Investors turn to growth stocks’ results after strong earnings start

NEW YORK: On the heels of blockbuster earnings from main US banks, buyers are centered on whether or not an upcoming batch of earnings from main technology-related corporations can maintain the season’s early momentum.

Estimated year-over-year first-quarter earnings growth for S&P 500 corporations rose to 31% from 25% prior to now week, primarily based on Refinitiv knowledge, pushed by final week’s stronger-than-expected results from Wells Fargo & Co , Goldman Sachs Group Inc and different banks.

Tuesday brings results from stay-at-home winner Netflix Inc, which is a part of the FAANG group of high-profile tech-related names. Chipmaker Intel Corp’s results are due later this week.

After the bell Monday, shares of International Business Machines Corp have been up greater than 2% as the corporate resumed gross sales growth within the first quarter after a 12 months of declines and beat Wall Street targets.

Earnings for the technology sector , which continued to develop final 12 months whereas S&P 500 general earnings dropped because the pandemic took its toll on companies and customers, are on observe for 25% year-over-year growth within the first quarter.

But this 12 months, tech is anticipated to lag revenue growth of sectors that ought to profit from the reopening of the economic system, corresponding to financials.

First-quarter revenue growth for the S&P 500 financials sector , is now estimated at 116%, in contrast with 76% every week earlier.

“Every time we go to earnings, there’s always the question of whether (tech) can keep delivering, especially in terms of guidance,” mentioned Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.

“And they have,” she mentioned. “What you are seeing is investors are prepared to have them – or some of them – in their portfolios along with cyclicals.”

To make sure, many strategists have been bullish on economically centered sectors, and US know-how and growth shares have just lately begun to achieve once more after months of being outpaced by economically delicate names that seem to be a greater worth.

Netflix nonetheless lags the broader market. Its inventory is up 2.5% to date in 2021 after gaining 67% in 2020, when customers embraced at-home leisure throughout the early pandemic lockdowns, however some analysts are optimistic Netflix’s strong run just isn’t over.

“It is reasonable to anticipate reduced engagement on the platform as the global economy reopens,” Brian White, an web and software program analyst at Monness Crespi Hardt who recommends shopping for the inventory, wrote in a latest observe.

“However, this crisis has acted as a catalyst in introducing more consumers to the service and we believe this story has a long runway of growth in the coming years.”

The present cycle of rising chip demand is anticipated to assist semiconductors, mentioned Daniel Morgan, senior portfolio supervisor at Synovus Trust Company.

“Semiconductors are operating on all cylinders right now. They can’t make them fast enough,” he mentioned.

Micron Technology Inc shares rose when it forecast quarterly income above Wall Street estimates due to an increase in demand for reminiscence chips, thanks to 5G smartphones and synthetic intelligence software program.

As corporations have extra money to improve their know-how spending, that can assist tech corporations as properly.

“With tech, either way they win. They’re really in a great position right now,” Morgan mentioned.

Microsoft Corp is anticipated to report April 27.

Rounding out the FAANG experiences, Google guardian Alphabet Inc, Apple Inc , Facebook Inc and Amazon.com Inc are also due to report results later this month.