Big Tech results move center stage after bruises

(Reuters) – Four of the big tech companies in the United States, accounting for nearly a fifth of the total value of the S&P 500, reported the results Thursday after a concussion in Congress to investigate the alleged abuse of their global dominance. .

It will be the first time that Apple Inc (AAPL.O), Amazon.com Inc (AMZN.O), Alphabet Inc (GOOGL.O) and Facebook Inc (FB.O) released financial results the same day, and investors wonder if they can deliver enough to extend a recovery that has been critical to Wall Street’s recovery since March.

Considered winners of “staying home” as millions of Americans were ordered indoors to contain the COVID-19 pandemic, the stocks of the big tech players have reached record levels at a time when the S&P 500 benchmark index .SPX is up less than 1% on the year

But with many of Apple’s stores still closed and Amazon’s e-commerce costs on the rise, there are question marks, and some on Wall Street argue that the share prices for all four have swelled beyond rational valuations.

Shares in Microsoft Corp (MSFT.O) fell 4.4% the day after its report last week, despite better-than-expected cloud revenue and its stock is now nearly flat in the month after hitting a record high in early July.

“It’s just a boost,” said Leo Kelly, founder of Verdence Capital Advisors, at the Reuters Global Markets Forum, before the results, due to the closing bell.

“When there are actions that seem to be entering a bubble, what you don’t know is how far it will go. You can’t just look at the valuation and say ‘it’s going to fall.’ It can go anywhere and the risk is becoming extremely, extremely high. ”

THREATS

Alphabet, Google and Facebook received particularly sharp blows Wednesday from Democrats and Republicans who say they have paralyzed smaller rivals in search of market share, the latest blows in an increasingly threatening regulatory landscape.

Apple’s headache is a slowdown in hardware sales as the world falls into recession, and analysts predict pandemic disruptions will see revenue drop by about 3% and the iPhone business by nearly 14% .

Similarly, Facebook and Google are facing a collapse in marketing spending. Refinitiv analysts estimate that Facebook could generate its slowest revenue growth, around 3%, since it became a public company.

Still, despite rising stock prices increasing the specter of another tech bubble: Amazon is up 64% this year and the other 13% -29%, analysts remain confident of further growth prospects. long term for all four companies.

“Even the bears will say these are fantastic companies and they are not going to stop being fantastic,” said Nicholas Colas, co-founder of DataTrek Research.

“The unifying factor is that they have the ability to grow and control their cost structures through the pandemic. It is always a good place to start when you have a recession. ”