US tech stocks lead recovery ahead of earnings

On Wednesday, the major US tech giants were grilled by the Congress. On Thursday, they will face the markets as they all report their earnings for the second quarter after the close of play.

Following the sharp sell-off for European stocks and slippery crude oil prices, US equity markets fell at the open. However, compared to European markets, the major US averages were holding their own rather well at the time of writing, shrugging off concerns the economy suffered its worst recession since the 40s. President Donald Trump suggested the US may need to “delay the election,” scheduled for November 3, amid claims mail-in voting would make the results “the most inaccurate and fraudulent in history.”  However, he does not have the power to unilaterally delay elections because of a mid-19th century law passed by Congress. The stronger performance of US markets suggest investors are hopeful that today’s big earnings may beat expectations. Indeed, shares of Apple, Amazon, Alphabet and Facebook have all turned green:
Tech stocks
Source: ThinkTrader
Below is a quick summary for the tech earnings coming up after the bell:
  • Noteworthy will be Apple, expected to report a revenue decline of 3.1% year-on-year to $52.14 billion, with EPS of $2.04. Investors are eager to see how the pandemic has affected iPhone sales and earnings from services. Share prices have increased by almost 90% from the lows in March to repeatedly hit all-time highs, before easing back a little ahead of earnings. Year-to-date, AAPL was up 28% and was leading the Nasdaq 100, which was up 20% so far this year.
  • Amazon is expected to post historic earnings for Q2 tonight. Revenue is expected to have risen 28.6% year-on-year to $81.53 billion on the back of strong online demand driven by the lockdowns. EPS is expected at $1.46. Amazon is likely to see growth in online store sales, amazon web services (AWS) and other subsidiaries such as Whole Foods. The stock price of Amazon more than doubled since the lows seen in mid-March and has continuously outstripped the S&P 500, before retreating along with the wider markets
  • Alphabet, the parent company of Google, is expected to report a 4.1% year-on-year fall in revenue to $37.33 billion. EPS is expected to be $7.94.. The search engine is likely to have experience an increase in revenues from cloud services and YouTube as lockdowns have pushed families to work or learn from home. This will likely be offset by declines in ad sales. Alphabet, like other big tech firms, recovered sharply from the mid-March lows and was up 13% on the year, doing better than the 5&P 500, which was slightly down year-to-date.
  • Facebook is expected to report a 3.1% rise in revenue to $17.4 billion. The social media giant is expected to post an EPS of $1.39. User engagement is expected to be up 10%, with daily active users (DAUs) for the core Facebook service and Messenger to reach 1.75 Billion. Increases in user engagement are likely to be coupled with decreases in ad revenues. Share prices have increased 80% since the March low, reaching all time highs. Facebook has beaten the S&P 500 on the year-to-date share price performance.