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Earnings Season Continues With Big Tech

Plus500 | Monday 25 April 2022

2022’s first earnings season is set to continue this week with a few of the largest names in the tech industry releasing their quarterly results. What’s in store for Meta, Amazon, and Apple this week?

BIG TECH

Meta Struggles

Meta (FB), the parent company of social media giant Facebook, had a difficult time after last quarter’s results. After the firm released its fourth-quarter 2021 earnings last February 2nd, its shares tumbled by 26%. Traders may have been swayed by statements by Meta executives that changes to privacy policies put into place by Apple could end up costing the firm $10 billion in advertisement sales this year.

This Big Tech pioneer is set to release its Q1 2022 results on Wednesday following the end of the trading day. Market watchers may be hoping that Meta stocks won’t lose $230 billion in value over the course of a single trading session this time, as happened following last quarter’s earnings. Many are waiting to see whether the firm has recovered from last quarter’s first-ever loss in daily users.

A key demographic among which Meta is fighting for its market share are young people. According to leaked internal documents, this age group provides almost all of the firm’s revenue, but Chinese video-based social network TikTok has been rapidly draining Gen X users away from Facebook and Instagram.

Despite Meta’s attempts to compete with TikTok via its new Facebook-based video tool, Reels, much of the firm’s capital has been funnelled toward the still-nascent metaverse, diverting crucial efforts from shoring up Meta’s existing user base. While Facebook still boasts nearly three billion global users, the banning of the platform in the Russian Federation on March 21st could be difficult for Meta to recover from.

All in all, on Wednesday, investors might be looking to find out how Meta has dealt with the rising challenges posed by the erosion of its user base and data privacy issues as the firm continues to pivot toward the metaverse. Meta has been one of the worst performers on the Nasdaq (US-TECH 100) this year, with its shares down by nearly 46% in 2022 to date. Consensus expectations are for Meta’s Q1 earnings per share (EPS) figure to come in at $2.56, a 22% decline from Q1 2021’s figure. While revenue for the first quarter is expected to have risen by 8% year-over-year to $28.3 billion, it still remains to be seen whether this will be enough to push market sentiment in Meta’s favour on Wednesday. 

Amazon Treads Water

Another American tech juggernaut, Amazon (AMZN), is expected to announce how it did in Q1 on Thursday following market close. Recent earnings seasons have been a mixed bag for this e-commerce leader, and with Amazon shares down by 15% so far this year, traders may be wondering what to expect.

While Amazon’s e-commerce branch has at times struggled with the continuing supply line issues caused by the COVID-19 epidemic, its cloud computing service, Amazon Web Services, is expected to have proved a buoy for the firm’s bottom line in Q1. However, a shortage of labour in the United States has also increased costs for this tech giant in recent months as wages have risen. 

Last quarter, Amazon’s EPS figure far outstripped analyst expectations at $27.75, influenced both by the holiday shopping season as well as a canny investment in Rivian Automotive (RIVN) which brought the firm $11.8 in pre-tax gains following the EV manufacturer’s IPO last November. 

Currently, analyst expectations are for Amazon’s Q1 EPS to drop by more than a quarter to $11.22, even as revenue is predicted to increase to $126.4 billion. Where Amazon’s share price heads following Thursday’s results may rest, in large part, on executives’ guidance for the current quarter.

Apple Ahead of the Pack

Apple (AAPL), so far this year, has stood alone among American Big Tech firms in outperforming the S&P 500 (USA 500). With this tech giant set to release its fiscal Q2 results on Thursday after the end of the trading day on Wall Street, many may be hoping for this trend to continue.

Apple has had to grapple with significant business obstacles stemming from the lockdowns put into place by the Chinese government following the latest wave of coronavirus infections. In addition, the pandemic pump observed in last year’s second quarter will most likely be absent from Thursday’s Q2 earnings release.

Apple stock is down 11% so far in 2022, and profit for the second quarter is expected to have declined slightly to come in at $23.33 billion out of a total revenue of $94.1 billion. Thursday’s EPS figures for this tech giant are estimated to be around $1.43, a 2% rise from the year-ago figure.

The American tech industry has an outsized effect on the trajectory of Wall Street Indices as a whole. Following this week’s Big Tech earnings, traders and investors alike may get a better sense of where the economy is likely to head in the near term.


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