Investors find upside in tech earnings
Stocks
February 1, 2022
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).
