Now It’s Apple’s Turn to Try and Boost Tech Stocks After Rout

(Bloomberg) -- Apple Inc.’s earnings Thursday now carry the burden of trying to turn the tide for technology stocks after the Federal Reserve’s signal of faster rate hikes made investors skittish.

Anything less than a top-notch earnings beat has the potential to disappoint shareholders as the stock has been outperforming peers so far this year, falling just 8% while the Nasdaq 100 Index is 12% lower. That would also put Apple further away from being the first $3 trillion company -- a milestone that was in touching distance just a few weeks back.

“The risk is that the current market backdrop appears to be only rewarding near flawless execution and results,” said Cowen analyst Krish Sankar. The Nasdaq’s rout is the worst-ever start to the year for the tech-heavy benchmark.

The iPhone maker’s ability to navigate supply chains roiled by a parts shortage and Covid-19 will be an area of focus, analysts say. Those snags cost Apple about $6 billion in lost sales in its fiscal fourth quarter and Chief Executive Officer Tim Cook warned at the time that the toll would be even greater in the first quarter. And that was before the omicron variant sent infections soaring worldwide. 

Read More: Apple Earnings Preview

With predictions for rising interest rates putting pressure on valuations, it’s critical that technology companies beat earnings estimates that are rising, according to DataTrek Research co-founder Nicholas Colas. “Flat/middling earnings revisions is not enough.”

Tesla’s earnings Wednesday are a good example of how a regular beat alone might not get rewarded. The electric-car maker beat Wall Street estimates for quarterly revenue and profit, excluding some items, but the stock fell as much as 5.4% after Tesla said supply chain shortages are hampering sales.

The stakes appear to be high as Apple shares are up 17% since a low on Oct. 4, suggesting any upside on the first-quarter results is already priced in. Moreover, its projected earnings of $1.90 a share on revenue of $119.1 billion for the December quarter is a significant downshift from last year’s booming growth. 

Of course, there is always the potential for upside. Microsoft Corp.’s strong earnings this week lifted a group of beaten-down software stocks Wednesday -- at least until Fed Chairman Jerome Powell jolted the market with his more hawkish tone.

Tech Chart of the Day

The Hang Seng Tech Index tumbled 3.8% in Hong Kong to near an all-time low after the Fed decision. The index that has been roiled by Beijing’s regulatory crackdowns over the past year is now caught in a broad selloff in tech stocks.

Top Tech Stories

• Samsung Electronics is stepping up spending on advanced chipmaking technology as it sees growing demand for its smartphones, displays and memory products
• Intel gave a disappointing forecast for profit in the current quarter, fueling concern that the cost of CEO Pat Gelsinger’s turnaround plan will weigh heavily on the chipmaker’s financial performance
• SoftBank was among the most-significant victims of a selloff of tech stocks across Asia on Thursday, with investors turning sour on billionaire Masayoshi Son’s firm as the tightening phase of central bank policies emerges
• Apple was China’s top-selling smartphone brand in 2021’s final quarter, industry research showed, taking the top spot in the world’s largest mobile market for the first time since 2015
• Tesla set a record for profit but warned that supply chain problems will keep it from introducing new vehicle models this year
• Cloud content security firm Egnyte is planning to go public as soon as this year, according to people with knowledge of the matter

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