Tech stocks may disappoint if a recession hits the U.S. economy and sends the S&P 500 down, says Bank of America. Megacap technology stocks could face the biggest challenges, BofA says.
"Many view tech as the new defensive sector with stable earnings, especially after Covid when tech earnings grew despite an economic recession," said the Bank of America report, published on Tuesday. "But we believe tech earnings will prove to be not as defensive as many hoped."
Among big-cap tech stocks, Netflix reports earnings on July 19. Microsoft and Google parent Alphabet follow on July 26. Apple reports earnings on July 28.
NFLX stock has plunged 70% in 2022 while MSFT stock is down 24%. GOOGL stock has tumbled 22% while AAPL stock is down 18%.
Tech Stocks: First Recession Amid De-Globalization
The BofA report continued, "In fact, 2022 consensus earnings for the Nasdaq 100 have been lagging S&P 500 earnings for the past nine months. Since the '80s, tech has seen bigger sales declines than the S&P 500 but has been buoyed by cost benefits from globalization and (more recently) a pull forward in demand. But megacap tech companies could now face the biggest challenges amid de-globalization."
Most Trusted Financial Companies — Take A Survey And Win A $50 Amazon Gift Card
At Wedbush, analyst Daniel Ives says second-quarter results for tech stocks will differ among the sectors.
"The coming weeks will be key for the tech sector with the Street highly anticipating Q2 earnings season to better gauge the health of consumer/enterprise demand in a softening macro market," he said.
Ives added, "Our view is that while multiple compression and the risk-off has been brutal this year, we believe enterprise demand in areas such as cloud and cybersecurity are holding up much better than feared and will be shining stars during June earnings season. Painting every tech sector with the same negative brush is the wrong approach in our opinion."
If you're new to IBD, consider taking a look at its stock trading system and CAN SLIM basics. Recognizing chart patterns is one key to the investment guidelines. For news on tech stocks, check out IBD's Technology News section.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
