When investing in the future, you can benefit from the strong fourth-quarter earnings season for tech companies. Companies like Apple and Microsoft have beaten estimates by a wide margin. In fact, 87% of tech companies beat their profit estimates. And fourth-quarter profits were higher than the average for all sectors of the S&P 500. CIBC Private Wealth Management’s Bryan Reilly agrees. He says that tech earnings should continue to outperform the rest of the market.
Despite this positive news, Wall Street analysts remain cautiously optimistic about future tech profits. Despite concerns about a possible recession and rising interest rates, analysts still expect stocks to grow at a faster pace than the overall market. The Nasdaq is down 25% this year, but most analysts are keeping buy ratings on Apple, Alphabet, Microsoft, Amazon, and Google. Despite the recent dips, analysts still expect big tech profits to outpace the market in the years to come.
A good tech stock has a reasonable valuation based on its projected growth, but it can be difficult to determine this. But if you believe that earnings growth will skyrocket over the next several years, paying a premium for these companies makes sense. If the future earnings growth of a tech company looks promising, consider investing in an exchange-traded fund. ARK Innovation ETF, for example, invests in high-growth tech stocks.
Today, the S&P 500 and the Dow Jones Industrial Average both climbed on the strength of positive tech earnings. Alphabet and Microsoft reported earnings that missed analysts’ expectations, but despite this, they came out better than expected. These results led to strong gains in the futures of the S&P 500 and Dow Jones Industrial Average. In addition, major tech firms like Apple and Facebook are scheduled to report their earnings on Friday, with the former topping expectations and Microsoft falling by 5%.
Alphabet, Facebook, and Microsoft also reported strong pre-market results but missed their bottom lines. While they both reported strong Google Search revenue, Alphabet and Microsoft’s overall results were a bit below expectations. Both companies are forecasting double-digit revenue growth for their fiscal years 2022 and 2023. Microsoft missed their earnings projections, but the company expects double-digit revenue and operating income growth for the next two years.