Apple offers a dim light in an otherwise ‘dark earnings season’: Morning Brief

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Friday, October 28, 2022

Today’s newsletter is by Julie Hyman, anchor and correspondent at Yahoo Finance. Follow Julie on Twitter @juleshyman. Read this and more market news on the go with Yahoo Finance App.

In the end, maybe it was too much pressure, even for Apple.

After Microsoft’s cloud revenue disappointed, Alphabet’s YouTube sales came up short, and Meta’s soaring expenses sent the stock down a crushing 25% — the quips came out.

“Tim Cook. You’re our only hope.” That was the tweet from one of our favorite FinTwit wags, @IvantheK, accompanied by a gif of Princess Leia.

Apple was seen as potentially standing above the fray. Like many of its peers in tech (Meta aside), the numbers were far from an across-the-board disappointment. But like Obi-Wan Kenobi’s eventual extrication of the princess with some help, perhaps the market’s rescue will take some time and some associates. (I’m running out of analogy here; if Tim Cook is Kenobi, Darth Vader is a potential recession, and tech investors are Leia, I’ll let you cast Luke Skywalker, Han Solo, and Chewbacca).

Albuquerque, USA - January 2, 2012: Lego Star Wars figures on green base plate. The Lego toys were originally designed in the 1940s in Denmark and have achieved an international appeal. — Albuquerque, USA – January 2, 2012: Lego Star Wars figures on green base plate. The Lego toys were originally designed in the 1940s in Denmark and have achieved an international appeal.

They’re probably not Amazon, which joined its mega-cap tech peers in disappointing investors on Thursday. Amazon Web Services revenue missed estimates, and the company’s overall guidance came up short. Intel provided a small dose of the Force with by slashing expenses, which investors seemed to like.

It’s unclear where Apple will land. Shares initially dipped on disappointing iPhone and services revenue. Faithful bull Dan Ives of Wedbush was unbowed. He didn’t draw on the “Star Wars” analogy, but waxed equally poetic in an email: “In a dark earnings season for Big Tech, Apple shined better than any of its tech stalwart brethren. iPhone Pro mix looked strong and services were better than whisper expectations. We believe Apple is the strongest boat to be on in this storm and Cook proved it once again despite some blemishes around the edges.”

Still, investors are now left to grapple with the question of what to do with tech stocks, which rewarded them handsomely for many years after tumbling this year. As our Jared Blikre wrote in yesterday’s Morning Brief, tech shares, which had been key to the big index rallies over the past decade, have floundered this year. Now, these results are dashing early hopes that some of the largest companies might be resilient in the face of an economic downturn.

Even longtime tech investors are getting discouraged. “My sector could be out of favor, and could be out of favor for long stretches. And we’re in one of those stretches,” veteran tech pundit Paul Meeks of Independent Solutions Wealth Management told Yahoo Finance Live.

That said, he and other investors, like John Stoltzfus, say investors might just have to get choosier within tech. “We always look for babies that get thrown out with the bathwater here when investors are impatient on a quarter-to-quarter basis in that area,” the Oppenheimer Chief Investment Strategist said in an interview. He prefers “growth at a reasonable price,” or GARP, within technology.

Meeks has a similar view: “I’m looking for companies that can actually grow their revenue and earnings, despite a recession. They still have maybe not great valuations, but reasonable valuations, and quite often these are companies that are much smaller than the FAANGs, under the radar.”

Another investor weighing in on tech stocks is Robert Smith, founder, chairman and chief executive at Vista Equity Partners, the giant private-equity firm that invests mostly in enterprise software companies, with $94 billion in assets under management. Yahoo Finance spoke to Smith as part of its All Markets Summit.

“Not all tech stocks, of course, are created equal,” he said. “If you look at the earnings of a lot of the enterprise software companies, they actually are holding up pretty well.”

I’ll leave it up to you which of these is Yoda.

What to Watch Today

Economy

8:30 a.m. ET: Employment Cost Index, 3Q (1.2% expected, 1.3% during prior quarter)
8:30 a.m. ET: Personal Income, month-over-month, September (0.4% expected, 0.3% during prior month)
8:30 a.m. ET: Personal Spending, month-over-month, September (0.4% expected, 0.4% during prior month)
8:30 a.m. ET: Real Personal Spending, month-over-month, September (0.2% expected, 0.1% during prior month)
8:30 a.m. ET: PCE Deflator, month-over-month, September (0.3% expected, 0.3% during prior month)
8:30 a.m. ET: PCE Deflator, year-over-year, September (6.3% expected, 6.2% during prior month)
8:30 a.m. ET: PCE Core Deflator, month-over-month, September (0.5% expected, 0.6% during prior month)
10:00 a.m. ET: Pending Home Sales, month-over-month, September (-5.2% expected, -2.0% during prior month)
10:00 a.m. ET: Pending Home Sales NSA, year-over-year, September (-22.5% during prior month)
10:00 a.m. ET: University of Michigan Consumer Sentiment, October final (59.6 expected, 59.8 prior)

Earnings

AbbVie (ABBV), AllianceBernstein (AB), Aon (AON), Bloomin’ Brands (BLMN), Colgate-Palmolive (CL), Exxon Mobil (XOM), Newell Brands (NWL), NextEra Energy (NEE)