Tech earnings will kick-start next week, with Texas Instruments, Inc. TXN and Intel Corp. INTC among the early reporters.
Focus Shifts To Imminent Recession: “The elephant in the room is clearly 2023 guidance for the tech space and gauging just how conservative management teams will be heading into a shaky 2023 backdrop,” Wedbush analyst Daniel Ives said in a Tuesday note. With the Fed likely to end its rate tightening over the coming months, the focus shifts to a recession backdrop and its implications for the 2023 Street estimates, he added.
The length and severity of the imminent downturn in 2023 will determine the outlook for the sector this year, the analyst said, adding the tech names are already baking in a mild recession into valuations.
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3 Key Debates Heading Into Tech Earnings Season:
Enterprise Spending – Softness Or Fall Off Cliff: Tech investors will be keen to know if enterprise spending is holding up better than feared, Ives said. Investors are worried over a major slowdown driven by cloud hyperscale data centers, he added.
He noted that this fear is weighing down on Amazon, Inc. AMZN, Microsoft Corp. MSFT, Alphabet, Inc. GOOGL GOOG and the broader cloud space.
Ives is of the view enterprise cloud spending will soften, but will not fall off the cliff as the market is fearing.
Can Apple Weather Economic Uncertainties: Investors’ worry about Apple, Inc. AAPL has shifted from supply constraints to a softer iPhone/Services demand trajectory, Ives said. The analyst expects the Street to focus on CEO Tim Cook’s iPhone demand growth forecast.
Ives is of the view that demand for Apple’s products/services will be more resilient than the Street forecast. The whisper number is currently well below the consensus, he noted.
Cost Cuts And Severity: Headcount reduction is the first major step toward stabilizing tech stocks, Ives said. He expects another 5-10% cuts by big and small companies across the tech space.
The Technology Select Sector SPDR Fund XLK was trading 0.80% higher at $131.54 on Tuesday morning, according to Benzinga Pro data.
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