Tech Stocks Profit Snapshot Q2: Will the Tech Rally Continue?

Big tech report while hovering around all-weather highs

Heading into the earnings seasons for US tech stocks, the Nasdaq is trading around its all-time high.

Reflation trade is on the decline. Growth expectations have deteriorated, reflected by falling US Treasury yields which fell to a 4-month low last week, restarting the rotation to high-growth tech stocks and propelling the Nasdaq to a new all-time high more early this week.

With major US tech trading at all-time highs ahead so earnings expectations are high and concerns revolve around the fact that the good news is already pricing.

Winning season

Expectations are high. Bloomberg predicts 65% EPS growth in SP500 companies. Technology is expected to lag behind other sectors with a 31% increase in profits.

However, it should be borne in mind that tech stocks will mainly face more difficult comparisons from last year than in the previous quarter, as these are the stocks that have shone through the pandemic amid digitalization. dynamic and accelerated WFH.

Big tech to watch in earnings:

Netflix – July 20

Netflix faces some extremely difficult comparisons a year ago. Streaming subscriptions jumped in the second quarter of 2020 during the lockdown. Netflix added 10 million new subscribers in the second quarter of last year, attracting nearly 26 million subscribers in the first half of last year. Netflix management believes great streaming demand has been put forward through 2020, explaining why Netflix added just 4 million in Q1 2021 and why Netflix is ​​only targeting 1 million new subscribers in Q2 2021 The outlook for the third quarter may start to normalize. All the news regarding the new direction of the game will be the center of attention.

What’s next for the Netflix share price?

After hitting an all-time high of 593 earlier this year, Netflix formed a series of lower highs, before bottoming out at 475. Price rebounded from that level and continued to rise, pushing back above the decline. the trendline and the DMA 50 and 200. The RSI suggests there may be more upside to come as long as it stays out of overbought territory. Buyers could look for a move above 565 to attack 592 and look to a new all-time high. Sellers could look for a move below 515 to reverse the short-term uptrend.

Apple – July 27

The fiscal second quarter was a stellar quarter for Apple. Revenue climbed 54% in Apple’s fiscal second quarter reported in April, and EPS stood at $ 1.40 from $ 0.99 expected, so the bar is set high. It was of course an easy comparison for the previous year.

As always, iPhone 12 sales will be at the center of expectations with resilient numbers. The premium product line is expected to outperform which should be good news for margins. In addition, the fast growing service business has increased its gross profit margins as the margins are approximately double that of its product business.

Let’s not overlook the iPad either, iPad sales have jumped in recent quarters amid WFH trends. After the new iPad pro equipped with M1 released in April, could the iPad surpass the iPhone this time? Third-quarter revenue is expected to grow 22% year-over-year, compared to a more difficult comparison, although that would still be tied for Apple’s second growth rate in many years. Wall Street expects EPS of $ 0.99 on revenue of $ 72,780 million

What next for the Apple share price?

Apple traded between $ 115 and $ 140 for most of the first half of 2021. In early June, Apple’s stock price rebounded against the 200 MA and broke the previous high of $ 145 to $ 150 . The RSI has moved into overbought territory, so a consolidation or decline could be considered. As long as the price holds above $ 145, all-time highs could be reached.

Microsoft – July 27

Microsoft has surged throughout the year. The share price has steadily hit new all-time highs month after month. The third quarter saw profits rise 38% to $ 14.8 billion from the same period a year earlier. The gains were spread widely across the company, with dynamic home working and the Xbox X gaming console increasing sales. Fiscal fourth quarter will be under the microscope due to its Windows 11 upgrade. Expect sluggish revenue growth of 16% in its June quarter on EPS of $ 7.77

What’s next for the Microsoft share price?

Microsoft was up 14.5% in the quarter against gains of 8% for the S & P500. Stock prices trade in the ascending channel, even briefly breaking the upper band of the channel, in a strong bullish trend. Watch for overbought conditions on the RSI. The bulls are firmly in control, it would take a move below 260 to reverse the short term uptrend.

Alphabet – July 27

Alphabet has had an exceptional year with a rally of 44% so far. This is because Alphabet has also managed to partially benefit from the reopening. With the reopening of businesses, they are going online to promote themselves by increasing advertising revenue. Alphabet is expected to continue to generate strong growth through its dominant advertising, streaming and cloud computing businesses – the company operates many businesses and controls many products and services that are likely to generate more substantial revenues in the future. For example, YouTube advertising sales in the first quarter of 2021 saw an increase of 49% year-on-year, while Google’s cloud business saw its revenue increase 46% year-on-year. The fact that Google is facing anti-competitive allegations for the fourth time this year has not seriously hampered the share price rally so far, but developments will be watched closely. Expectations are for EPS of $ 16.14 on revenue of $ 56.03.

What next for the Alphabet share price?

The share price has risen 18% so far in the second quarter, from a new high to a new high. The recent selloff seen this week barely touched the sides of the rally but took the RSI out of overbought territory. The 50 sma offered support at several points during the rally. A move below that support at 2400 could reverse the short term uptrend. On the upside, beyond 2585 the all-time high, resistance may be encountered around 2640 the upper band of the ascending channel.

Facebook – July 28

Facebook crushed analysts’ estimates in the first quarter with revenue rising 48% to $ 26.2 billion, well ahead of the forecast of $ 23.7 billion. Advertising business saw a 30% year-over-year increase in price per ad and 12% more ad impressions. The strong momentum is expected to continue in the second quarter, with Facebook guiding the rate of revenue growth to remain stable or accelerate slightly. This bodes well given that advice from FB is generally cautious. Also, let’s not forget that Facebook faces a fairly easy year-over-year comparison where revenue grew only 11%, as covid blocks have meant businesses have cut back on ad spend. .

What’s next for the Facebook share price?

Facebook is trading within its ascending channel dating back to early March. It is trading above its 50 and 100 MA, showing an established uptrend. Today’s decline saw the stock price slide below the midpoint of the ascending channel, however, it has traded for extended periods below the midpoint. The bias remains bullish. The lower band of the ascending channel and sma 50 would have to be moved below $ 325 to reverse the short-term uptrend and sellers to gain ground. On the positive side, a move above $ 360 is needed for FB to reach a new all-time high.

Amazon – July 28

Looking back to the second quarter of 2020, Amazon saw exceptional revenue growth of 40%, its highest level since 2018, while EPS beat consensus with the biggest margin on record.

Digital consumption, cloud adoption and acceleration worked in Amazon’s favor as most businesses closed their doors. Expectations are 30% revenue growth on ESP of $ 12.22 a 20% increase. E-commerce has been huge throughout the pandemic. However, e-commerce was gaining shares from physical retailers before the start of the pandemic, so the pandemic accelerated a trend that was already in place. Perhaps this means that it is unlikely to reverse.

What next for the Amazon share price?

Amazon’s stock price has been trading in a limited range since September, capped on the lower band at 2875 and 3500 on the bullish side. The recent breakout of the 3500 level sent the stock price to new all-time highs of 3775. A declining bearish bias on the MACD supports a downside, especially if a bearish cross forms. It would take a fall below 3500 to reverse the current uptrend.


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Eric Harris

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