U.S. technology stocks tumbled on Friday
ahead of a crucial week of quarterly reports from Alphabet, Facebook and other
heavyweights as investors worried that the high-performance sector may be
running out of fuel.
Google-parent Alphabet and Microsoft both
lost more than 1 percent, while Apple tumbled 4 percent because of worries
about slower-than-expected iPhone demand.
When Alphabet and Facebook report next week,
investors will be anxious for new details about how they may be affected by
calls for increased government regulation following reports on March 17 that
Facebook improperly shared personal information about its users with political
consultancy Cambridge Analytica.
A European law taking effect in May will
allow European regulators to fine companies for collecting or using personal
data without users’ consent, affecting Alphabet, Facebook and other major
Shares of Facebook, Amazon.com, Apple,
Netflix and Alphabet - which in recent years propelled Wall Street’s gains - in
recent months have splintered in different directions.
Amazon.com has rallied 31 percent in 2018,
while Netflix has soared 73 percent. Portfolio mainstays Facebook and Apple,
meanwhile, are both down year to date, while Alphabet’s 2.4 percent return is
only a little higher than the S&P 500’s flat performance.
“Investor sentiment with tech stocks is in a
long, slow retreat,” said Jake Dollarhide, chief executive officer of Longbow
Asset Management in Tulsa, Oklahoma. “If guidance is significantly more
optimistic than what was expected, they might get a pop on that, but anything
negative will be disastrous.”
Hurting Apple, Morgan Stanley analyst Katy
Huberty in a note to clients cut her estimates for iPhone shipments in the
March and June quarters due to weakness in China. Huberty trimmed her Apple
price target to $200 from $203, compared with Friday’s $166 level.
Analysts on average expect S&P 500
information technology companies to grow their earnings per share by nearly 24
percent, which is better than the 20 percent growth estimated across the
S&P 500, according to Thomson Reuters I/B/E/S.
But the high bar suggests that failure to
deliver on those expectations may exacerbate recent market worries about high
valuations, damage from a trade war with China and expectations the U.S.
Federal Reserve will continue to raise interest rates.
The S&P 500 information technology index
is trading at about 18 times expected earnings, down from nearly 20 in late
January but still above its 15-year average of 17, according to Thomson Reuters
After the bell on Monday, Alphabet is
expected by analysts on average to report a 22 percent increase in revenue to
$30.3 billion, with net income rising 21 percent, equivalent to $9.28 per share
on a non-GAAP basis, according to Thomson Reuters data.
Analysts expect Facebook to post a 42 percent
surge in quarterly revenue, to $11.4 billion, when it reports late on
Wednesday. Its stock has lost 10 percent since the revelations about Cambridge,
underscoring investors’ concerns about regulation that could crimp the leading
social network’s profitability.
Amazon late on Thursday is expected to report
a 40 percent jump in revenue to $50 billion as the online retailer continues
its expansion into cloud computing and brick-and-mortar groceries. Chief
Executive Officer Jeff Bezos may face questions from analysts about how Amazon
might react to U.S. President Donald Trump’s allegations that the company
enjoys unfair business advantages, including its use of United States Postal
Also reporting next week are Twitter and
Qualcomm on Wednesday, and Intel and Microsoft on Thursday.
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