eToro’s weekly Nasdaq focus: A tale of two tech giants
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In this Stockhead series, Josh Gilbert – market analyst at global investment platform eToro – gives investors the scoop on all things Nasdaq related; the key market themes, along with popular investment trends based on eToro’s data and insights.
It was a mixed week for markets last week, as big tech earnings results stole the spotlight.
But once the dust settled, the Nasdaq closed higher to post its best week so far this year.
We are halfway through a solid Q4 earnings season on US markets, and despite Meta’s disappointing result last week, tech hasn’t disappointed so far with some of the strongest growth this quarter.
For investors navigating choppier markets, there are some positives to take away right now: a weak January has also improved the equity markets risk/reward; Fed risks are more accurately priced; earnings are still rising, valuations are lower than they were at the start of the year, and investor sentiment is still positive.
However, those positive factors still need to be assessed in the context of a more hawkish Federal Reserve, after stronger than expected jobs data on Friday and US CPI that is expected to reach new 40-year highs again this week.
Five hikes are now priced in, but the likelihood of a 50bps hike in March is growing.
Turning to the big news of the week, and it was a tale of two tech giants; Meta disappointed, and Amazon delivered.
Meta shares dropped 26 per cent on Thursday after its Q4 earnings. The sell-off saw USD$230 billion wiped off Meta’s market value — something never seen before in US markets.
In addition, the Q4 result seemed to show Facebook was now struggling to attract users, with no growth in daily active users from Q3 to Q4.
To add insult to injury, Meta Platforms offered nothing to stem the bleeding with its weak Q1 guidance.
Analysts had expected revenue guidance around USD$30.25 billion, but Meta Platforms said it expects between USD$27 billion to USD$29 billion.
In the short term, Meta Platforms needs to focus on sales growth and growing users to please Wall Street analysts.
Instagram is anticipated to play a crucial role in this effort, given its ‘reels’ feature that can rival TikTok.
Meta is now the cheapest big tech name by far, trading at 19 times forward earnings.
Despite feeling the effects of Meta’s earnings, Snap delivered some pretty stellar earnings, posting its first-ever quarterly profit, which saw shares rise by 59% on Friday, the company’s largest-ever one day gain.
In addition, Snap reported an increase in active daily users and offered guidance above expectations for Q1, as young users shift to social video sites.
Away from the socials, Amazon reported one of the last big tech earnings, and it delivered.
It smashed through earnings expectations, with net income climbing to USD$14.3 billion thanks to its investment in electric vehicle manufacturer, Rivian.
The spotlight was once again on Amazon Web Services (AWS), and once again it delivered robust growth, with revenues up 39.5 per cent year-over-year.
With remote working continuing to be “the new normal” and enterprises’ cloud budgets increasingly swelling, it seems that the shift towards cloud technologies is only just getting started, and Amazon is in the prime position to benefit.
Amazon also announced it would be raising its Prime Membership from USD$12.99 to USD$14.99 per month — the first price hike since 2018.
Right now, a key issue cited by analysts for Amazon is margin pressure, and this price hike looks set to address that.
On the macro front this week, all eyes will be on the CPI data. Economists are forecasting that US inflation rose by 7.3 per cent year-on-year in January.
This week, earnings season continues with Nasdaq 100 names, Amgen, Fiserv, Datadog, Illumina, Pepsi and Dexcom all reporting.