Apple and Alphabet are, among others, due to post their fourth-quarter results this week and all are facing their “own set of challenges,” according to tech fund manager Jeremy Gleeson. It comes after Microsoft issued a disappointing revenue forecast last week, but its stock held up better than expected. Gleeson, who manages the £1.1 billion ($1.5 billion) AXA Framlington Global Technology Fund, said there was enough bad news in Microsoft’s earnings to “spook” some investors into selling the stock. However, the stock’s more-than 2% bounce subsequently is an “encouraging” sign for the rest of Big Tech, Gleeson told CNBC’s “Squawk Box Europe”. MSFT 3M line Apple and Alphabet make up 8.7% and 7.8% of the AXA Framlington Global Technology fund respectively. Apple The biggest concern for investors is the loss of demand for Apple’s products due to a lack of supply, according to Gleeson. Apple, which makes 95% of its products in China, has grappled with supply-chain issues since Beijing enforced its zero-Covid policy in 2022. However, Gleeson believes that even if Apple reports poor fourth-quarter results, a one-off event doesn’t reflect a long-term dent in consumer demand. “The sales that they’re making in Q4 aren’t necessarily going to be a fair reflection on exactly what demand for their products is like out there because they have been somewhat supply constrained — in terms of what they can produce,” the fund manager said. Having said that, Gleeson remains bullish on Apple. He said there was “fairly good, healthy demand” for Apple’s products despite a recession and an expected drop in consumer spending. “In fact, what we’ve seen the last couple of quarters is that their customers are actually trading up, in terms of the devices that they’re buying. They’re buying, not the low-end products, but the high- end products from Apple,” Gleeson added. The median price target of 41 analysts compiled by FactSet gives the stock a potential upside of 18%. Alphabet In contrast, Gleeson struck a more bearish tone on Google-parent Alphabet’s stock. He expects the company to report “awful” quarterly numbers and paint a “pretty terrible” outlook for the first half of the year as the global economy slows down. As companies look to cut costs ahead of a recession, advertising – which is Alphabet’s most significant revenue source – is often one of the first expenses to be reduced. The fund manager also said a “dark cloud” is looming over the stock as regulators ramp up their scrutiny of the tech giant’s dominance in the online advertising and search technology sectors. “Clearly, there is an increasing amount of regulatory scrutiny that’s taking place around Alphabet. And that’s going to probably leave a dark cloud looming over them into the foreseeable future,” he said. Gleeson cautioned that any talk of a break-up right now would be premature, but added that if Alphabet were to be restructured, its valuation would likely be higher. The consensus price target of analysts compiled by FactSet indicates 23% upside for the stock over the next 12 months. GOOGL 5Y line
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