Big Tech’s Growth Status in Doubt With Weaker Sales Outlooks

Earnings for most of Big Tech are out and the group delivered even bigger profits than Wall Street anticipated. The bad news: the outlook for repeat performances in the fourth quarter dimmed.

| Updated on: Nov 06 2023, 06:27 IST
Google Pay launches 5 new lending products for consumers and merchants in India; Know them all
Big Tech’s Growth Status
1/6 At the Google for India 2023 event, the tech giant announced multiple India-centric announcements, ranging from AI, online safety, accessibility to small businesses, to Pixel phones. Google also launched 5 different lending products in India for both consumers and merchants by collaborating with banks and NBFCs. These credit services are aimed at addressing the credit gap in India. (Shaurya/HT Tech)
image caption
2/6 Earlier this year, Google Pay added the facility to add Rupay credit cards to the app, and using them to seamlessly make payments via UPI.  Extending this functionality further, in collaboration with its PSP ICICI Bank, users can now avail credit lines from banks on UPI, and use it to make payments via Google Pay in the same way that they would with a UPI payment.  (Shaurya/HT Tech)
image caption
3/6 Personal loans have been available on Google Pay for the last few years in collaboration with its partner DMI Finance. This portfolio is expanding with Axis Bank making its personal loans available on Google Pay, with more partners to follow shortly.  (Shaurya/HT Tech)
image caption
4/6 Expanding the portfolio of merchant loans: On the merchant side, Google announced its new partnership with ICICI Bank and seamless repeat loans powered by Indifi.  (Shaurya/HT Tech)
image caption
5/6 Merchants often require smaller ticket loans and simpler repayment options. To address this, Google Pay is enabling on its platform, sachet loans in collaboration with DMI Finance. These start as low as Rs. 15000 and can be repaid with easy repayment options starting at just Rs. 111. This offering is aimed at bringing ease and convenience to SMBs.  (Shaurya/HT Tech)
image caption
6/6 Google Pay is enabling a credit line for merchants in partnership with ePayLater. This product will help solve the working capital requirements of merchants. Merchants can use this line across all online and offline distributors to buy their stock and supplies and grow their business.  (Shaurya/HT Tech)
Big Tech’s Growth Status
icon View all Images
Apple Inc., Alphabet Inc., Meta Platforms Inc. and Tesla Inc. all gave investors reason to fret about growth. (AFP)

Earnings for most of Big Tech are out and the group delivered even bigger profits than Wall Street anticipated. The bad news: the outlook for repeat performances in the fourth quarter dimmed. 

Apple Inc., Alphabet Inc., Meta Platforms Inc. and Tesla Inc. all gave investors reason to fret about growth. From Apple's muted holiday outlook to Google parent Alphabet's lackluster cloud computing sales results, a recurring theme for the cohort was caution. Meta warned that the year ahead is looking less predictable, while Tesla raised concerns that demand for electric cars is starting to weaken.

That's stirring angst for investors even as the Nasdaq 100 Stock Index rallied last week, rising 6.5% and clocking in its best week in a year.

We are now on WhatsApp. Click to join.

“This is all about failure of future guidance,” said Scott Colyer, chief executive at Advisors Asset Management. “Big tech stocks were priced to historic perfection, so that left investors disappointed after those companies came up short.”

Tech stocks are now on shaky ground. The seven biggest tech stocks are down an average of about 9% from 52-week highs. Apple alone has lost more than $300 billion in market value.

The selloff has made valuations cheaper, but they're still pricey and with future expansion less certain, investors are balking at paying up for the stocks. Shares of the seven biggest companies in the S&P 500 Index are priced at an average of 31 times projected profits, according to data compiled by Bloomberg. That's nearly twice the multiple of the other 493 stocks in the benchmark.

Profits for the seven biggest so-called growth companies in the S&P 500 — Apple, Microsoft Corp., Alphabet, Inc., Nvidia Corp., Meta and Tesla — are on course to rise 50%, according to data compiled by Bloomberg Intelligence. Despite Tesla's missing earnings, the group is poised to surpass the 36% increase estimates called for before earnings season began. Nvidia is the last to report on Nov. 21.

To Keith Lerner, co-chief investment officer at Truist Advisory Services, the pressure on Big Tech is a sign that the correction in the S&P 500 is close to running its course, setting the stage for outperformance in the last two months of the year, which tend to be a good time for stocks.

“We are in a better seasonal period for the market, rates stabilizing, mixed economic data and upbeat news on AI,” he said. “With many investors underperforming, partly because of missing out on tech earlier this year, we think we could see some investors chasing tech into year-end on the fear of being left behind.”

Of course, the tech sector in the S&P 500 still carries a nearly 36% premium to the index on a forward price-to-earnings basis, per data compiled by Bloomberg Intelligence.

That's why Colyer says he still sees more pain ahead for bigger growth stocks that may have gotten ahead of themselves. His firm, Advisors Asset Management, has opted to own Microsoft shares on bets that the company's big artificial intelligence investment is paying off.

“There's a lot of AI hype, but not every company is market ready,” he added. “Stocks may rally into the end of the year, but I wouldn't say this is an all-clear for tech shares or even the broader market.”

After the S&P 500 logged three straight monthly declines, the gauge notched its best week of 2023 after the Federal Reserve signaled on Wednesday that a run-up in long-term Treasury yields will reduce the impetus to raise interest rates again.

Still, the battle between tech stocks and bond yields may continue in the weeks ahead, which may potentially hurt money managers who've just plunged back into US megacap companies as yields fell.

“Everything can change in a heartbeat if there is economic or geopolitical upheaval, which would directly impact stocks broadly that aren't discounting the inherent dangers of a concentrated market in technology companies,” said Max Wasserman, senior portfolio manager at Miramar Capital. “So be cautious and don't get too optimistic on megacap tech.”

One more thing! HT Tech is now on WhatsApp Channels! Follow us by clicking the link so you never miss any updates from the world of technology. Click here to join now!

Follow HT Tech for the latest tech news and reviews , also keep up with us on Whatsapp channel,Twitter, Facebook, Google News, and Instagram. For our latest videos, subscribe to our YouTube channel.

First Published Date: 06 Nov, 06:27 IST