Tech Stocks Preview

The tech sector has been dragged down by monetary policy fears among other things, but is there a chance for an earnings-inspired rebound?

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An unsociable 2022

"Social tech" (tech firms that have a significant social component) has had a bad start to the quarter.

Netflix is perhaps the most notable, losing subscribers for the first time in a decade, primarily due to withdrawing from Russia. But other platforms, such as Disney+ plus have seen underperformance. Warner pulled its CNN+ with just a month of operations. Consumers appear to be moving back to work, combined with increased pressure on household finances cutting "luxuries".

On top of that, the EU has reached a political agreement for a new framework for increased oversight on the big predominantly US tech firms.

Meta Preview

Facebook and Instagram owner Meta reports on Wednesday. Focus will be on whether the company can reverse the first loss of users it reported in the last quarter. Other issues include the impact on Russian and Ukrainian operations, and EU regulations on user data. Last but not leasr, how much the company is spending on its ‘move to the metaverse’. Earnings are expected at $2.56, less than last quarter. Revenue is also expected to be lower at $28.3B.

Microsoft Preview

Microsoft reports on Tuesday. Prior results have been driven by cloud services (particularly Azure), which has shown resilience following the end of pandemic stay-at-home economics. Microsoft has made substantial investments in the gaming sector, and traders are likely to be looking for results, as it's becoming a key metric. Microsoft is expected to report earnings of $2.19, on increased revenues of $49.0B

Alphabet Preview

The tech conglomerate that owns Google will report on Tuesday. Like Microsoft, cloud computing is likely to be the focus, and potentially offset poorer performance in more "social" platforms such as YouTube. But weaker advertising trends could also be a focus, as well as a more detailed look into the impact from the war in Ukraine. Earnings are expected at $25.75, on $68.1B in sales.

MSFT outlook

Evidently, Facebook is in bear market 30% lower while Alphabet and Microsoft are enjoying gains of 60% and 38% -respectively over the past 12 months. Alphabet would have to erase 45% of its gains to reach the 200-day average alone, whereas, Microsoft, 15%. Both are far from performing as bad as Facebook.

Looking specifically at MSFT, the outperformer of the group. The stock is T’ing up what could be a major Head and Shoulders top - with the share price testing the neckline at 27,100 ahead of the release of Q1 earnings.

Source: Spreadex trading platform

Key takeaways

Social tech saw a bad start to the quarter due to people returning to work and lost business from the war, sanctions and a corporate backlash against Russia.

Facebook will be likely judged about its investment in Metaverse, Microsoft in gaming but also traders will focus on cloud computing, where Alphabet might offset poor performance from YouTube.