Tag: Computers/Electronics

Apple earnings beat as record back-to-school Mac sales outweigh a slight miss on iPhones

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At the end of a woeful week for Big Tech earnings, Apple Inc. managed to top expectations on revenue and earnings with the help of Macs selling at a record pace during the back-to-school season, which outweighed a slight miss on iPhone sales.

Apple
AAPL,
-3.05%
shares bounced between slight gains and losses in after-hours action Thursday, even as executives projected that revenue growth could slow in the holiday quarter. As has been the case throughout the COVID-19 pandemic, Apple executives declined to offer a traditional financial forecast, but Chief Financial Officer Luca Maestri told investors on a conference call that they expect a sequential slowdown in growth during the December quarter, driven in part by sharp currency impacts, tough comparisons for the Mac business and pressures on the services business.

The smartphone giant’s revenue grew 8% in its fiscal fourth quarter, to $90.1 billion from $83.4 billion a year earlier, and came in ahead of the FactSet consensus of $88.7 billion. Apple generated $42.6 billion in its biggest business, iPhone sales, up from $38.9 billion a year before, but analysts were projecting $43.0 billion.

A big driver of the upside came from Apple’s
AAPL,
-3.05%
Mac segment, which posted a massive beat even as iPhone sales came up light. The Mac business set an all-time quarterly revenue record at $11.5 billion in the back-to-school quarter, up from $9.2 billion a year before and easily above the FactSet consensus, which called for $9.3 billion.

Chief Executive Tim Cook explained on the call that the Mac category benefited from the launch of the MacBook Air with Apple’s custom M2 chip, as well as easing supply constraints that allowed Apple to meet a prior demand backlog. Maestri said he expects that Mac revenue will “decline substantially” on a year-over-year basis in the December quarter, however, as that period faces tough comparisons.

A key question coming into Apple’s report was how demand for the company’s new iPhone 14 line has held up, especially given reports that the company has scaled back earlier production goals. Cook shared that while it was still early, “consumer demand was strong and better than we anticipated that it would be.”

The company is supply-constrained on the iPhone 14 Pro and iPhone 14 Pro Max models, Cook said, adding that it is difficult for the company to “determine the accurate mix” of its phones until it is able to fulfill all of its demand.

Revenue performance across Apple’s product lines was mixed. While Mac sales were strong, iPad revenue fell to $7.2 billion from $8.3 billion, whereas analysts were modeling $7.8 billion in iPad revenue. That category saw “opposite” trends relative to the Mac business in that iPads were up against an “exceptionally strong iPad quarter” from a year before that included a product launch.

The company raked in $9.7 billion in revenue across its wearables, home and accessories category, up from $8.8 billion in the same period a year ago. Analysts had expected revenue of $9.2 billion.

Services revenue climbed to $19.2 billion from $18.3 billion but fell short of the FactSet consensus, which was for $20.0 billion. Maestri shared that while he expects the segment to grow in the December quarter, the business could be impacted by pressures on advertising and gaming, as well as foreign-exchange effects.

For the latest quarter, Apple recorded net income of $20.7 billion, or $1.29 a share, compared with $20.6 billion, or $1.24 a share, in the year-earlier period. Analysts tracked by FactSet were expecting $1.27 a share in earnings.

If Apple’s stock managed to hold gains through Friday’s close, it would likely be the only Big Tech company to see positive post-earnings stock performance this week. Shares of Microsoft Corp.
MSFT,
-1.98%,
Alphabet Inc.
GOOG,
-2.34%

GOOGL,
-2.85%,
and Meta Platforms Inc.
META,
-24.56%
each posted sharp declines in the session after their respective reports, and Amazon.com Inc.
AMZN,
-4.06%
shares were off 12% in late trading Thursday.

Shares of Apple have lost 18% so far this year, as the Dow Jones Industrial Average
DJIA,
+0.61%
— which counts Apple as one of its 30 components — has declined 12%.

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October 27, 2022
Apple earnings show iPhone sales miss amid questions about smartphone demand; stock dips

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Apple Inc. joined the chorus of Big Tech woes Thursday, falling short of expectations on quarterly iPhone sales and sending its stock lower in late trading.

The smartphone giant delivered $90.1 billion in fiscal fourth-quarter revenue, up from $83.4 billion a year earlier and ahead of the FactSet consensus, which was for $88.7 billion. A big driver of the upside came from Apple’s
AAPL,
-3.05%
Mac business, which posted a massive beat even as iPhone sales came up light.

Apple generated $42.6 billion in iPhone sales during its latest quarter, up from $38.9 billion a year before, while analysts were projecting $43.0 billion.

The stock was down 1% to 4% in after-hours trading immediately following the release of the report Thursday.

As has been the case throughout the pandemic, Apple declined to offer a financial forecast in its release, so investors will need wait for the company’s earnings call to get a sense for how things have fared since the September quarter ended and what expectations are like going into the holiday period.

A key question coming into Apple’s report was how demand for the company’s new iPhone 14 line has held up, especially given reports that the company has scaled back earlier production goals. While the company isn’t likely to offer a traditional quantitative outlook on the call, executives could give some indication of how consumer behavior has played out recently amid the backdrop of economic pressure and more incremental upgrades within the newest family of iPhones.

For the latest quarter, Apple recorded net income of $20.7 billion, or $1.29 a share, compared with $20.6 billion, or $1.24 a share, in the year-earlier period. Analysts tracked by FactSet were expecting $1.27 a share in earnings.

Revenue performance across Apple’s product lines was mixed. The company saw $11.5 billion in Mac revenue, up from $9.2 billion a year prior, along with $7.2 billion in iPad revenue, down from $8.3 billion. Analysts tracked by FactSet were modeling $9.3 billion for the Mac line and $7.8 billion in iPad revenue.

The company raked in $9.7 billion in revenue across its wearables, home and accessories category, up from $8.8 billion in the same period a year ago. Analysts had expected revenue of $9.2 billion.

Services revenue climbed to $19.2 billion from $18.3 billion but fell short of the FactSet consensus, which was for $20.0 billion.

Shares of Apple have lost 18% so far this year, as the Dow Jones Industrial Average
DJIA,
+0.61%
— which counts Apple as one of its 30 components — has declined 12%.

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October 27, 2022
Meta spending slams Facebook stock, but here are the chip stocks that are benefiting

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Data-center stocks buoyed an otherwise down chip sector Thursday as shares of Facebook parent Meta Platforms Inc. cratered on torn-in-half profits and a hike in capital spending to fuel Mark Zuckerberg’s metaverse ambitions, prompting one analyst to ask if server chips can only go up now.

As shares of Meta dropped as much as 25% Thursday, shares of Nvidia Corp.
NVDA,
+2.31%
surged as much as 7%, compared with less than 1% declines on the PHLX Semiconductor Index
SOX,
-1.51%
and S&P 500 index
SPX,
-0.69%.

Late Wednesday, Meta reported that quarterly profits fell by more than 50% and added that it expects 2022 capital expenditure of $32 billion to $33 billion, compared with a previous range of $30 billion to $34 billion. In 2023, the company said, it expects capital expenditure in the range of $34 billion to $39 billion, “driven by our investments in data centers, servers, and network infrastructure.”

Meta
META,
-24.64%
noted that an “increase in AI capacity is driving substantially all of our capital expenditure growth in 2023.”

Soon after Meta made that announcement, Jefferies analyst Mark Lipacis said in a note that “positive capex commentary from Alphabet
GOOGL,
-2.80%,
Microsoft
MSFT,
-2.03%
and Meta” was all a positive for data-center equipment providers Nvidia, Advanced Micro Devices Inc.
AMD,
-1.92%,
Broadcom Inc.
AVGO,
-1.26%
and Marvell Technology Inc.
MRVL,
+3.61%.
Lipacis has buy ratings on all four stocks.

Shares of AMD rallied as much as 5%, Broadcom shares rose as much as 2% and Marvell shares surged as much as 10% Thursday. Intel Corp.
INTC,
-3.69%
shares were up a little more than 1% at one point ahead of its earnings report, scheduled for after the close Thursday.

Opinion: Facebook and Google grew into tech titans by ignoring Wall Street. Now it could lead to their downfall

Jefferies noted that Meta’s capital expenditure for 2023 alone charts a 12% year-over-year hike at midpoint, compared with the Wall Street consensus of $29 billion, or a 5% year-over-year decline.

“We sense investor caution around Nvidia’s datacenter business this quarter, but we expect all four [equipment providers] to discuss positive datacenter trends this earnings season,” Lipacis said, noting he was a buyer of Nvidia stock “in front of its earnings call.”

From the perspective of the chip industry — which has gone from a two-year global chip shortage to a sudden glut in a matter of months as PC and consumer-electronics demand has dropped sharply, causing chip fabricators to pump the brakes on investments in new capacity — Lipacis questioned whether the glut will ever reach data-center sales, as many have feared.

“The most common comment we hear from investors on Nvidia is ‘the Datacenter Shoe has to Drop,’” Lipacis said, noting that his data shows that the shoe has already dropped and an uptick is on the horizon.

Lipacis explained that data-center sales from Nvidia, AMD and Intel combined declined to $10.5 billion in the second quarter from $12 billion in the fourth quarter of 2021 and that he is modeling another $10.5 billion quarter in the third.

“This looks consistent with the pattern since 2017 of 4-to-5 qtrs above trendline, followed by 2-to-3 qtrs of below trendline ‘digestion,’ i.e., it looks like the datacenter shoe has already dropped,” Lipacis said.

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October 27, 2022
Mobileye prices IPO above targeted range to raise nearly $1 billion, and most of it will go to Intel

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Mobileye Global Inc. priced its initial public offering higher than its targeted range late Tuesday to raise nearly $1 billion, most of which will go to Intel Corp.

Mobileye priced its initial public offering at $21 late Tuesday, the company announced in a news release, after previously stating a targeted range of $18 to $20; shares are expected to begin trading on the Nasdaq under the ticker symbol “MBLY” on Wednesday. Intel
INTC,
+0.85%
will sell at least 41 million shares of Mobileye, which would raise $861 million, and also agreed to a $100 million concurrent sale of stock to General Atlantic, which would make the total raised at least $961 million.

Intel paid $15.3 billion to acquire Mobileye in 2017, and was reportedly aiming for a valuation as high as $50 billion when originally planning this IPO, but instead will settle for a basic valuation of roughly $16.7 billion. After a record year with more than 1,000 offerings in 2021, the IPO market has largely dried up in 2022.

Read: Mobileye IPO: 5 things to know about the Intel autonomous-driving spinoff

Underwriting banks — Intel listed two dozen underwriters, led by Goldman Sachs Group Inc.
GS,
+1.13%
and Morgan Stanley
MS,
+1.36%
— have access to an additional 6.15 million shares for overallotments, which could push the total raised higher than $1 billion and make Mobileye the second-largest offering of the year. Only two offerings thus far this year have raised at least $1 billion — private-equity firm TPG Inc.
TPG,
+4.21%
raised exactly $1 billion in January, and American International Group Inc.
AIG,
-0.11%
spinoff Corebridge Financial Inc.
CRBG,
+1.36%
raised at least $1.68 billion in September.

Intel will receive the bulk of the proceeds of the offering — after promising to make sure that Mobileye has $1 billion in cash and equivalents, the chip maker will take the rest of the proceeds for its own coffers. Wells Fargo analysts calculated that Mobileye will need about $225 million to hit that level, leaving at least $736 million for Intel before fees and other costs.

Intel will also maintain control of the company after spinning it off, keeping class B shares that will convey 10 votes for each share while selling class A shares that convey one vote per share. Intel will retain more than 99% of the voting power and nearly 94% of the economic ownership of the company, and the Mobileye board is expected to include four members with ties to Intel, including Chief Executive Pat Gelsinger serving as chairman of the board.

Read also: Intel files for Mobileye IPO, creating a share structure that will keep the chipmaker in control

Mobileye will continue to be led by founder Amnon Shashua, who served as chief executive before Intel acquired the company and stayed at the helm while it was part of the Silicon Valley chip maker. Shashua founded Mobileye in 1999 and turned it into a pioneer in the field of automated-driving technology and one of Israel’s most prominent tech companies.

Mobileye filed for the initial public offering at the end of September, when executives were still reportedly hoping for a $30 billion valuation.

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October 25, 2022
Microsoft stock slammed by cloud-growth fears, taking Amazon down with it

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Microsoft Corp. shares fell more than 6% in after-hours trading Tuesday as the company’s cloud-computing growth hit a sudden deceleration and executives guided for holiday-season revenue to come in more than $2 billion lower than expectations.

The Azure cloud-computing business has grown into the largest and most important business for Microsoft
MSFT,
+1.38%,
and there have been concerns about cloud growth as the U.S. faces a potential recession for the first time since the technology became ubiquitous. Microsoft executives said that Azure grew by 35% in their fiscal first quarter, a marked slowdown from Azure’s 40% growth rate in the previous quarter, as well as the 50% growth shown in the same quarter last year; analysts on average were expecting 36.5% growth, according to FactSet.

Opinion: The cloud boom is coming back to Earth, and that could be scary for tech stocks

In the current quarter, Chief Financial Officer Amy Hood suggested a similar sequential decline is in store for Azure, saying percentage growth should decline by five points on a constant-currency basis. Hood also suggested that more cost cuts could be coming to Microsoft, after the company confirmed layoffs of fewer than 1,000 employees earlier this month.

“While we continue to help our customers do more with less, we will do the same internally,” she said. “And you should expect to see our operating-expense growth moderate materially through the year while we focus on growing productivity of the significant head-count investments we’ve made over the last year.”

Microsoft shares slid to declines of more than 6% in after-hours trading following Hood’s forecast, which was provided in a conference call. Shares closed with a 1.4% increase at $250.66.

Concerns about cloud growth immediately spread to Azure’s biggest competitor, Amazon Web Services, as Amazon.com Inc. stock
AMZN,
+0.65%
fell more than 4% in after-hours trading.

Microsoft reported fiscal first-quarter earnings of $17.56 billion, or $2.35 a share, down from $2.71 a share in the same quarter a year ago, when the tech giant disclosed a 44 cent-per-share tax benefit. Revenue increased to $50.1 billion from $45.32 billion a year ago. Analysts on average were expecting earnings of $2.31 a share on sales of $49.66 billion, according to FactSet.

For the fiscal second quarter, Hood guided for revenue of $52.35 billion to $53.35 billion, while analysts on average were expecting sales of $56.16 billion, according to FactSet. Hood said that “Intelligent Cloud” revenue should land from $21.25 billion to $21.55 billion, while analysts on average were projecting $21.82 billion heading into the print; Microsoft’s other revenue-segment forecasts were even further off analysts’ average expectations.

Microsoft has also suffered from the strengthening dollar, as well as a sharp downturn in personal-computer sales, which spiked during the pandemic but are now showing record regression.

For more: The pandemic PC boom is over, but its legacy will live on

Microsoft reported PC revenue of $13.3 billion for the quarter, roughly flat from $13.31 billion a year before and beating the average analyst estimate of $13.12 billion, according to FactSet. While PCs have long been what consumers largely know Microsoft for, their importance to the company’s financials has declined in recent years as cloud computing has grown in importance.

“Historically, Windows was a very large driver of Microsoft revenue and, given its strong margins, a disproportionate driver of earnings,” Bernstein analysts wrote in a preview of the report, while maintaining an “overweight” rating. “Over time other businesses, especially Microsoft’s commercial Cloud, have grown fast while the Windows business has grown quite slower, decreasing the relative impact of Windows.”

The “Intelligent Cloud” segment reported first-quarter revenue of $20.3 billion, up from $16.96 billion a year ago but slightly lower than the average analyst estimate tracked by FactSet of $20.46 billion. Azure’s 35% growth was the slowest Microsoft has reported in records dating back through the prior two fiscal years; Microsoft only reports percentage growth for its Azure cloud-computing product, even as main rivals Amazon.com Inc.
AMZN,
+0.65%
and Alphabet Inc.
GOOGL,
+1.91%
GOOG,
+1.90%
report revenue and profit margin for their cloud-computing products.

Microsoft’s other revenue segment, “Productivity and Business Processes,” reported revenue of $16.5 billion, up from $15.04 billion a year ago and higher than the average analyst estimate of $16.13 billion, according to FactSet. That segment includes Microsoft’s core cloud-software properties such as its Office suite of products — which is being officially renamed Microsoft 365 — as well as LinkedIn and some other properties.

Microsoft stock has declined 25.5% so far this year, as the S&P 500 index
SPX,
+1.63%
has dropped 20.3% and the Dow Jones Industrial Average
DJIA,
+1.07%
— which counts Microsoft as one of its 30 components — has declined 13.3%.

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October 25, 2022
Microsoft stock slips as Azure growth slows and cloud sales miss projections

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Microsoft Corp. shares slipped in after-hours trading Tuesday despite an earnings beat, as the company’s cloud-computing revenue came in lower than expected and its core cloud product, Azure, grew at a slower rate than projections.

Microsoft’s
MSFT,
+1.38%
cloud-computing business has grown into the largest and most important business for the company, especially for investors who like Azure’s high margins and strong growth. There have been concerns about cloud growth as the U.S. faces its first possible recession since the technology became ubiquitous, and Azure’s growth in Tuesday’s report was the slowest Microsoft has reported in the past two years, while Microsoft’s cloud division was the only segment to come in lower than estimates.

The “Intelligent Cloud” segment reported first-quarter revenue of $20.3 billion, up from $16.96 billion a year ago but slightly lower than the average analyst estimate tracked by FactSet of $20.46 billion. Microsoft said that Azure grew by 35%, while analysts on average were expecting 36.5% growth, according to FactSet.

Opinion: The cloud boom is coming back to Earth, and that could be scary for tech stocks

That is a marked slowdown from Azure’s 40% growth rate in the previous quarter, as well as the 50% growth shown in the same quarter last year. Microsoft only reports percentage growth for its core cloud-computing product, even as main rivals Amazon.com Inc.
AMZN,
+0.65%
and Alphabet Inc.
GOOGL,
+1.91%
GOOG,
+1.90%
report revenue and profit margin for their cloud-computing products.

Overall, Microsoft
MSFT,
+1.38%
reported fiscal first-quarter earnings of $17.56 billion, or $2.35 a share, down from $2.71 a share in the same quarter a year ago, when Microsoft disclosed a 44 cent-per-share tax benefit. Revenue increased to $50.1 billion from $45.32 billion a year ago. Analysts on average were expecting earnings of $2.31 a share on sales of $49.66 billion, according to FactSet.

Microsoft shares fell between 1% and 2% in after-hours trading following the release of the results, after closing with a 1.4% increase at $250.66. Microsoft stock tends to react most strongly in after-hours trading following earnings reports after executives share their forecast for the current quarter in their conference call, which is scheduled to begin at 5:30 p.m. Eastern.

Microsoft has started to show some effects of a weakening macroeconomic climate, confirming layoffs of fewer than 1,000 employees earlier this month. Microsoft has suffered from the strengthening dollar, as well as a sharp downturn in personal-computer sales, which spiked during the pandemic but are now showing record regression.

For more: The pandemic PC boom is over, but its legacy will live on

Microsoft reported PC revenue of $13.3 billion for the quarter, roughly flat from $13.31 billion a year before and beating the average analyst estimate of $13.12 billion, according to FactSet. While PCs have long been what consumers largely know Microsoft for, their importance to the company’s financials has declined in recent years as cloud computing has grown in importance.

“Historically, Windows was a very large driver of Microsoft revenue and, given its strong margins, a disproportionate driver of earnings,” Bernstein analysts wrote in a preview of the report, while maintaining an “overweight” rating. “Over time other businesses, especially Microsoft’s commercial Cloud, have grown fast while the Windows business has grown quite slower, decreasing the relative impact of Windows.”

Microsoft’s other revenue segment, “Productivity and Business Processes,” reported revenue of $16.5 billion, up from $15.04 billion a year ago and higher than the average analyst estimate of $16.13 billion, according to FactSet. That segment includes Microsoft’s core cloud-software properties such as its Office suite of products — which is being officially renamed Microsoft 365 — as well as LinkedIn and some other properties.

Microsoft’s second-quarter guidance will be crucial to investors hoping that the tech giant can withstand any economic jolts headed its way and show stronger growth in cloud. Analysts on average were expecting overall second-quarter revenue of $56.16 billion and “Intelligent Cloud” sales of $21.82 billion heading into the print, according to FactSet, while some wrote that they would like to hear more from Microsoft executives about the picture for the full year.

“Our hope is that management provides a bit more color on full-year fiscal 2023 beyond just the double-digit revenue growth and operating margins being roughly flat commentary from last quarter,” MoffetNathanson analysts, who have a “market perform” rating and $282 price target on the stock, wrote in their preview. “We would expect headcount-related revenue streams like Office to see increasing headwinds in coming quarters, but volume businesses like Azure, which is tied to data, being more resilient.”

Microsoft stock has declined 25.5% so far this year, as the S&P 500 index
SPX,
+1.63%
has dropped 20.3% and the Dow Jones Industrial Average
DJIA,
+1.07%
— which counts Microsoft as one of its 30 components — has declined 13.3%.

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October 25, 2022
IBM stock rallies on third-quarter results, upbeat forecast

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Shares of International Business Machines Corp. rallied in extended trading Wednesday, after the tech software, consulting and infrastructure giant reported third-quarter results that beat expectations and offered up a more upbeat full-year sales forecast.

IBM
IBM,
-0.35%
reported earnings as Wall Street tries to gauge the impact of a tough foreign-exchange environment, and the state of business spending on tech services amid worries over a downturn. But the company saw gains in hybrid cloud services, products like open-source software platform Red Hat, its consulting services and its zSystems servers and software.

“Globally, clients view technology as an opportunity to enhance their business, which is evident in the results across our portfolio,” Chief Executive Arvind Krishna said in a statement. He added that he now expects full-year sales growth “above our mid-single-digit model.”

That’s a bit more optimistic than the forecast he gave over the summer, when IBM reported second-quarter results. Krishna, at that time, said he continued “to expect full-year revenue growth at the high end of our mid-single-digit model.”

Wall Street expects IBM’s full-year sales to come in at $59.667 billion, according to FactSet. Analysts expect 2022 earnings per share of $9.28. IBM also said it continued to expect around $10 billion in consolidated free cash flow for the year.

For the third quarter, the company reported a net loss of $3.2 billion, or $3.54 per share, compared with a $1.1 billion profit, or $1.25 per share, in the year-earlier period. On an adjusted basis, IBM earned $1.81 per share.

Sales came in at $14.1 billion, compared with $13.3 billion a year ago.

Analysts polled by FactSet expected adjusted earnings per share of $1.79, on revenue of $13.517 billion.

Revenue in the company’s software segment grew 7.5%. Consulting revenue rose 5.4%, while the company’s infrastructure segment jumped 14.8%.

Shares gained 4.8% after hours on Wednesday.

Prior to the results, analysts had zeroed in on the impact of the strong dollar and what Morgan Stanley, in a recent note, described as “continued wage pressure in consulting.” IBM has also been trying to lean more into cloud and AI technology, unloading some businesses in an effort to narrow its focus.

Last year, in a move toward that goal, IBM spun off its infrastructure services business into Kyndryl Holdings
KD,
-2.85%.
But afterward, some analysts raised questions about IBM’s ability to grow sales and compete in the cloud-services industry. Francisco Partners, an investment firm, this year also acquired health-care data and analytics assets that were part of IBM’s Watson Health segment.

In January, IBM declined to provide an earnings-per-share forecast. The company also changed how it organizes its business segments at the beginning of this year.

But during the spring, Krishna said he saw “demand staying strong” even if economic growth flattens or enters into a brief recession, with the decision to halt business in Russia, following its invasion of Ukraine, the only drag on results.

IBM stock is down 8% year to date. By comparison, the S&P 500 Index
SPX,
-0.67%
is down 22%.

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October 19, 2022

These 11 stocks can lead your portfolio’s rebound after the S&P 500 ‘earnings recession’ and a market bottom next year

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This may surprise you: Wall Street analysts expect earnings for the S&P 500 to increase 8% during 2023, despite all the buzz about a possible recession as the Federal Reserve tightens monetary policy to quell inflation.

Ken Laudan, a portfolio manager at Kornitzer Capital Management in Mission, Kan., isn’t buying it. He expects an “earnings recession” for the S&P 500
SPX,
+2.78%
— that is, a decline in profits of around 10%. But he also expects that decline to set up a bottom for the stock market.

Laudan’s predictions for the S&P 500 ‘earnings recession’ and bottom

Laudan, who manages the $83 million Buffalo Large Cap Fund
BUFEX,
-2.86%
and co-manages the $905 million Buffalo Discovery Fund
BUFTX,
-2.82%,
said during an interview: “It is not unusual to see a 20% hit [to earnings] in a modest recession. Margins have peaked.”

The consensus among analysts polled by FactSet is for weighted aggregate earnings for the S&P 500 to total $238.23 a share in 2023, which would be an 8% increase from the current 2022 EPS estimate of $220.63.

Laudan said his base case for 2023 is for earnings of about $195 to $200 a share and for that decline in earnings (about 9% to 12% from the current consensus estimate for 2022) to be “coupled with an economic recession of some sort.”

He expects the Wall Street estimates to come down, and said that “once Street estimates get to $205 or $210, I think stocks will take off.”

He went further, saying “things get really interesting at 3200 or 3300 on the S&P.” The S&P 500 closed at 3583.07 on Oct. 14, a decline of 24.8% for 2022, excluding dividends.

Laudan said the Buffalo Large Cap Fund was about 7% in cash, as he was keeping some powder dry for stock purchases at lower prices, adding that he has been “fairly defensive” since October 2021 and was continuing to focus on “steady dividend-paying companies with strong balance sheets.”

Leaders for the stock market’s recovery

After the market hits bottom, Laudan expects a recovery for stocks to begin next year, as “valuations will discount and respond more quickly than the earnings will.”

He expects “long-duration technology growth stocks” to lead the rally, because “they got hit first.” When asked if Nvidia Corp.
NVDA,
+6.14%
and Advanced Micro Devices Inc.
AMD,
+3.69%
were good examples, in light of the broad decline for semiconductor stocks and because both are held by the Buffalo Large Cap Fund, Laudan said: “They led us down and they will bounce first.”

Laudan said his “largest tech holding” is ASML Holding N.V.
ASML,
+3.79%,
which provides equipment and systems used to fabricate computer chips.

Among the largest tech-oriented companies, the Buffalo Large Cap fund also holds shares of Apple Inc.
AAPL,
+3.09%,
Microsoft Corp.
MSFT,
+3.88%,
Amazon.com Inc.
AMZN,
+6.63%
and Alphabet Inc.
GOOG,
+3.91%

GOOGL,
+3.73%.

Laudan also said he had been “overweight’ in UnitedHealth Group Inc.
UNH,
+1.77%,
Danaher Corp.
DHR,
+2.64%
and Linde PLC
LIN,
+2.25%
recently and had taken advantage of the decline in Adobe Inc.’s
ADBE,
+2.32%
price following the announcement of its $20 billion acquisition of Figma, by scooping up more shares.

Summarizing the declines

To illustrate what a brutal year it has been for semiconductor stocks, the iShares Semiconductor ETF
SOXX,
+2.12%,
which tracks the PHLX Semiconductor Index
SOX,
+2.29%
of 30 U.S.-listed chip makers and related equipment manufacturers, has dropped 44% this year. Then again, SOXX had risen 38% over the past three years and 81% for five years, underlining the importance of long-term thinking for stock investors, even during this terrible bear market for this particular tech space.

Here’s a summary of changes in stock prices (again, excluding dividends) and forward price-to-forward-earnings valuations during 2022 through Oct. 14 for every stock mentioned in this article. The stocks are sorted alphabetically:

Company	Ticker	2022 price change	Forward P/E	Forward P/E as of Dec. 31, 2021
Apple Inc.	AAPL, +3.09%	-22%	22.2	30.2
Adobe Inc.	ADBE, +2.32%	-49%	19.4	40.5
Amazon.com Inc.	AMZN, +6.63%	-36%	62.1	64.9
Advanced Micro Devices Inc.	AMD, +3.69%	-61%	14.7	43.1
ASML Holding N.V. ADR	ASML, +3.79%	-52%	22.7	41.2
Danaher Corp.	DHR, +2.64%	-23%	24.3	32.1
Alphabet Inc. Class C	GOOG, +3.91%	-33%	17.5	25.3
Linde PLC	LIN, +2.25%	-21%	22.2	29.6
Microsoft Corp.	MSFT, +3.88%	-32%	22.5	34.0
Nvidia Corp.	NVDA, +6.14%	-62%	28.9	58.0
UnitedHealth Group Inc.	UNH, +1.77%	2%	21.5	23.2
Source: FactSet

You can click on the tickers for more about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information available free on the MarketWatch quote page.

The forward P/E ratio for the S&P 500 declined to 16.9 as of the close on Oct. 14 from 24.5 at the end of 2021, while the forward P/E for SOXX declined to 13.2 from 27.1.

Don’t miss: This is how high interest rates might rise, and what could scare the Federal Reserve into a policy pivot

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October 17, 2022

Asian stocks moving lower in wake of latest volatile session on Wall Street

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TOKYO (AP) — Asian shares were mostly lower on Wednesday following another volatile day on Wall Street, as traders braced for updates on inflation and corporate earnings.

Benchmarks fell in Tokyo
NIY00,
+0.09%,
Shanghai
SHCOMP,
-1.12%
and Hong Kong
HSI00,
-2.90%
but rose in Sydney.

South Korea’s Kospi
180721,
+0.34%
lost 0.1% to 2,189.86 after the Bank of Korea raised its key rate by 0.5 percentage point, amid the backdrop of Fed rate hikes in the U.S. and growing inflation risks from the weak won and rebounding global oil prices.

In currency trading the Japanese yen declined to a 24-year low against the U.S. dollar
JPYUSD,
-0.24
at 146 yen-levels, raising expectations of another intervention by Tokyo to prop up the yen. By midday the dollar
USDJPY,
+0.24%
was at 146.17 yen, up from 145.80 late Tuesday. The euro
EURUSD,
+0.12%
cost 96.96 cents, inching down from 97.07 yen.

The weaker yen raises costs for both consumers and businesses who rely on imports of food, fuel and other needs, but the bigger purchasing power for foreign currencies is expected to boost tourism. Japan reopened fully to individual tourist travel this week after being closed for more than two years because of the pandemic.

Japan’s benchmark Nikkei 225 lost 0.2% to 26,348.73 in morning trading. Australia’s S&P/ASX 200
ASX10000,
-1.54%
gained nearly 0.2% to 6,656.00. Hong Kong’s Hang Seng slipped 2% to 16,491.39, while the Shanghai Composite shed 1.2% to 2,943.24.

On Tuesday, the S&P 500
SPX,
-0.65%
fell 0.7%, marking its fifth straight loss, closing at 3,588.84. The Nasdaq
COMP,
-1.10%
dropped 1.1% to 10,426.19. The Dow Jones Industrial Average
DJIA,
+0.12%
added 0.1% to 29,239.19, while the Russell 2000 index
RUT,
+0.06%
rose 1 point, or about 0.1%, to 1,692.92.

Recession fears have been weighing heavily on markets as stubbornly hot inflation burns businesses and consumers. Economic growth has been slowing as consumers temper spending and the Federal Reserve and other central banks raise interest rates.

The International Monetary Fund on Tuesday cut its forecast for global economic growth in 2023 to 2.7%, down from the 2.9% it had estimated in July. The cut comes as Europe faces a particularly high risk of a recession with energy costs soaring amid Russia’s invasion of Ukraine.

See: Global economy most vulnerable since COVID crisis, with housing market at potential ‘tipping point,’ IMF warns

Wall Street is closely watching the Federal Reserve as it continues to aggressively raise its benchmark interest rate to make borrowing more expensive and slow economic growth. The goal is to cool inflation, but the strategy carries the risk of slowing the economy too much and pushing it into a recession.

“The market desperately wants a reason for the Fed to be able to stop tightening and the data recently hasn’t given them that opening with respect to inflation,” said Willie Delwiche, investment strategist at All Star Charts.

Computer-chip manufacturers continued slipping in the wake of the U.S. government’s decision to tighten export controls on semiconductors and chip manufacturing equipment to China. Qualcomm
QCOM,
-3.99%
fell 4%.

See: Intel reportedly plans to lay off thousands of workers, with details potentially emerging alongside quarterly earnings

Uber
UBER,
-10.42%
fell 10.4% and Lyft
LYFT,
-12.02%
slumped 12% following a proposal by the U.S. government that could give contract workers at ride-hailing and other gig economy companies full status as employees.

The Fed will release minutes from its last meeting on Wednesday, possibly giving Wall Street more insight into its views on inflation and next steps.

Investors still expect the Fed to raise its overnight rate by three-quarters of a percentage point next month, the fourth such increase. That’s triple the usual amount, and would bring the rate up to a range of 3.75% to 4%. It started the year at virtually zero.

Rex Nutting: Leading indicators show inflation is slowing, but Fed policy makers are too busy looking in rearview mirror to notice

The government will also release its report on wholesale prices Wednesday, providing an update on how inflation is hitting businesses. The closely watched report on consumer prices will be released on Thursday, and a report on retail sales is due Friday.

“Everyone is still hoping that every inflation report will be the one that shows that pressure is alleviating,” Delwiche said.

Wall Street is also gearing up for the start of the latest corporate earnings reporting season, which could provide a clearer picture of inflation’s impact.

Among the companies reporting quarterly results this week: PepsiCo
PEP,
+0.48%,
Delta Air Lines
DAL,
-1.97%
and Domino’s Pizza
DPZ,
-1.99%.
Banks including Citigroup
C,
-2.76%
and JPMorgan Chase
JPM,
-2.89%
will also report results.

In energy trading, benchmark U.S. crude
CL00,
-0.75%
lost 82 cents to $88.53 a barrel in electronic trading on the New York Mercantile Exchange. U.S. crude-oil prices fell 2% Tuesday. Brent crude
BRN00,
-0.56%,
the international pricing standard, fell 62 cents to $93.67 a barrel.

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October 11, 2022
Amazon’s second ‘Prime Day’ of 2022: When it starts, the best deals and more

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Amazon Prime Day is coming back. Well, kind of.

Amazon
AMZN,
-0.76%
is debuting a new holiday shopping event this week called “Amazon Prime Early Access Sale” where shoppers can get exclusive access to hundreds of thousands of deals ahead of the holidays.

The new sale is essentially another Amazon Prime Day event, where subscribers can get certain deals for a 48-hour period, just with a different name.

As millions of shoppers are impacted by record-high inflation in the U.S., some data still suggest, consumers are still set to spend more than last year this holiday season.

According to data insights from Adobe Inc.
ADBE,
-1.00%,
online-only holiday spending (Nov. 1 to Dec. 31) is expected to grow 2.5% in 2022, representing the smallest increase since Adobe began tracking this data in 2015. In 2021, holiday spending was 8.6% higher than the year prior, despite, at the time, the rate of U.S. inflation at a 30-year high.

Here’s what you need to know about Amazon’s Early Access Sale:

When is Amazon Prime’s Early Access Sale?

Amazon’s savings event is two days long, running from Tuesday, Oct. 11 through Wednesday, Oct. 12.

What time does Amazon Prime’s Early Access Sale start?

The Early Access Sale begins at midnight PT (3 a.m. ET) on Tuesday, Oct. 11, and runs for 48 hours, through the end of the day on Wednesday, Oct. 12.

Which countries participate in Amazon Prime’s Early Access Sale?

Fifteen countries in total are participating in the deals. Those countries include: Austria, Canada, China, France, Germany, Italy, Luxembourg, the Netherlands, Poland, Portugal, Spain, Sweden, Turkey, the U.K., and the U.S., according to Amazon.

How does Amazon Prime’s Early Access Sale work?

Items for sale can be viewed on Amazon.com or on Amazon’s app. Anybody can locate which items are listed on sale through Amazon’s platform, but the deals are only available to Prime subscribers, similar to how Amazon’s flagship annual savings event Prime Day is structured.

Is Amazon Prime’s Early Access Sale only for Prime members?

Yes. Only Prime members can participate in the deals. Non-Prime members can make purchases on Amazon, but won’t get the type of savings that members get — non members also don’t get access to typically cheaper, and sometimes free shipping costs.

See also: ‘We are surprised and bewildered’: My brother passed away and left his house, cash and possessions to charity. Can his siblings contest his will?

Additionally, people who sign up for a 30-day free trial of Amazon Prime can participate in the Early Access Sale.

How much does Amazon Prime cost?

An Amazon Prime subscription is $14.99 a month, or $139 for a full year. The subscription includes access to free delivery on millions of items, Prime Video, Prime Gaming, Amazon Music, and Amazon Photos, and broadcasts of “Thursday Night Football.”

Earlier in 2022, Amazon increased its Prime subscription price from $119 to $139.

Amazon increased its Prime subscription price from $119 to $139 in 2022.

What are the best Amazon Prime Early Access deals this year?

According to a statement from Amazon prior to the event beginning, some of the top deals will be on items including Fire TVs, Alexa enabled devices, and products from LEGO, Adidas
ADS,
-1.14%
and Ashley Furniture.

There will also be a Top 100 list that features the best deals on the e-commerce platform. The list will highlight the most popular products being purchased, Amazon says, and will launch in unison with the event’s start on Tuesday.

Are retailers like Target and Walmart starting holiday deals too?

Target Inc.
TGT,
+0.51%
announced customers will enjoy “earlier than ever” holiday shopping deals this year, including seven weeks of Black Friday deals, marking another instance when retailers are ditching the traditional shopping calendar of the holidays.

See also: Sorry folks, Black Friday has already started. But don’t worry if you miss the early sales.

Last month, Walmart
WMT,
+0.58%
announced a “holiday guarantee” that extends the return window for purchased items, beginning Oct. 1, and running through Jan. 31.

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October 10, 2022
AMD stock drops as $1 billion shortfall blamed on even weaker-than-expected PC sales

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Advanced Micro Devices Inc. shares fell in the extended session Thursday after the chip maker cut its already conservative forecast because a drop in PC sales after two years of pandemic-driven sales appears worse than feared.

AMD
AMD,
-0.13%
shares fell as much as 4% after hours, following a 0.1% decline in the regular session to close at $67.85.

Late Thursday, the company forecast third-quarter revenue of about $5.6 billion with adjusted gross margin of 50%.

“The PC market weakened significantly in the quarter,” said Lisa Su, AMD’s chair and chief executive, in a statement. “While our product portfolio remains very strong, macroeconomic conditions drove lower-than-expected PC demand and a significant inventory correction across the PC supply chain.”

AMD expects a 40% drop in client sales to about $1 billion, compared with Wall Street’s consensus estimate of $2.04 billion.

In early August, AMD held firm on its revenue forecast of $26 billion to $26.6 billion for the year, and forecast third-quarter revenue of $6.5 billion to $6.9 billion, which at the time fell below the Wall Street consensus, and gross margins of 54%.

Analysts polled by FactSet currently forecast third-quarter revenue of $6.71 billion, and annual sales of $26.13 billion. AMD is scheduled to report quarterly earnings on Nov. 1.

“The gross-margin shortfall to expectations was primarily due to lower revenue driven by lower client processor unit shipments and average selling price,” AMD said. “In addition, the third-quarter results are expected to include approximately $160 million of charges primarily for inventory, pricing and related reserves in the graphics and client businesses.”

Last week, after Micron Technology Inc.
MU,
-0.20%
reported an “unprecedented” oversupply problem, analysts debated whether this supply glut was worse than the one in 2019 that the industry has tried to avoid this time around, following two-years of COVID-19-related demand and supply-chain difficulties.

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October 6, 2022
Intel files for Mobileye IPO, creating a share structure that will keep the chipmaker in control

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After nearly a year’s wait, Mobileye is on the highway to Wall Street.

Intel Corp.
INTC,
-2.31%
-owned Mobileye Global Inc. launched its drive to an initial public offering in a Securities and Exchange Commission filing late Friday, leaving the size of the offering blank for now on what is expected to be one of the largest IPOs of the year.

Intel executives were targeting mid-2022 as of late last year, and filed confidentially with the SEC in March for the IPO of its self-driving-car unit, but the IPO market has been dry amid a decline for stocks, especially those that went public in a 2021 rush.

Mobileye plans to trade Class A shares of common stock on the Nasdaq exchange under the symbol “MBLY,” the same symbol the company had before Intel acquired Mobileye in 2017 for $15.3 billion in cash. While selling shares in Mobileye, Intel will retain official control of the company, keeping class B shares that carry 10 votes apiece while selling class A shares that have only one vote.

Mobileye also plans to have four Intel-affiliated members on its board, including Chief Executive Pat Gelsinger serving as chairman of Mobileye’s board.

Intel will also get paid from the offering: Mobileye issued Intel a dividend note for $3.5 billion, and expects to pay that off with proceeds from the sale, according to the filing; there was an initial payment of $336 million, leaving more than $3 billion still owed to Intel. Earlier reporting suggested Intel would seek a $30 billion valuation for Mobileye in the IPO, though the initial filing Friday did not include targeted prices for the shares.

The filing did include financial information, though: Mobileye reported revenue of $1.39 billion in 2021, well ahead of Nvidia Corp.
NVDA,
-0.66%,
which reported fiscal-year revenue of $566 million in auto chip sales in January. Mobileye reported a loss of $70 million last year, compared with a $196 million loss in 2020 and $328 million in 2019. Revenue in the first half of this year hit $854 million, growing 41% in the second quarter from the year before.

The filing lists a whopping 24 underwriters for the deal including Goldman Sachs, Morgan Stanley, Evercore ISI, Barclays, Citigroup, and B of A Securities.

Shares of Intel were up 0.5% after hours Friday, following a 2.3% decline in the regular session to close at $25.77.

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September 30, 2022