Wall Street eyes earnings stabilizer after FAANG stocks wobble
by onlysureshot.com |
Wall Street is hoping that first-quarter earnings growth and corporate forecasts are strong enough to bring the FAANG group of stocks back into favor and take the spotlight off worries that caused the recent sell-off in the high-flying group.
For the group, analysts expect average first-quarter year-over-year earnings growth of 25.8 percent, up from 12.4 percent growth in the fourth quarter and a 12.8 percent increase a year ago, according to Thomson Reuters data.
“All we’re getting now is negative news ... once we start to see the numbers, you’re going to see a bigger spotlight on the success these companies are having,” said Daniel Morgan, portfolio manager at Synovus Trust in Atlanta, which holds shares in the FAANG stocks.
Morgan says he is in a wait-and-see mode until after the first report from Netflix, which is due to be issued on Monday. Analysts expect Netflix earnings growth of 59 percent and revenue growth of 39 percent, according to Thomson Reuters data.
The entire group was hurt by fears that Facebook and other internet firms including Google would face onerous regulations or slowing advertising revenue growth after Facebook said nearly 87 million of its members’ personal data was improperly leaked.
Facebook fell almost 24 percent below its early February record to hit $149.02 on March 26, its lowest point since July last year, due to the scandal. Google had fallen almost 18 percent below its late January record by March 28.
Amazon.com stock was hurt by criticism from U.S. President Donald Trump, who said he would take a serious look at what he claimed were the online retailer’s unfair advantages with taxes and shipping rates. It fell 16.3 percent between March 13 and April 4.
The broader technology sector was also hammered by fears of a trade war with China, a big source of revenue. Apple derived about 20 percent of its revenue from China in its fiscal year 2017. Investors seek details how big the financial risks are in the face of events such as a trade war, new regulations or a stronger dollar.
“The guidance will be more important,” said Robert Phipps, a director at Per Stirling Capital Management in Austin, referring to comments on quarterly conference calls about the potential financial impact of all these issues.
But Patrick Palfrey, equity Strategist at Credit-Suisse in New York is mainly focused on strong estimates for the sector, which has posted impressive growth “time and time again.”
“I can’t help but look at the group and have a positive outlook even with the current uncertainties,” said Palfrey.
Fund flow data shows investors were warming up to the sector again. Science and technology funds showed inflows of $152 million on the week ending April 11 after outflows of $610.9 million the previous week, which had marked the first weekly retreat since early February, according to Thomson Reuters Lipper data.
Facebook has risen about 11 percent from its most recent low while Google has climbed 5 percent above its recent trough; Apple is roughly 6 percent higher than its early April low, as is Amazon.com. Netflix has gained about 15 percent in the last 7 sessions.
Options trading flows suggest that much of the fear of the recent sell-off has faded. But while bears have been exiting positions, bulls have yet to make a big move into the space.