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With the likes of Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and Intel (INTC) delivering their latest quarterly results this week, the tech sector is facing a “moment of truth” heading toward the end of the year.
That’s the view from Wedbush analyst Dan Ives, who called the current earnings season “crucial” for setting the lay of the land for tech stocks for the rest of 2022, and into 2023.
Ives said the tech sector’s earnings “will either expose the negative underlying fundamentals across the tech space” and lead to “massive” cuts in earnings next year or “prove that the bearishness and the demise of growth tech was premature and many pockets of tech are holding up well despite the dark storm clouds.”
Ives’ comments come on the heels of a relatively good report and outlook from IBM (IBM) last week, and as Wall Street awaits the latest business updates from Microsoft (MSFT), Google parent Alphabet (NASDAQ:GOOG), Apple (AAPL), Intel (INTC) and Meta Platforms (NASDAQ:META). Ives said issues such as foreign currency exchange rates and the ongoing strength of the U.S. dollar will remain headwinds facing the tech sector, and have a potential to negatively impact outlooks going forward, but that such issues have already been taken into consideration by much of Wall Street.
However, Ives said what remains a “big question” is how enterprise spending is holding up as “it’s easy to punt on discretionary projects and tighten IT budgets as darker storm clouds approach into 2023.”
Still, enterprise software on the whole has held up well, as Ives said between 85% and 90% of the deals Wedbush “tracked” during the third quarter were either signed or completed “which is within the range of the past few quarters.”
Ives said cybersecurity earnings should also hold up well as spending on cloud transformation projects, data analytics and hybrid cloud integrations are still getting “green lighted” by many companies due to budgets already being set going into next year.
On the whole, Ives said there are enough signs that the earnings season that kicks into gear this week “will be a positive catalyst for tech stocks” and show that “pockets” of software, cybersecurity and some other areas of tech will turn out better than feared.
As Meta (META) prepares for its earnings report on Wednesday, the company has gotten the attention of hedge fund Altimeter Capital, where investor Brad Gerstner has called upon Meta (META) Chief Executive Mark Zuckerberg to cut thousands of jobs at the social-media giant.
