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With market at record highs, eyes on reports from chipmakers – MENAFN.COM


(MENAFN – Khaleej Times) Report from Netflix, Intel, and Texa Intrument next week may hint at what i to come in the December quarterly earning eaon, with ome invetor wary of poible danger ign that could knock Wall Street after it latet urge to record high.

The S & P 500 ha gotten off to a trong tart in January, up three per cent o far thi year, fueled by a truce in the US-China trade war, low interet rate, and ign the economy remain healthy.

Analyt on average expect report to how S & P 500 earning per hare fell 0.8 per cent in the fourth quarter, with technology earning een up 0.6 per cent, according to IBES data from Refinitiv. Invetor are looking beyond fourth-quarter reult at what companie may ay about outlook and plan for invetment in light of the recently igned Phae 1 trade deal between Wahington and Beijing.

Earning etimate for the fourth quarter have already weakened lightly in the latet week, a initial report from big bank and a mattering of other companie filtered in. “Mot of the rally we had in 2019 wa in anticipation of better earning in 2020,” aid Willie Delwiche, an invetment trategit at Baird in Milwaukee. “Rather than getting caught up in what the Q4 number are, the attention will be on what – if any – reviion you get to Q1 and Q2 number.”

Analyt etimate for quarterly earning tend to decline a any given quarter approache, and any hint that etimate for 2020 are bucking that trend would be poitive, Delwiche aid.

The S & P information technology index ha led Wall Street o far in 2020 with a nearly ix per cent gain. It i up 50 per cent over the pat year, the tronget performer over that period. The index i now trading at 22 time expected earning, it highet multiple ince early 2005, according to Refinitiv’ Datatream.

The S & P 500 i trading at about 18 time expected earning, imilar to level it briefly hit two year ago.

“There’ going to be heightened attention to guidance to increae comfort level with valuation, given the trength we’ve een in the lat two month in the majority of tech name,” aid Michael Jame, managing director of equity trading at Wedbuh Securitie in Lo Angele.

Becaue of that, “you’re more likely to ee light diappointment punihed more everely than poitive guidance i rewarded,” he added.

Undercoring the importance of reult from Intel on Thurday and Apple on January 28, the information technology ector i expected to have accounted for nearly 22 per cent of total S & P 500 operating earning in the lat quarter of 2019, according to S & P Dow Jone Indice.

“For a lot of the tech name, they eem to be well poitioned for 2020,” aid Rick Meckler, partner, Cherry Lane Invetment, a family invetment office in New Vernon, New Jerey.

Still, in the market overall, “What ha happened i the multiple expanded. And that’ really the rik of the market.”

Technology earning growth for 2020 i etimated at 10.4 per cent, which i expected to contribute 2.0 percentage point to the S & P 500′ expected growth rate of 9.7 per cent, according to Refinitiv’ data, which would make tech the larget contributor.

Netflix’ quarterly report on Tueday after the bell will how how well the video treaming giant i withtanding a wave of competition led by entertainment heavyweight Walt Diney Co.

Netflix hare tumbled lat year on worrie over lowing ubcriber growth and ballooning cot of high-budget production uch a The Crown and The Irihman. It hare are down nearly eight per cent ince April 2019, when Diney+ wa unveiled. Diney’ tock ha rien 24 per cent ince then. Netflix hare tend to be volatile after it report reult, which could be the cae again.

Netflix option imply a 7.6 per cent wing for the hare in either direction by next Friday, January 24. Over the lat eight quarter, on average, the hare moved ix per cent after the company reported reult, according to Trade Alert.

Seen a the chip indutry bellwether, Texa Intrument’ report and potential comment from management on Wedneday after the bell will provide evidence of whether a global downturn in emiconductor i bottoming out.

Expectation that the chip indutry will oon pick up have fueled a 30 per cent urge in the Philadelphia Semiconductor Index ince mid-2019.

Analyt on average expect Intel to report a three per cent increae in fourth-quarter revenue and to forecat a even per cent increae in current-quarter revenue, according to Refinitiv.

– Reuter

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