Earnings season is heating up, and market driving tech is up to bat. Can 2020's market motivators achieve the lofty expectations that analysts'/investors' have set? Will tech be able to sustain its parabolic gains through this Q3 earnings season?
This crucial earnings season will be the final stress test for 2020's biggest movers before this unprecedented election that could change the course of the equity market for the next 4 years.
Below is next week's batting order, and these market movers could be in for some action.
I'll break-down next week's earnings line up into two categories: Tech Rockets & High-Yield Tech.
These tech rockets have taken-off in 2020 thus far, and their massive returns will be put to the test next week. Netflix (NFLX - Free Report) , Snap (SNAP - Free Report) , Tesla (TSLA - Free Report) , and Amazon (AMZN - Free Report) have illustrated significant gains that outpaced analysts' wildest estimates for 2020.
The world experienced a rapid acceleration in digitalization that the "stay at home" initiative catalyzed. NFLX, SNAP, TSLA, and AMZN all benefited from this technology tailwind.
With stocks that have run-up this far this fast, I am concerned that there will be profit-pulling when investors/traders see the results they were looking for in the quarterly report and lock-in some of their gains. A beat may not be enough to keep these shares soaring.
Remember that the stocks that have risen the highest this year will likely experience the most volatility going through this set of quarterly earnings. Watch out for TSLA as it has already surged 420% in 2020 so far.
Forward guidance from management is going to be crucial to price action.
IBM (IBM - Free Report) , Verizon (VZ - Free Report) , and AT&T (T - Free Report) are providing investors with consistent dividends and are seen as safe blue-chips. Contrary to what many would have expected amid a global recession, low-beta plays like AT&T & Verizon, as well as legacy tech giant IBM have underperformed the broader market this year.
Despite these stocks' underperformance, they are all yielding a nice-healthy dividend ranging from VZ's 4.3% to T's 7.6%. These stocks are also trading at a P/E valuation discount to both their 5-year trends and their industries.
Investors and analysts have much lower expectations for these 3 tech stocks. The potential upside on a strong earnings report could be much more significant if the company can beat estimates and provide robust forward guidance.
Zacks Consensus Estimates
We are investing & trading in one of the most uncertain socio-economic climates in history, with stocks teetering at all-time highs, a resurgence in the devastating pandemic, and an election that could change everything. This pre-election earnings season will be crucial to these tech giants' trajectory for the remainder of the year.
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