The usual nervousness that comes with the technology earnings calendar each quarter is here, with several of the Big Dogs of Tech set to report earnings in the next several days. Investors are wondering if the sector can continue with the progress it's made this year.
As it does traditionally, IBM kicked off first-quarter tech earnings on April 19. It beat expectations for first-quarter profit and signaled that demand for information technology services was better than expected.
So far, so good.
Coming up on the earnings calendar this week, Alphabet reports April 25, followed by Meta on April 26. Intel and Amazon report April 27, and Apple results are due May 4.
Nasdaq 100 Index Up 19%
From an investor viewpoint, optimism seems high. The tech-laden Nasdaq 100 Index has jumped about 19% this year, more than double the S&P 500's gain.
However, there are good reasons to be cautious, judging by the latest report by John Butters, senior earnings analyst at FactSet. He issued his latest first-quarter earnings review of the S&P 500 information technology sector Thursday and emailed it to Investor's Business Daily.
Butters says analysts and companies in the sector have lowered earnings expectations heading into the peak weeks of the first-quarter earnings season, which runs from April 24 through May 12. Companies in this group include Apple, Microsoft, Intel, IBM, Oracle, and Cisco Systems.
Earnings estimates in aggregate for these tech companies were lowered by 6.5% during the first quarter. Downward revisions to earnings estimates for Intel, Apple, and Microsoft were substantial contributors to the decrease in expected profits, Butters said.
Earnings Calendar: A Number Of Headwinds
The deteriorating view reflects a number of headwinds. This includes expectations of possible higher interest rates, turmoil in the banking sector and weaker economic growth.
In terms of guidance, Butters wrote, more companies in the information technology sector issued negative earnings outlooks than average. A negative outlook comes in below that of analyst estimates.
Overall, 40 companies in the sector have issued earnings predictions for the first quarter. Of these companies, 27 have issued negative outlooks and 13 have issued positive projections.
"The number of companies issuing negative EPS guidance for the first quarter is above the five-year average of 19 and above the 10-year average of 20 for this sector," Butters wrote.
However, one place these concerns aren't being seen is in stock prices, such as those for Nasdaq 100 companies. And a rally has taken price-to-earnings multiples for tech firms in the S&P 500 to elevated levels.
A Different View On Tech Earnings Calendar
A differing perspective comes from Dan Ives, senior equity analyst at Wedbush.
"Tech stocks have held up very well so far in 2023 and comfortably outpaced the overall market as we believe the tech sector has become the new 'safety trade' in this overall uncertain market," Ives told Investor's Business Daily.
"Tech fundamentals are holding up much better than feared and (it) continues to be a safety blanket sector," he said. "It's still a green light to own tech stocks as the soft landing scenario becomes front and center. Cost cutting across the tech space has put a floor on valuations despite the tech haters continuing to hate."
Stocks Ives likes include cybersecurity names such as Palo Alto Networks, Check Point Software, CyberArk Software, Tenable, Zscaler and CrowdStrike. He also likes Microsoft and Datadog.
"Mongo and Salesforce are our top cloud picks for 2023," Ives said. "Apple firmly remains our top tech pick for 2023 with Tesla our favorite disruptive tech name."
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
