising and e-commerce. Here are five key questions in the tech industries that investors should be answering at the end of this reporting season:
Is the PC boom over?
During the pandemic, there was a boom in PC demand as consumers needed new technology to work and study from home. However, the return of workers to offices and students to schools may reduce demand. In addition, there is a problem with a shortage of microcircuits, which can slow down the pace of production and create a shortage.
Apple’s Mac sales (AAPL) rose 70% last quarter, and consumer PC sales also skyrocketed at HP Inc. (HPQ) and Dell Technologies (DELL). But last week, Gartner reported that growth in global PC shipments in the second quarter slowed from 35.7% in the first quarter to 4.6% due to severe component shortages.
Intel’s report on Thursday should provide insight into PC demand.
Will semiconductor manufacturers continue to grow?
Many of the world’s processor manufacturers have benefited from the global shortage of semiconductors, as sales grew at a rapid pace against the backdrop of increased demand and the shortage allowed prices to rise.
In the current season of reports, analysts and investors will be looking closely at forecasts and statements from the CEOs of these companies in order to understand in which direction the industry will move.
The world’s largest contract chip maker Taiwan Semiconductor (TSM) said last week that it will increase production of microcontrollers used in automotive manufacturing.
But as noted by Wireless Fund portfolio manager Paul Meeks, the news sparked a sharp drop in shares in both TSM and its rivals Microchip Technology (MCHP) and NXP Semiconductor (NXPI). Since the increase in supply is bad in this case, the limited number of chips shipped allowed higher prices.
David Ryderman, portfolio manager at Endurance Capital, said the Texas Instruments (TXN) quarterly report on Wednesday should provide important insights into demand in the industrial, automotive, electronics and communications equipment markets.
Will IT costs rise?
In 2020, spending on enterprise data centers declined as companies closed offline offices and connected to cloud services.
However, research firm Gartner estimates IT spending will rise 8.6% this year, up from 0.9% last year, as the economy reopens and employees return to offices.
This should affect the revenues of hardware companies such as: Dell, Cisco Systems (CSCO) and Hewlett Packard Enterprise (HPE); Seagate Technology (STX) and Western Digital (WDC); and enterprise software vendors such as SAP (SAP) and Oracle (ORCL).
IBM’s report on Monday should show whether corporate IT spending is moving upwards.
Freedom of movement after a pandemic
Current trends show that more and more Americans are leaving home for both work and pleasure, which is good news for airlines, travel and travel.
Evercore ISI analyst Mark Mahani is optimistic about the outlook for Uber Technologies (UBER) and Lyft (LYFT), believing that the number of travel orders may exceed Wall Street forecasts.
Trends continue to benefit tech giants
Market experts believe in the continued growth of the five largest technology companies – Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon.com (AMZN) and Facebook (FB), with a combined market valuation of about $ 9.1 trillion.
Evercore’s Mahani considers Amazon the “strongest fundamental asset” among others, given the improved outlook. He is also optimistic about Facebook stock, based on the ongoing recovery in internet advertising. The same factor should drive Alphabet. Wedbush analyst Dan Ives likes Apple the most because he sees pent-up demand for the iPhone. For Microsoft, all trends – games, PC, cloud, corporate spending – work in its favor.