I’m sure you’ve noticed. The technology sector, which led the stock market rally in 2023 and in the early days of 2024, is in a slump. The Technology Select Sector SPDR ETF (XLK) tumbled 6.27% last week and is down 7.16% in the last month. For 2024 to date, as of the close on April 19, the sector is ate break even with gain of 0.19%. Quite a turnabout for a sector that is still up 30% for the last 12 months.
This week brings a raft of tech earnings that could turn the sector’s trend around. Or not.
First out of the chute on Tuesday, Tesla (TSLA). The company is likely to report a year over year decline in sales. Investors are going into the company’s conference call with a raft of questions about the company’s strategy–Will Tesla launch a new low-priced car to compete in that part of the market for electric vehicles?–and production and technology problems–What’s the story on the new electric truck?–and the company’s vision–Does Tesla really believe it’s future is in robot taxis? But if past performance is any guide, CEO Elon Musk will present spin on the current problems rather than the clarity that might reassure investors. The good news for the market as a whole is that investors are so negative on Tesla right now that bad news won’t be a surprise or push the market averages lower. Tesla shares are down 40% for 2024 as of April 19 and fell 14% last week.
Tuesday also brings reports from Visa (V), General Motors (GM), PepsiCo (PEP), and Freeport-McMoRan (FCX).
Wednesday: If you’re looking for a catalyst to move technology shares higher, your best bet of the week is Meta Platforms (META). The company reports after the bell on Wednesday, April 24. The stock is up 42% the year And most of Wall Street is expecting a revenue and earnings beat. Meta Platforms’ investments in AI will get a lot of credit in any case–which would be good news for the struggling AI sector. Watch for market enthusiasm on any news about the company’s Llama 3 AI model, which is still in development but is generating a lot of excitement. Analysts are expecting earnings per share o $4.32 versus $2.64 in 2023. Meta has delivered solid positive surprises of 10.4% and 21.3% in the past two quarters.
Wednesday also brings reports from AT&T (T), Ford (F), Boeing Company (BA),and Chipotle Mexican Grill (CMG).
Thursday continues the AI theme–and the possibility of strongly positive earnings–with reports from Alphabet (GOOG) and Microsoft (MSFT). Analysts expect Alphabet to show 13% year-over-year revenue growth and a 28% increase in earnings. The stock is up 10.5% in 2024 to date as of April 19 and up 48.3% in the last 12 months. Look for any comments from the company on the effects of AI such as ChatGPT on Google Search’s ad-based business model.
From Microsoft analysts expect more than 15% growth in both the top and bottom lines. BUT the key metric here is the growth rate for Microsoft’s Azure cloud and AI unit. This business grew revenue at a 30% rate in fiscal 2023 but the worry has been that growth rates have been slowly falling for Azure. It’s tough to grow a $58 billion business unit at 30%. Microsoft shares are still up 6.3% for 2024 to date as of April 19, but they fell 5.4% in the last week.
Other companies reporting on Thursday include Intel (INTC), Merck (MRK), Bristol-Myers Squibb Company (BMY), and Caterpillar (CAT).
Friday is oil day with Chevron (CVX) and Exxon Mobil (XOM) both reporting before the market open. Analysts are looking for a year-over-year decline in earnings per share and revenue for both Chevron and Exxon Mobil.
Also reporting Friday AbbVie (ABBV), Colgate-Palmolive Company (CL), and Unilever PLC (UL).
