ASML, Netflix Kick-Off Tech Earnings Amid Nasdaq Surge

The premier tech index has rocketed higher in April, recovering all of its losses since the war in Iran started, as traders regain confidence in tech amid concerns that higher costs will weigh on the global economy.

Tech Stocks Reporting This Week

• Nasdaq is outperforming other indices as tech companies are considered less vulnerable to energy pricing.
• ASML is expected to post sales of €10.2 billion, up 25%, and give insight into the continued demand for AI chips.
• Netflix is expected to shrug off higher prices, posting earnings of $0.76 per share, with a focus on what it will do after desisting from the Warner Bros. Discovery deal.

Nasdaq Beyond Recovery Mode

At the start of the year, markets rotated into industrials from tech as traders worried that AI disruptions and stretched valuations would shake up markets. All major US indices then entered a correction in March, pressured by concerns over the impact of the war. But since the start of April, the Nasdaq has risen at a breakneck pace, recovering all its losses since the war began. Seemingly, the tech-to-industrial rotation has stalled, as large production firms are facing higher input costs due to rising energy prices. While energy is a component of tech stocks, it has a smaller impact given higher tech margins. Also, their value is in future earnings, which will be long after the energy markets rebalance. This could mean demand for tech reasserts itself as a growth sector ahead of this earnings season. The challenge for the markets will be whether the financial reports meet lofty expectations and allow the Nasdaq to power back to its record highs from a few months ago. Giving potential insight into this possibility, two major tech stocks will kick off earnings season this week:

AI Fuelling ASML Sales

First up is the Dutch company that makes chip-fab machines, expected to report before the European market opens on Wednesday. Analysts unanimously agree ASML sales will increase by 25% to €10.2 billion, although this may prove challenging after several analysts raised their forecasts for the company prior to its earnings report. Sales are likely to be a focus for the market seeking reassurance that demand for chips remains solid. In its prior earnings, the company said it expected "significant" EUV sales this year, with total revenue anticipated between €34 and €39 billion. Traders will be looking for that guidance to be maintained at least to feel positive about the stock. Additional commentary from the CEO on the state of the market will likely take top priority as well.

Netflix Looking Beyond M&A

The streaming giant will report earnings after the market close on Thursday. Consensus for Netflix's Q1 earnings is $0.76, up from $0.66 a year ago, as revenue rises 15.5% to $12.2B. The main event this quarter was the company bowing out of a deal to acquire Warner Bros. Discovery, which sent the stock up 30%. Now, markets can focus on Netflix's organic growth figures, including profitability after recent price hikes. Traders will be keen to know whether there has been any customer blowback in subscription numbers amid higher inflation. On the other hand, the company has been building out its advertiser-supported services, which have turned into its main growth sector. Markets will be looking to the CEO for guidance on how it will use the funds it has allocated for M&A, whether that's for new projects, a different takeover vehicle, or improving shareholder returns.

Nasdaq Continues Rally towards Record Highs

The US tech index might be affected by the two earnings reports this week, as their results could affect other sector stocks. Poor earnings wouldn’t necessarily stop the Nasdaq rally towards record highs, but a positive interpretation of the numbers would support the rise seen from below the 23K handle. The VWAP lines are expanded, though prices have nearly touched the upper line, suggesting at least a correction. Still, the RSI has not reached overbought levels, and as long as Nasdaq prices remain above the auto-trend line, the bias remains to the upside. The next resistance above 25630 is at 26K, followed by the record peak at 26250. On the other hand, losing 25K and failing to reclaim the trendline might send prices down to the middle line, which lies just above the 24K support.

Source: SpreadEx | US Tech 100, Daily Chart