Tech stocks on display on the Nasdaq.
Peter Kramer | CNBC
The Nasdaq just wrapped up its fifth straight week of gains, jumping 3.3% over the past five days. It is the longest weekly winning streak for the tech-laden index since a stretch that resulted in November 2021. Coming off its worst 12 months since 2008, the Nasdaq is up 15% to start out 2023.
The last time tech stocks enjoyed a rally this long, investors were gearing up for electric carmaker Rivian’s blockbuster IPO, the U.S. economy was closing out its strongest 12 months for growth since 1984, and the Nasdaq was trading at a record.
This time around, there’s far less champagne popping. Cost cuts have replaced growth on Wall Street’s checklist, and tech executives are being celebrated for efficiency over innovation. The IPO market is dead. Layoffs are abundant.
Earnings reports were the story of the week, with results landing from lots of the world’s most dear tech firms. However the numbers, for essentially the most part, weren’t good.
Apple missed estimates for the primary time since 2016, Facebook parent Meta recorded a 3rd straight quarter of declining revenue, Google‘s core promoting business shrank, and Amazon closed out its weakest 12 months for growth in its 25-year history as a public company.
While investors had mixed reactions to the person reports, all 4 stocks closed the week with solid gains, as did Microsoft, which reported earnings the prior week and issued lackluster guidance in projecting revenue growth this quarter of only about 3%.
Cost control is king
Meta was the highest performer among the many group this week, with the stock soaring 23%, its third-best week ever. In its earnings report Wednesday, revenue got here in barely above estimates, even with sales down 12 months over 12 months, and the first-quarter forecast was roughly in keeping with expectations.
The important thing to the rally was CEO Mark Zuckerberg’s pronouncement within the earnings statement that 2023 can be the “Yr of Efficiency” and his promise that “we’re focused on becoming a stronger and more nimble organization.”
“That was really the game-changer,” Stephanie Link, chief investment strategist at Hightower Advisors, said in an interview Friday with CNBC’s “Squawk Box.”
“The quarter itself was OK, nevertheless it was the cost-cutting that they finally got religion on, and that is why I feel Meta really took off,” she said.
Zuckerberg acknowledged that the times are changing. From the 12 months of its IPO in 2012 through 2021, the corporate grew between 22% and 58% a 12 months. But in 2022 revenue fell 1%, and analysts expect growth of only 5% in 2023, in line with Refinitiv.
On the earnings call, Zuckerberg said he doesn’t expect declines to proceed, “but I also don’t think it may return to the best way it was before.” Meta announced in November the elimination of 11,000 jobs, or 13% of its workforce.
Link said the rationale Meta’s stock got such a giant bounce after earnings was because “expectations were so low and the valuation was so compelling.” The stock lost almost two-thirds of its value last 12 months, excess of its mega-cap peers.
Navigating ‘a really difficult environment’
Apple, which slid 27% last 12 months, gained 6.2% this week despite reporting its steepest drop in revenue in seven years. CEO Tim Cook said results were hurt by a strong dollar, production issues in China affecting the iPhone 14 Pro and iPhone 14 Pro Max, and the general macroeconomic environment.
“Apple is navigating what’s, after all, a really difficult environment quite well overall,” Dan Flax, an analyst at Neuberger Berman, told “Squawk Box” on Friday. “As we move through the approaching months and quarters, we’ll see a return to growth and the market will begin to discount that. We proceed to just like the name even within the face of those macro challenges.”
Amazon CEO Andy Jassy, who succeeded Jeff Bezos in mid-2021, took the bizarre step of joining the earnings call with analysts Thursday after his company issued a weaker-than-expected forecast for the primary quarter. In January, Amazon began layoffs, that are expected to lead to the lack of greater than 18,000 jobs.
“Given this last quarter was the top of my first full 12 months on this role and given among the unusual parts within the economy and our business, I assumed this could be a superb one to hitch,” Jassy said on the decision.
Managing expenses has develop into a giant theme for Amazon, which expanded rapidly through the pandemic and subsequently admitted that it hired too many individuals during that period.
“We’re working really hard to streamline our costs,” Jassy said.
Alphabet can also be in downsizing mode. The corporate announced last month that it’s slashing 12,000 jobs. Its revenue miss for the fourth quarter included disappointing sales at YouTube from a pullback in ad spending and weakness within the cloud division as businesses tighten their belts.
Ruth Porat, Alphabet’s finance chief, told CNBC’s Deirdre Bosa that the corporate is meaningfully slowing the pace of hiring in an effort to deliver long-term profitable growth.
Alphabet shares ended the week up 5.4% even after giving up a few of their gains during Friday’s sell-off. The stock is now up 19% for the 12 months.
Ruth Porat, Alphabet CFO, on the WEF in Davos, Switzerland on May twenty third, 2022.
Adam Galica | CNBC
Should the Nasdaq proceed its upward trend and notch a sixth week of gains, it will match the longest rally since a stretch that resulted in January 2020, just before the Covid pandemic hit the U.S.
Investors will now turn to earnings reports from smaller firms. A number of the names they’ll hear from next week include Pinterest, Robinhood, Affirm and Cloudflare.
One other area in tech that flourished this week was the semiconductor space. Just like the patron tech firms, there wasn’t much by the use of growth to excite Wall Street.
AMD on Tuesday beat on sales and profit but guided analysts to a ten% year-over-year decline in revenue for the present quarter. Intel, AMD’s primary competitor, reported a disastrous quarter last week and projected a 40% decline in sales within the March quarter.
Still, AMD jumped 14% for the week and Intel rose almost 8%. Texas Instruments and Nvidia also notched nice gains.
The semiconductor industry is coping with a glut of additional parts at PC and server makers and falling prices for components akin to memory and central processors. But after a miserable 12 months in 2022, the stocks are rebounding on signs that an easing of Federal Reserve rate increases and lightening inflation numbers will give the businesses a lift later this 12 months.
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