Investors find upside in tech earnings – The Average Joe
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    Investors find upside in tech earnings

    victorlei

    February 1, 2022

    tech stocks

    It’s a big week for earnings. 20% of companies in the S&P 500 are reporting earnings this week and so far, they’re strong in a few sectors — notably, big tech.

    What’s the big deal? Companies are under pressure to beat earnings as stocks took a heavy hit at the start of the year. Of the 33% of S&P 500 companies that reported earnings so far, 77% beat earnings expectations — above the 5-year average of 76% (data via Factset).

    • 100% of communication services companies beat earnings estimates.
    • 93% of information tech companies beat earnings estimates.

    Not a bad start. Cloud software demand remains strong — as cloud stocks beat earnings and raise 2022 forecasts. Since reporting earnings last week:

    • ServiceNow (NYSE:NOW) — an IT automation software provider — is up 21%.
    • Qualtrics (NASDAQ:XM) — a customer experience management software provider — is up 20%.
    • Atlassian (NASDAQ:TEAM) — a project management software — is up 11%.

    The bounce: Earnings could catalyst a rebound — with tech stocks “quite oversold” — per Miller Tabak + Co chief market strategist.

    • The relative strength index — an indicator of whether stocks are oversold or overbought — on the NASDAQ is at its lowest since Oct 2018 (via BBG).
    • This is often seen as a buy signal during times of excessive selling — a contrarian bet for those looking to go against the crowd.

    Some relief is needed in the cloud industry — with the WisdomTree Cloud Computing ETF (NASDAQ:WCLD) down 32% since November over interest rate fears.

    Other companies also reported positive earnings including Intel, IBM, Microsoft and Apple. Not Netflix though.

    Notable cloud earnings this week: Alphabet (NASDAQ:GOOG), Bill.com (NASDAQ:BILL), Fortinet (NASDAQ:FTNT) and Amazon (NASDAQ:AMZN).

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