The most important earnings season for tech since the dot-com boom went bust is about to begin, but don’t expect a holiday miracle, especially for the companies that are used to a victory lap at this time of year.
The first round of quarterly earnings every year is normally an exuberant time for tech companies, which get to show off how many devices they put under Christmas trees, how many ads for those goodies they sold, or services that will be enjoyed on the new iPhones, PCs and more. This earnings season, though, comes in the wake of a huge fourth-quarter decline for tech stocks, as forecasts for the holiday season sparked concerns about the death of huge growth rates[1] that have propelled tech companies to previously outsize valuations — the most serious challenge the current tech boom has faced.
The one bright spot from the bloodletting at the end of 2018 is that expectations have been diminished, leading Wall Street to expect slower revenue and earnings growth. With much more subdued results now expected for many tech companies, strong growth is likely to be rewarded and slowing growth may not be punished as harshly as it was late last year. As was the case last quarter, all companies will likely be judged more on their outlook than their past results, as investors try to get a handle on where the tech boom will go from here.
For more: You should be worried about tech stocks, and here’s why[2]
In general, financial analysts expect a mixed bag from tech this quarter that goes against what we would expect from the holiday season. The biggest growth is expected from companies focused on the corporate sector and internet advertising, while consumer-focused hardware could drag the overall results down. Those expectations show investors must break tech into different sectors, instead of trying to view it as a monolith that moves as one.
“Unfortunately, people lump tech all in one group, they say tech is good or bad,” said Daniel Morgan, a senior portfolio manager at Synovus Trust Company in Atlanta.
The S&P 500 index helped in this regard last year by splitting some large tech companies away from the sector largely referred to as tech, to show the differences between the companies. The interactive media sector — which was created last year and comprises Google parent Alphabet Inc. GOOG, +0.77%[3] GOOGL, +0.74%[4] Facebook Inc. FB, +1.17%[5] , Twitter Inc. ...