Big Tech earnings – Apple, Amazon, Google, and more!
Microsoft, Google, Apple, Amazon… it’s earnings galore for Big Tech companies as we pass the mid-point of 2022. Four of the most valuable companies in the world, plus Meta (Facebook) are all reporting quarterly results this week.
Alphabet (Google) and Microsoft will kick off the action on July 26 followed by Meta on July 27, Apple and Amazon are set to release their quarterly earnings on July 28.
The economy is down, and markets are still volatile
These companies’ earnings come at a time when investor confidence has been shaken by surging inflation, rising interest rates, and fears of a recession.
The year started with a big sell-off in tech stocks; Amazon has dropped by 27% in 2022, Google by 25%, Microsoft by 23%, and Apple is down 13%.
Yet, regardless of the economy, quarterly earnings will shake the market and provide opportunities for traders. Investors and traders will be eager to see how the world’s biggest companies are doing financially.
Here’s how to trade company earnings
Fred Razak, CMTrading’s Senior Trading Specialist, answers all your trading questions and more.
Q: It’s earnings week for Big Tech – What opportunities are there for traders?
Razak: “Traders are always looking for volatility and I’m sure that at least one or two or more of the FAANG stocks that are coming out with earnings reports are going to give us some insight as to the direction of the markets.
“Are we heading into a recession? Are we getting closer to a recession or is it going to just be mild? We’re not sure yet. Any one of those earnings is going to give us more clarity. In terms of opportunities, even if things are not bad and things are just, you know, in line with what they expect in terms of their earnings season, then I think the markets are going to react quite positively to any price movements this week.
“If, however, these companies do present themselves as negative, then I think the markets are going to react negatively. It’s something to consider, as no matter what happens in the markets there’s no bad news. Good news would give us a very bullish sentiment. However, you play it, there’s going to be some sort of action in the markets.
Q: How important are earnings this week for Big Tech?
Razak: “It’s not the most important quarter out there. I would say the most important quarter of the year is the one that we’ll have in October. That’s the biggest one because that shows us how we’re going into the end of the year. It reveals whether or not we’re going to be positive by the end of the year or negative.
“This might not be the biggest quarter, but it is important considering the situation we are in right now. Just in general the economic climate and corporate climate are a little more bearish. I mean, Facebook just fell out of its, you know stratosphere in terms of its luster, and you hear the sentiment that the management is cutting down on Meta employees to come back to the offices and, you know, getting a little bit stricter.
“So those things usually happen, more markets are not expanding but contracting. It’s sentiments we’re looking for as market sentiment and that gives us a better picture of what’s going on.”
Q: Any FAANG companies you have your eye on?
Razak: “I do have an eye on Microsoft and Facebook this week. Those are the two that I’m very concerned about. Microsoft because it was the IT stock that took us to these very overpriced levels.
I mean Amazon is in a consumer market, so I’m not as concerned about it, although that wouldn’t be a telling sign if it was in trouble as well.
“Apple has so many streams of income that it’s really hard to pinpoint in terms of its financial growth or financial decline based on how they do. But I would say those three, Facebook, Amazon, and Microsoft, I have my eye on. So it could be a very interesting week.
Q: Do you think the Big Tech sell-off will continue?
Razak: “I’m bearish in the markets and I think there’s going to be a wash in the markets. A bust in the markets in the next, probably. Up to 24 months between now and 24 months.
“So I do think that, yeah, the markets are, as the saying goes ‘whatever hits the fan’. I think. I think the markets are going to be reactive to it. I think that’s inevitable.
Q: How do you trade company earnings?
Razak: “So I gave a live Facebook presentation about price gaps either on the upside or the downside. I’m not a big fan of going into a number with a position, which means that you already opened the position before the big number comes out. I like to see how the markets react to it and then wait and look for the opportunity in either direction the markets are going.
“I feel that that’s a much greater probability play as opposed to just jumping in right away. I think the first reaction is always over-reactive. So in these types of situations where there is an overreaction, you want to wait for everybody to overreact and then once it does settles then you can make more of a balanced decision about the markets.”
Q: Why trade earnings during a poor global economy?
Razak said: “Well because the markets are trading with the volatility. So even though the economy is not doing well, it doesn’t mean that the markets are not trading and providing tremendous opportunities for traders.”
Q: Advice for traders?
Razak said: “Make sure that you have stop-losses in place and that you know the support resistance levels of the trade you’re making. Make sure you’re paying attention just as much to the news but know to decipher what’s important news and what’s not.
“I think that the biggest misconception any of us come across with financial information is that, for example, you know, if revenue is up, but you know, sales growth is down, means that the company made more profit in. If the company didn’t make its sales targets, that’s disconcerting, that’s not positive news. You want to see a company that is hitting its sales targets and the revenue and profit margin are still good.
“That’s the toe of information I think the people misconstrue. Especially if you’re a novice, you think ‘they had great profits’ but overall sales are down. The reason is that sales are indicative of growth and revenue or profit is just indicative of better management that’s all that means.
“So in those times, deciphering that type of information I think is important for traders. Educate yourself about what is noise and what is relevant.”