The tech titans Meta (Facebook), Apple, Alphabet (Google) and Amazon are all reporting their quarterly earnings this week, after a brutal 2022 for the tech sector.
Investors around the world are scrutinizing these market-moving big tech earnings reports for not only profit and revenue information, but also guidance as to the companies’ trajectories.
Despite the likely mixed set of reports, Nigel Green, CEO and founder of deVere Group is predicting that they will “herald the start of The Great Rotation back into growth stocks.”
Green says: “Facebook’s parent company Meta has exceeded estimates for revenue in its fourth-quarter earnings report, with the stock soaring in extended trading on the results.
“For Apple, a considerable number of factors suggest the company’s first year-on-year revenue may have declined since early 2019.
“Alphabet, the parent company of Google is expected to report a third consecutive quarter of declining earnings.
“While Amazon’s earnings are expected at $0.15 per share, which would be an 89% decrease from the same quarter in 2021.”
But Green says tech stocks are becoming more appealing again for investors.
“As market conditions shifted in 2022, investors dumped growth stocks, like tech, in favor of value stocks which were deemed more suitable to the challenging environment,” he observes.
“But what is happening now, we believe, is the beginning of a rebound," he commented
These big tech reports herald the start of The Great Rotation back to growth stocks for two key reasons.
First, valuations of tech and other growth stocks are currently low having been hit by the previous rotation into value stocks. Investors are now eyeing these super attractive entry points to top-up their portfolios as the trend is reversing.
And second, inflation has seemingly peaked and interest rates are set to stabilize, which takes away a major obstacle for tech stocks.
As The Great Rotation gets underway, Nigel Green says that investors must act judiciously.
“Investors should avoid the ‘buy everything’ approach, as there will be big winners and losers. They must concentrate on high quality, profitable companies which can consistently maintain or steadily grow margin.”
Ahead of earnings season, Green told the media that investors shouldn’t bet against big tech in the longer term.
He noted the tech heavyweights – which got carried away during the pandemic era amid soaring revenues and profits and which are now being forced to regroup – still have piles of cash, in some cases hundreds of billions of dollars, and remain enormously profitable.
In addition, these companies maintain considerable user bases, world-class research and development, plus some of the smartest talent on the planet.
“Tech stocks are back. Rotation into the right growth stocks will provide strong returns,” Nigel Green concludes.
