Will Tech Earnings Maintain The Rally? - What I Expect

What a week in the stock market! Last week Intel, IBM and Google met or exceeded consensus analyst estimates. The market rose significantly on these results, with IBM hitting a new high and Google gaining almost 90 points. Of note, these results plus other earnings reports (e.g. Coca-Cola, Caterpillar, and Honeywell) provided a markedly different global business/economic perspective than the disappointing miss by General Electric last Friday, i.e. non-financial companies with a major presence in international markets are likely to do well.

This week, four major tech companies report after the close. Yahoo (Tuesday), both Amazon and Apple (Wednesday) and Microsoft (Thursday). Here's what I expect:

Yahoo! - Hmm... I haven't thought about Yahoo! much. Like Ebay, I think Yahoo! is no longer relevant to the future of tech. I think Yahoo! will either meet expectations and disappoint via future guidance, or miss expectations.

Amazon - I expect Amazon.com to exceed expectations. Companies that reported good earnings results last week partly credited growing international sales. Amazon's international sales account for 46% of revenue and are growing. They currently have the lead on cloud computing, based on their experience in managing retail sales. Any good news on this front will also be positive.

Apple - As usual, Apple provided a conservative outlook in January, 2008, slightly below consensus estimates. The stock price declined significantly after that report. I expect Apple to meet expectations, and continue to provide conservative forward guidance. There is a reasonable chance Apple will beat consensus estimate, due to international markets, which account for 45% of its sales. Thus, any overseas growth in sales will be a help.

Microsoft - My guess is that they will meet estimates, but like Yahoo!, I don't think Microsoft is a barometer for the tech sector any longer. Most of Microsoft's revenue is from Windows and Office upgrades and not from new innovations or the Internet. A merger with Yahoo! wouldn't change my future assessment of the company. In our household, we call the company "Microdog." Just check out its performance since 2000 to understand why.

Overall, I look to Amazon.com and Apple earnings results to determine trend the market this week. Since I expect Amazon to beat and Apple to meet estimates, I believe the stock market will continue to rally this week.

Disclosure: I own shares of Amazon.com, Apple and General Electric.

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This is not financial or investment advice. Please consult a professional advisor.

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