As investors reevaluate the post-pandemic worth of many company models, the Nasdaq 100 is down nearly 31% so far this year, wiping off trillions of dollars in market value.
Bloomberg: As investors prepare for earnings shortfalls that might cause the Nasdaq 100 to fall by more than 10%, the great tech selloff of 2022 is far from finished. More than two-thirds of the 914 participants in the MLIV Pulse study believe that the market will be let down by technology company profits throughout 2022.
While streaming services like Netflix Inc. fear a loss of price-sensitive members as consumers tighten their pockets, companies like Alphabet Inc.’s Google face the possibility of advertising decreasing spending as the global economy struggles.
As Investors reevaluate the post-pandemic worth of many company models, the Nasdaq 100 is down nearly 31% so far this year, wiping off trillions of dollars in market value. The value of equities’ future earnings is declining as a result of interest rate increases. Costs are rising due to inflation, a stronger dollar is hurting profitability, and a recession is becoming more likely.
Retailers like Amazon.com Inc. are discovering that some of their immediate answers to the Covid-19 outbreak, such as significant investments in warehouses and staff to pack goods in them, are biting them in the rear.
As the value of foreign currencies falls in relation to the dollar, Apple Inc. said that it will increase the cost of App Store purchases in Asia and in nations that utilise the euro. Because of the currency’s surge in June, Microsoft Corp. reduced its prediction. Additionally, Sony Group Corp.
Issued a warning to investors in July regarding the negative impacts of a strong currency and the global economic slowdown, particularly in Europe, on its financial results. Since those pronouncements, the Bloomberg dollar index, which measures the performance of the dollar against ten of the most important world currencies, has reached a new high.
Are strategists reliable?
In the third and fourth quarters, it is predicted that tech’s earnings will underperform the S&P 500. According to statistics from Bloomberg Intelligence, earnings per share for the info tech sector are predicted to decrease 6.6% year over year in the third quarter, as opposed to a 3.2% increase for the S&P 500 as a whole. Since June 1, the 12-month future EPS for the Nasdaq 100 has decreased by around 2.9%, versus a 0.8% decline for the S&P 500.
Retail and professional investors are likewise pessimistic about the metaverse at the moment. Although the metaverse will not impact the way they engage with people and businesses over the next two years, more than 70% of MLIV Pulse respondents stated they were aware of it.
The sentiment doesn’t quite fit with how Mark Zuckerberg defined the potential of the metaverse. When the billionaire changed the name of his business from Facebook to Meta Platforms Inc., he declared that it was “the next frontier.”
His business said that spending in Reality Labs, the Meta branch that creates hardware like virtual reality headsets, would result in a $10 billion operating profit reduction in 2021. Both software developer Unity Software Inc. and computer graphics chip manufacturer Nvidia Corp.
Seek to use their Omniverse platforms to power some of the metaverse’s supporting infrastructure. Numerous technology firms, both large and small, have lofty goals for the metaverse. MLIV responders, however, are reserved in their enthusiasm for its potential despite the lofty promises made by industry executives.
On the plus side, the unprecedented energy crisis that has resulted from Russia’s invasion of Ukraine is likely to be advantageous for technological companies that concentrate on environmentally friendly and energy-saving goods. Energy prices soared to record highs after Russia cut off supply of natural gas to its economically depended neighbours, and governments are now fending against an eventual economic collapse.
Investors believe that the development of green solutions will be aided by high electricity costs and a lack of fuel. Retailers were the most upbeat, with 63% of respondents believing that a gas and oil crisis would promote the creation of environmentally friendly electronics. Professional responses, 60%, concurred.
The dean of the Fletcher School at Tufts University, Rachel Kyte, stated in a Bloomberg TV interview that “we would be in a better situation if we had invested more in energy efficiency and invested more in renewable energy.”
According to Bloomberg Intelligence Senior Clean Energy Analyst Rob Barnett, “the nearly 5x increase in European gas prices over the past 12 months is providing a nice tailwind for clean energy equipment suppliers with companies like SolarEdge or Enphase on track to boost sales by more than 50% this year.”
Regarding their status, respondents are a little more upbeat. Over the following six months, almost a third said they intended to grow their exposure to tech companies, slightly less than a third said they would reduce it, and the remaining third said they would maintain steady.
On some measurements, such as the current price-to-earnings ratio relative to its 10-year average, technology is still attractive, and businesses like Apple continue to be significant cash creators. In general, it’s difficult to escape the technology sector, which accounts for over 27% of the S&P 500.