Topline
Several major technology stocks crashed this week as a flurry of lousy earnings came out, as typically high-growth shares of the West Coast titans are vastly underperforming the market.
It’s been a brutal year for the largest tech stocks.
Key Facts
Shares of Facebook parents Meta are down 71% year-to-date, including a 21.6% dip Thursday after reporting declining revenue last quarter, and Meta is now among the five worst-performing stocks on the S&P 500 in 2022.
Streaming giant Netflix briefly held the honor as the S&P’s worst performer but has since recovered to a respectable 484th place, still falling 50% year-to-date as investors panicked over two straight quarters of subscriber losses to open 2022.
The remainder of the fabled FAANG group (Facebook, Amazon, Apple, Netflix, Google) are faring a bit better but are still down big this year, with Amazon down 34%, Apple down 20% and Google parents Alphabet down 36%.
Microsoft and Tesla may not be invited to the FAANG party, but their stocks are drinking the same punch as their big tech counterparts: Microsoft is down 32% year-to-date, while Tesla is down 44%.
The losses of all but Apple outpaced the broader market, with the S&P down 20% year-to-date.
Key Background
Shares of all seven of the aforementioned technology giants surged to record highs in 2021 before coming back to earth this year as part of a broader market downturn. Microsoft, Alphabet and Meta all tumbled this week after coming short of earnings expectations last quarter and cutting forecasts for the rest of the year. Apple and Amazon report earnings after Thursday’s market close.
Tangent
Swelling headcounts at the top tech firms has begun to cut into the company’s bottom lines, Vital Knowledge analyst Adam Crisafulli noted Thursday. Amazon has grown from 800,000 to 1.5 million workers since 2019, while Meta, Alphabet and Amazon have all grown their workforce by more than 50% in the period, according to Crisafulli.
Crucial Quote
“Big Tech…risks losing its luster for investors who have bet on these tech thoroughbreds for the past decade,” Wedbush analyst Dan Ives wrote in a Thursday note to clients. Ives said this week’s dismal earnings stretch could “ultimately be a ‘fork in the road moment’ for the stalwarts.”
Contra
One notable name in tech has been immune to the market downturn: Twitter. Shares of the social media company are up 25% year-to-date as its ticker inches towards the $54.20 per share purchase price ponied up by Tesla CEO Elon Musk, who is expected to close his takeover of Twitter Friday.
Further Reading
Microsoft And Alphabet’s $250 Billion Stock Plunge Fuels Fears Of Earnings Recession (Forbes)
Meta Stock Crash Steepens As Facebook Parent Grapples With Recession Fears (Forbes)
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