Tech stocks have just had another tough week. A post-pandemic hangover, illustrated an eMarketer analyst.
Seen on the Web, this expression attached to the giants of techno translates the euphoric effect that the health crisis has had on their financial results. Today, rising interest rates, inflation and shortages are affecting them, forcing the Nasdaq index to accumulate a loss of some 15% over the month, its biggest collapse since 2008. Compared to its peak in mid -November, the index representing technology stocks fell 23%, its worst correction since the crash of tech stocks in early 2000.
(You have to put it all in perspective, though, that this index, boosted by two years of the pandemic, was accumulating a 115% surge between March 2020 and its peak in November 2021.)
Accounting for around 30% of the S&P 500, tech stocks contributed to an acceleration in the fall of Wall Street’s benchmark index. The S&P 500 continued its slide on Friday to inflate its April loss to nearly 9% – which represents its worst stock market month since the start of the pandemic – and that since the start of the year to more than 13%.
Shakiest Amazon
Amazon’s stock was the most shaken this week, with a 14% loss mostly taken on Friday. Amazon had just disappointed with weaker-than-expected sales guidance for the current quarter, citing inflation and supply chain difficulties. Its chief financial officer estimated the additional costs in the first three months of the year at US$6 billion, due in particular to the loss of productivity, inflation and the cost of labour, after having doubled its staff during the pandemic. Amazon lost 3.8 billion US dollars due to an investment loss, thus registering its first quarterly loss since 2015, reads a text from Agence France-Presse (AFP).
Apple also posted slower revenue growth in the January-March quarter, with the 9% year-on-year rise being the first time since the summer of 2020 that Apple has posted single-digit growth. If they weigh more than half of the turnover, iPhone sales only increased by 5.4%.
The group has managed to limit the supply problems that affect the entire electronics sector, particularly in the semiconductor industry. He still estimates that the disruption caused by the resurgence of coronavirus cases should deprive him of 4 to 8 billion dollars of income for the current quarter.
Alphabet (Google, YouTube) and Meta (Facebook, Instagram), for their part, spoke of the pressure exerted on online advertising in an economic environment that has become more difficult. Not to mention the impact of TikTok’s appeal to young people. Google’s parent company made a profit 8% lower than it was a year earlier, while Meta posted a net profit down 21% year-on-year, AFP said.
Netflix had opened the ball on April 20 by announcing that it had lost 200,000 subscribers worldwide in the first quarter compared to the end of 2021 – a first for more than ten years, a result weighed down by the withdrawal of Netflix from Russia – and by saying expect to lose even more in the spring. The news sent the stock plummeting 35% in a single session. The decline since the start of the year is 68%.
Netflix set the tone at the start of the year by announcing the slowest growth in subscriptions for the first three months of the year since 2010, while indicating that “growth in new subscribers was not managing to return to the levels of ‘before the pandemic’, which could attest to the rise of HBO Max, Disney+ and Apple TV+.
Added to these economic factors are the attacks on their business model. Many of these tech giants have to do battle with regulatory authorities on different continents who accuse them of monopolistic practices or abuse of a dominant position, the most recent targets being the free choice of application stores.
On the good side of the story, from 30 times the earnings of the last 12 months to December 31 last year, the price/earnings ratio of the Nasdaq is back to 23. For the Nasdaq 100, this ratio is at 30, against 39 at the end of 2021, and 27 at the end of 2019.