Tech earnings season is fast approaching. The end of Q2 is about a week away. Then quiet periods begin and a few pre-announcements drift in. Which ever way macro ends up taking this market we’re expecting positive reactions from tech in Q2 thanks to momentum and strong Q3 guides.
Earnings Drive Stocks
While macro and tariffs can push stocks around when there is no earnings news, once we enter earnings season, earnings news rules.
Earnings reports are the true arbiter for stock prices when that 90 day report flashes across and all the mutual funds, hedge funds and brokers need to quickly update their numbers and positions.
Where ever markets are located when earnings are reported, we think announcements take tech stocks generally higher on those reports. If markets are down into earnings reports that sets up an even better risk/reward.
Intel, on Thursday, was the first to come clean about an accelerated Q2.
We think there is more to come from many other top tech companies.
Companies in Q1 had the fastest earnings growth since 2010 at 25% and the most upside surprises since, at least 2008. The tech sector led those upside surprises.
Q2 is expected to also be a strong quarter and even though the Street is expecting a slight slowdown in EPS growth to 19%. 19% would mark the second fastest growth since 2010. We think, though based on our work, tech has the potential to show similar if not better results as we saw in Q1.
Macro news may shake tech stocks around without earnings news. We think the most important fundamental news that exists for stocks, earnings, will be a support to take tech stocks higher.
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We are long QQQ for a customer.