Big Tech hit hard by headwind

The tech giants, in turn, are suffering from headwinds. All are feeling the impact of inflation, prudent household spending, supply difficulties and the side effects of the war in Ukraine. Not to mention the decline in the proliferation of telecommuting, which had boosted demand for their services – and their stock market valuation – during the pandemic.

When they released their quarterly results on Thursday, Amazon, Apple and Intel had to take the deal down, even lowering their earnings forecasts.

Amazon: the rising effect
fuel prices

The world’s number one in e-commerce Amazon is already scarred by these dangers. He released quarterly results below expectations last Thursday and presented forecasts that were deemed disappointing. The world number one in e-commerce mentioned several factors: first of all an increase in costs, the increase in fuel prices that made deliveries more expensive. Added to this are the tight labor market and Amazon’s obligation to offer favorable salary conditions to attract new hires against a background of market tensions. It is in this context that the Seattle firm was forced to support its first union, in one of its warehouses in New York.

Another factor is the sharp rise in inflation, prompting consumers to be cautious about their spending. In the United States, consumer prices continued to rise in March, rising 6.6% year-on-year, according to the PCE inflation index, released Friday by the Commerce Department.

Result: The Seattle company suffered a net loss of $3.8 billion (3.60 billion euros) in the first quarter, or $7.56 per share. Still driven by the pandemic, which had benefited technology stocks, it posted earnings of $8.1 billion ($15.79 per share) a year ago. The accounts also suffered a pre-tax loss of $7.6 billion related to its title to the electric-car maker Rivian Automotive.

And Amazon is already anticipating a possible operating loss of up to $1 billion in the current quarter. It could bring in an operating profit of $3 billion for the period – well below the $7.7 billion recorded in the same period last year. It also expects second-quarter net sales between $116 billion and $121 billion. Analysts expect $125.48 billion in losses, according to IBES data from Refinitiv.

Result: Goldman Sachs, which maintains its positive recommendation, nevertheless lowered its price target from $4,000 to $3,700 on Friday. Likewise, Jefferies has also lowered its target price to $3,700.

Delivery problems
for Apple and Intel

Apple must also take delivery problems and inflation into account in its forecasts. Another aggravating factor for him is the very strict current containment measures in China, a market on which he depends – a market with $18.3 billion in sales for this first quarter, or nearly half of the US market ($40 billion). The iPhone designer already expects that the current fiscal year will be heavily cut due to these factors. “We expect these limitations to be in the $4 billion to $8 billion range, which is significantly greater than what we experienced in the first quarter”Apple’s chief financial officer Luca Maestri said Thursday.

Which affects his good balance sheet for the first quarter: quarterly revenue of $97.3 billion, up 8.6% over the year, and quarterly profit of $25 billion (+6%), all above consensus. Apple also announced that it would increase its dividend by 5%.

The world’s second largest semiconductor company, Intel, also fears the worst with the same factors. It is already feeling the effect of a slowdown in PC sales, reporting a nearly 7% first-quarter revenue decline to $18.35 billion on Thursday. The PC chips division saw sales fall 13% to $9.3 billion in the period.

Worse, CEO Pat Gelsinger expects microprocessor shortages to continue for years to come. “We now expect the deficit to last until 2024,” said the leader. These difficulties will not jeopardize Intel’s efforts to increase production by investing in new manufacturing sites, he added.

Unsurprisingly, they were all sanctioned in the stock market on Friday. Amazon fell 13% over the course of the day to $2,486.63 (-14.05%). The decline was less pronounced for Apple, at -3.66%. Intel, in turn, fell 6.94%. Alphabet (Google) and Microsoft, whose quarterly results were nevertheless supported by their booming activity in the storage of dematerialized data (cloud), both lost about 4%. As a result, the Nasdaq, with its strong technological color, is heading for its worst monthly performance since November 2008 with a decline of 10.2%.

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